Employment lawyers often tell their employee clients that they need to look for work once they have been wrongfully dismissed from their employment. The expression that we use is the “duty to mitigate.” We often say that employees “must mitigate their damages” by looking for alternative employment. It is an important concept to understand because it can have a significant impact on an employee’s case against the employer for termination or severance pay because of their wrongful dismissal. There have been and continue to be many Ontario court cases that deal with this issue in employment law. In fact, we have written about this topic before in several of our case commentaries. Some interesting case commentaries that deal with mitigation include our commentaries entitled “2 in 1 Creates Confusion: What is Considered Mitigation Income” and “I am a Boss: Consequences of Inflating Your Position Title to Secure Employment.”
So what is the “duty to mitigate”?
The duty to mitigate simply means that an employee must look for a new job once their employer has wrongfully dismissed the employee. Further, the employee need only take reasonable steps to mitigate their damages in order to try to prevent or minimize their loss of employment. The fired or terminated employee must look for a new job to replace the lost one in order to prevent or minimize loss of employment income or other benefits. The only possible way to get around the duty to mitigate is if the employee has a fixed-term contract with the employer that is silent on the duty to mitigate or if the employee is totally disabled as to not to be able to look for alternative employment.
It is important to note that while the employee must look for work the search is only what is reasonable. This means that the fired or terminated employee need not apply to each job that would be marginally suitable. Nor does it mean that they can simply refrain from applying to jobs that are very suitable without any consequence. For instance, it may be reasonable to refrain from applying or seeking out work in a location that is too far from the employee’s personal residence. On the other hand, if an employee refrains from applying or seeking out work that is like or similar to their old job because they want to seek out work that is outside of their expertise or experience such an action by the employee could be arguably unreasonable. Generally, the courts have held that employees meet their duty to mitigate if they are applying or seeking out new work that is comparable to their old job in terms of rank, prestige, pay, etc.
So how does the duty to mitigate affect the notice period?
To remind our readers, when an employee is terminated or fired without cause by the employer, the employer must provide to the employee proper notice of the termination. The amount of the notice is determined by using certain factors (called Bardal factors) found in the common law. The common law is judge or court-made law. It is further important to understand that the employer may contract out of the notice owed under the common law to the employee by a properly worded termination provision in the employment agreement or employment contract that limits the employee’s rights to the Employment Standards Act (“ESA”).
As such, one of the main heads of damage when an employee sues their employer for wrongful dismissal is for notice under the common law. The whole point of the litigation could be to determine the appropriate length or amount of notice. In fact, using the Bardal factors or how long the court thinks is reasonable to find a new job will fluctuate from person-to-person and / or job-to-job. For instance, the employee’s age, length of service, job title or description, etc. will all act to affect the length of notice.
If the employee fails in their duty to mitigate, the employer may argue that the damages to be paid for notice should be reduced to reflect that failure. Conversely, if the employee finds a comparable job during the notice period then any such income will offset the employer’s obligations to pay in lieu of notice. However, the foregoing propositions are not without caveats. Firstly, the employee will still be entitled to all statutory amounts under the ESA, regardless if they failed to mitigate their loss of employment outright or if they found a job shortly after their dismissal. Secondly, if the employee’s alternative employment is substantially inferior, the employer may not be able to get the benefit of the employee’s income as such income may not be regarded as “mitigation income” in the eyes of the law. This analysis is case-specific and should be applied using the context of each case.
Employers may demand that the employee show their efforts at mitigation and the employee should then show the proof of their job search. For instance, the employee may show to the employer job lists of companies or businesses that they applied to, emails that they sent out with their resume, etc. However, ultimately, it is the employer’s legal burden to show or prove the employee’s failure to mitigate and failure to do so may entitle to employee to some or all of the amounts claimed.
A terminated or fired employee has a duty to mitigate their damages. This means that they must make reasonable efforts to look for a new comparable job. If the employee fails in their duty to mitigate, it could result in the court’s reducing the length of the notice period owed to the employee by the employer.
It is important for employees to ensure that they record or keep documents that set out their mitigation efforts. Things like a logbook of what jobs they applied to or email lists and correspondence with prospective employers and recruitment agencies of where they sent their resumes are great options to keep track of their job search.