Mitigation Following Termination: A Cautionary Note

In the absence of a contractual clause to the contrary, an employee who has been terminated has a “duty to mitigate” and seek alternative employment. As stated in Michaels v. Red Deer College:

“The main rule in breach of contract cases, that an aggrieved plaintiff is entitled to be placed in as good a position as he would have been in had there been proper performance by the defendant, is subject to the proviso that the defendant cannot be called upon to pay avoidable losses which would result in an increase in the quantum of damages payable to the plaintiff. The reference in the case law to a “duty” to mitigate must be included in this meaning. “[1]

In short, this duty requires an employee to take reasonable steps to try to find new employment. A court will reduce any monetary compensation awarded to the former employee by the amount of employment income the employee earned from other sources during the reasonable notice period. A court can also reduce any monetary compensation for an employee’s inaction and take reasonable steps in the performance of their duties.

In a wrongful dismissal action, the onus is on the employer to prove, on a balance of probabilities, both of the following:

  • The employee has not made reasonable efforts to find work; and
  • The employee could have found a similar job, suited to his abilities, if reasonable efforts had been made.

It is often not sufficient for an employer to merely criticize the employee’s efforts, but rather to present evidence that the employee’s efforts were unreasonable. In addition, an employer’s failure to present evidence of reasonable comparable employment may also prevent it from proving a failure to mitigate. However, when an employer succeeds in proving the above elements, the consequences for the employee can be significant.

In Patel vs. Crimp Circuit Inc.. (2022, Small Claims Court decision), the court reduced a notice period granted from 14 months to 5 months (7 months reduction for non-mitigation and further reduction of 2 months of work notice). In finding that the employee failed to mitigate, the Court considered the following facts:

  • The plaintiff did not apply for any job in the field in which he had experience;
  • The company that bought out his trained employer offered him a comparable job, but he did not accept such a job; and,
  • Counsel for the employer provided the employee with six job offers within the industry in which the employee had experience. The employee did not pursue these postings.

Takeaways and considerations

At the time of termination, if an employee has not accepted severance pay, consider reviewing the availability of similar employment. Document these postings and consider sending copies of available postings to the employee/lawyer, rather than waiting for the employee to take action. Additionally, consider providing outplacement counseling to assist an employee in their mitigation efforts. However, if an employer intends to rely on the assistance offered at trial, this should not be conditional on the signing of a release.

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