Duty to Mitigate in Claims of Wrongful Dismissal

The duty to mitigate is one of the few employee obligations in a wrongful dismissal dispute, and it can reduce a defendant employer’s liability significantly. 

What is the Duty to Mitigate?

The duty to mitigate requires an employee to take reasonable steps to secure comparable employment after they have been wrongfully dismissed. When an employer wrongfully dismisses an employee, unless there is enforceable contract language to the contrary, the employee is entitled to damages for pay in lieu of common law reasonable notice. 

Damages’ awards are designed to compensate a former employee for their losses as a result of the wrongful termination, including compensation for the income, benefits, and bonuses lost. The duty is based on the idea that the defendant employer should not be responsible for losses the former employee could have reasonably avoided. 

Therefore, the plaintiff employee has a duty to take reasonable steps to mitigate – or reduce – their losses, requiring them to make reasonable efforts to secure new, comparable employment. 

The Employee’s Duty

What does it mean for an employee to take “reasonable steps” to reduce their losses? What constitutes “comparable employment”? These are the two big questions adjudicators face when assessing whether an employee has met their duty to mitigate. Unfortunately, as with many legal concepts, there is no set test or formula that applies. 

Below are some of the factors Courts have historically considered in assessing the reasonableness of an employee’s efforts to mitigate: 

  • Whether the employee searched and applied for jobs in an appropriate industry matching their qualifications.
  • Whether the employee unreasonably delayed their search, though employees are not expected to start their job search the day after termination. 
  • Whether the geographic scope of the job search was reasonable. 
  • Whether the employer provided any assistance and whether the employee made use of the assistance provided (ex. Offering outplacement counselling, providing a reference letter, sending job postings).
  • Where an employee chooses to retrain and this delays their job search, whether the retraining is reasonable in the circumstances.
  • Whether the employee has a serious medical condition that may limit their job prospects.

“Comparable” employment is typically assessed based on: 

  • Compensation;
  • Job status or prestige; 
  • Job location; and 
  • Skills necessary for the job.

Ultimately, a Court will look at the totality of circumstances when deciding what is reasonable and comparable, and employees are typically given significant latitude in these assessments. Employees are not held to the standard of perfection. 

The Employer’s Onus 

While the employee bears the burden of taking reasonable steps to mitigate, the employer bears the onus of demonstrating to an adjudicator that the employee failed to mitigate. As is often the case in employment law, the employer’s onus is a heavy one.

In order to meet this burden, an employer defendant must demonstrate: 

  1. The former employee failed to take reasonable steps to mitigate their damages; and
  2. If the former employee had taken such reasonable steps, they would have been expected to secure a comparable position reasonably adapted to their abilities.

Reducing Entitlements to Damages

Damages in a wrongful dismissal action reflect the employee’s actual loss over the reasonable notice period. This means that, if an employee finds comparable employment, they will be awarded damages for reasonable notice less the amount they have mitigated but including any costs associated with mitigation. Where an employer successfully demonstrates the employee did not meet their duty to mitigate, wrongful dismissal damages may be reduced. 

Key Takeaways for Employers

When an employee sues for wrongful termination and is entitled to damages for common law reasonable notice, those damages are limited by the duty to mitigate. The onus of proving an employee failed to make reasonable efforts to mitigate their losses falls on the employer and it is a heavy onus. Nevertheless, it remains an important tool in an employer’s toolbelt when it comes to wrongful dismissal claims. 

Stay tuned for Part 2 of our Mitigation series for more recent guidance from the Courts on the duty to mitigate. 

In the meantime, if you have questions about termination entitlements or the duty to mitigate, get in touch!