Employee's Duty to Mitigate Damages After Termination

Termination of employment is an unfortunate reality that many individuals may face. Once terminated, employees have a “duty to mitigate”, meaning that terminated employees must make efforts to obtain comparable, alternate employment.

This legal obligation places the onus on the employee to take reasonable steps to minimize their losses from the termination by actively seeking new employment. Understanding this duty is crucial for both employees and employers alike, as it impacts common law entitlements and the overall financial award that may be awarded in wrongful dismissal cases.?

The Law

Under the Employment Standards Act, 2000 (ESA), when an employee is terminated without just cause, they are entitled to receive reasonable notice of their termination, or pay in lieu of notice.?

For employees seeking an increased notice period pursuant to the common law, otherwise known as a “severance package”, the duty to mitigate will kick in after the minimum notice period under the ESA ends.

Burden of Proof

In a wrongful dismissal action, the burden of proof rests on the employer to establish, based on a balance of probabilities, the following two elements:

1. The employee did not exert reasonable efforts to seek alternate employment; and
2. The employee could have secured employment of a comparable nature, suitable for their abilities, had they made reasonable efforts.

It is not enough for an employer to simply criticize an employee's efforts to mitigate their losses. The employer must present evidence demonstrating that the employee's efforts were genuinely unreasonable. Criticism without supporting evidence is generally insufficient.?

The Supreme Court of Canada on The Duty to Mitigate

As set out by the Supreme Court of Canada (SCC) in the case of Red Deer College v Michaels, in the absence of a contractual provision stating otherwise, when an employee is terminated from their employment, they have a duty to mitigate and actively seek alternate employment.?

The SCC demonstrated in Evans v. Teamsters Local Union No. 31 in 2008, that in some cases, mitigating damages may require a dismissed employee to return to work for the same employer. Where an employer offers a chance to mitigate damages by returning to work, the court will consider whether a reasonable person would accept the opportunity. In such a case, the salary offered, the working conditions, and the status of the working relationships will be considered.

However, the SCC emphasized in this case that an employee should not be forced to mitigate by working in an atmosphere of hostility, embarrassment or humiliation.? The Court noted that although an objective standard must be used to evaluate whether a reasonable person in the employee’s position would have accepted the employer’s offer, it is important that the non?tangible elements of the situation (including work atmosphere, stigma and loss of dignity) be included in the evaluation.

Reasonable Efforts?

The duty to mitigate requires that employees make reasonable efforts to find comparable employment in order to reduce their financial losses. What constitutes “reasonable efforts” can vary depending on various factors, such as the nature of the employee's occupation, the job market conditions, and the employee's individual circumstances.

The cases noted above and others have consistently emphasized that employees must act diligently and proactively in their job search during the notice period. Just this year in the case of? Zoehner v. Algo Communication Products Ltd., the Supreme Court of British Columbia reduced the Plaintiff’s notice period by 20% for failing to look for comparable employment, and therefore failing to mitigate damages.

Mitigation Steps

To fulfill the duty to mitigate damages, terminated employees should consider taking the following steps:

Actively search for new employment: Employees should promptly start looking for comparable employment opportunities within their field. This may involve networking, utilising online job boards, contacting recruitment agencies, and attending job fairs.

Update and tailor resumes: Employees should update their resumes, ensuring they reflect their skills and experience accurately. Tailoring resumes to each job application can significantly enhance the chances of securing an interview.

Seek professional guidance: If needed, employees may consider seeking career counselling or assistance from professionals specialising in job placement or resume writing. These services can provide valuable insights and advice for a successful job search.

Attend interviews and maintain records: Employees should attend interviews and keep records of their job search efforts, including the dates, positions applied for, and the outcomes. These records can serve as evidence of their diligent efforts if any dispute arises.

Impact on Severance Entitlements

It is important to note that if an employee fails to reasonably mitigate their damages, their common law entitlements may be reduced. The courts may deduct the amount the employee could have earned through reasonable efforts from the total amount of common law notice they are owed. This deduction aims to prevent employees from receiving a windfall by remaining unemployed or underemployed when they could have secured comparable employment.

For further information regarding termination of an employee and their duty to mitigate, do not hesitate to contact us at Workly Law.

Rebecca Stein

Law Student at Workly Law