Does a Wrongfully Dismissed Employee Need to Seek New Work?
Former Employees Have a Duty to Mitigate By Taking Steps to Reduce the Losses That Occur By Termination of Employment. The Duty Applies to Employees Whether the Termination was a Wrongful Dismissal or Constructive Dismissal.
Understanding What Constitutes As a Failure to Mitigate Within Wrongful Dismissal or Constructive Dismissal Cases
The law in Canada often requires a harmed person to mitigate. Simply stated, the harmed person must act reasonably in a genuine effort to reduce the extent of the harm suffered. In the employment law context, this duty to mitigate is imposed on the wrongfully terminated employee. Frustratingly to many employees who misperceive that some form of punishment should be inflicted upon the employer, the employee is unable to simply sit around doing nothing all the while blaming the past employer for the employee’s unemployed situation; and accordingly, when an employee sues an employer for terminating without proper notice or termination pay-in-lieu of proper notice, the employer often points back alleging that the employee failed to mitigate. The requirement to make a reasonable effort to obtain new employment was well articulated within the cases of Lake v. La Presse, 2022 ONCA 742, and Clark v. Township of Otonabee-South Monaghan, 2019 ONSC 6978 wherein it was said:
Lake v. La Presse,
2022 ONCA 742 at paragraph 11 to paragraph 13
Clark v. Otonabee-South Monaghan,
2019 ONSC 6978 at paragraph 17 to paragraph 21
The Requirement to Minimize Loss of Income
When a wrongful dismissal occurs, that is when an employer fails to provide reasonable notice of termination or proper pay-in-lieu of notice, an employee is generally granted some time to get over the initial shock of unemployment as well as to prepare and implement a job seeking strategy. A few weeks to a few months, depending on the situation, as a grieving period is generally granted by the courts. However, if an employee fails to seek new employment within a reasonable period of time, or fails to keep proof of the effort, the employer may become excused from liability.
Mitigating With the Same Employer
Surprising, the law sometimes requires the dismissed employee to mitigate by staying on with the very employer that is terminating the employee. This requirement, where the dismissing employer makes a clear offer for the employee to work out the notice period, or a portion of, was stated by the Supreme Court in Evans v. Teamsters Local Union No. 31, [2008] 1 S.C.R. 661 where it was said:
Evans v. Teamsters,
[2008] 1 S.C.R. 661 at paragraph 29 to paragraph 31
While unusual that an employer desires a dismissed employee to stay on and work out the notice period, where the employee is at low risk to commit sabotage, breach confidentiality, or cause other difficulties, the employer might make the offer to stay on. If there is nothing humiliating or embarassing or unduly oppressive or indignifying, the employee may have the duty to stay on and work out the notice period.
As a means of protecting employees from employers that may allege that an employee failed to accept a notice period position, the Ontario Court of Appeal stated in Farwell v. Citair (General Coach Canada), 2014 ONCA 177 that the employer must offer a, “… clear opportunity …” to mitigate. Specifically, the Court of Appeal said:
Farwell v. Citair,
2014 ONCA 177 at paragraph 20
Oddly, if the employee was constructively terminated whereas the employer unilaterally made substantial changes to the employee’s position and the employee turned down this new alternate position and advising that the employee is deeming the change as a constructive termination, the employer is required to retable the offer. Essentially, in such a situation, the employer must make the offer twice – the first time when offering the employee the alternate employment position that was turned down and deemed a constructive termination and then again for the second time as a mitigation position. It is important to note that the offer of the mitigation position must happen after the employee declines the alternate employment position that triggered the constructive termination situation. While seemingly odd that the employer must offer the position twice, this actually makes logical legal sense, even if not common sense, simply because the duty to mitigate – and an opportunity to mitigate – fails to exist until after termination occurs. Accordingly, if the event that culminates in termination is the offer of an alternate employment position consistent with a constructive termination, then this offer was originally in the context of employment rather than mitigation. If the employer wishes to rely on a failure to mitigate defence, the employer is required to clearly re-offer the position in the context of a chance to mitigate; as again, the duty to mitigate and a chance to mitigate are unable to exist until after termination first occurs. This requirement was further explained and clarified in the case of Fillmore v Hercules SLR Inc., 2016 ONSC 4686 where it was said that a failure to accept a lesser position, essentially a demotion, is not a failure to mitigate. Specifically, it was said:
Fillmore v. Hercules SLR Inc.,
2016 ONSC 4686 at paragraph 28
Employment Insurance
Historically, much confusion appears whereas it seems that monies received by the employee as income from employment insurance during the notice period was commonly deducted and applied as a form of income loss mitigation; however, as the Court of Appeal reminded in Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402, such monies are intended as a benefit and are excluded from calculation as mitigation monies. Specifically, the Court of Appeal said:
Brake v. PJ-M2R Restaurant,
2017 ONCA 402 at paragraph 101 to paragraph 105
Statutory Entitlements
Additionally, the Court of Appeal in Brake also stated that monies earned during a statutory notice period, such as income from a new job during the period of notice prescribed by the Employment Standards Act, 2000, S.O. 2000, Chapter 41 are excluded from mitigation calculations whereas it was said:
Brake v. PJ-M2R Restaurant,
2017 ONCA 402 at paragraph 111
Summary Comment
When an employee is dismissed and brings a wrongful dismissal case seeking compensation for insufficient notice or pay-in-lieu of notice, the employee is required to make a reasonable effort to minimize losses by taking reasonable steps to a new job (substitute employment). If the employee unreasonably delays the search for a replacement position, the compensation due to the employee may be reduced. While the employee bears the duty to seek new work, the employee is allowed a reasonable period of time to get over the initial shock of unemployment. Of special note, it is the employer that bears the burden to prove that the employee failed to mitigate which includes the burden to prove that an opportunity to obtain a suitably comparable position was available. Of further interest, in some situations, the employee may have a duty to mitigate with the very employer that is terminating the employee.