WHEN THE EMPLOYEE’S DUTY TO MITIGATE ARISES

You are challenging your former employer for wrongfully terminating your employment and it seems like an open and shut case till your employer’s lawyer states, “the Plaintiff has failed to take all reasonable steps to mitigate his damages”.

What does this mean?

In the eyes of the law, a terminated employee has an obligation to make a reasonable effort to find comparable new employment within their applicable notice period to minimise their damages. This is because the purpose of providing notice to terminate is to give the employee time to find new work and not to reward the employee’s service or punish the employer. According to the courts, such reasonable efforts involve a constant and diligent application for new employment and an exploration of what is available.

Mitigation applies in calculating the damages that an employee would be entitled to, which varies depending on the circumstance. Where an employee is successful in finding employment, any income from the new position during the applicable notice period may be deducted from the total damages owed to the employee by the former employer. Where an employee genuinely seeks, but does not find, employment, the employee will be entitled to his full severance and possibly damages for their wrongful dismissal.

A dismissed employee who, however, fails to take reasonable steps to search for new employment may find that a court will reduce or completely deny their entitlement to damages for wrongful dismissal. An employee who was found to have been wrongfully terminated but instead of searching for jobs, began a self-employment course was held to have failed to mitigate her damages and her claim was rejected accordingly.

This seems tough, are there any exceptions?

Sure!

1. First, it is the past employer’s task to show failure to mitigate. This could be by showing comparable available positions through job websites or newspapers. It is, however, not enough for the former employer to prove that the employee did not take reasonable steps to seek employment, but they must also show that if the employee had taken those steps, they likely would have found equivalent employment. Therefore, in a case where the court found the employee’s employment search efforts inadequate, the employer failed to fulfill the second requirement and the court decided that the employer had not proven failure to mitigate and was held responsible for the notice period and damages.
2. Secondly, the new employment should be comparable to the former position. An executive at a company would not be expected to accept an entry level or menial position for the sake of being employed or showing mitigation.
3. Certain contractual stipulations can exclude the duty to mitigate. The courts have held that mitigation does not apply to fixed term contracts, or to employment contracts with termination clauses that specifically exclude mitigation or provide for a specific notice periods or pay in lieu of notice. In such circumstances, the employee is under no duty to mitigate their loss and income from any alternative employment found cannot be deducted from the contractual amount.
4. Dismissed employees are not required to accept re-employment offers if it would mean returning to a toxic environment. A dismissed employee is not bound to accept a comparable offer of re-employment by their previous employer if it means that they would be working in an atmosphere of hostility, embarrassment, or humiliation. So, in a case where the employer offered re-employment after discovering that the employee had sued the employer, the court found that the employer did not establish failure to mitigate.
5. There is no general rule requiring an employee to relocate to take up new employment or fulfill the requirement for mitigation. This topic has recently come up for debate considering recent economic downturns and the COVID-19 pandemic. Overall, whether this obligation exists is decided on the circumstances of the case. However, the courts have considered factors such as the employee’s age, health concerns, family circumstances, community attachment and the norms within a given industry. Therefore, where an engineer had been offered a comparable role in a different city by the company who had bought his company over, the court held that he had failed to mitigate his loss. In reaching this decision, the court considered that it is customary for engineers to be prepared to relocate, and that there was no reasonable prospect of employment in his current city if he refused the offer. Whereas, in another case, the court confirmed that the employee’s refusal to relocate to join another division of the employer was reasonable because he was 54, had a long association with his hometown and had decided to start his own business.
6. Lastly, income from a second job is largely excluded from mitigation calculations where the employment contract permits simultaneous employment. This said, post-termination income that could not have been earned, had the first job continued, would be part of mitigation calculations and deducted from the total damages owed.

It is one thing to prove wrongful termination, and another to be able to claim adequate damages once you are over that hurdle. At Osuji & Smith employment lawyers in Calgary, we are more than happy to help you navigate this process and determine your entitlements, obligations, and options.