Duty to Mitigate in Wrongful Dismissal Cases

Under Ontario employment law, an employee who is wrongfully dismissed by their employer is entitled to be put in the same position he or she would have been if had the employer fulfilled their obligations under employment contract. In other words, an employee in a wrongful dismissal claim is entitled to damages (compensation) for the employer’s failure to provide them with reasonable prior notice or a proper severance package before terminating their employment). However there is one caveat to this rule – the employee is not entitled to be paid for losses that he or she could reasonably have avoided. This rule is referred to as the “duty to mitigate,” which has an important application in the employment law context.

What is an Employee’s Duty to Mitigate?

In basic contract law, an employee’s duty to mitigate requires an employee to take such steps as a reasonable person in the dismissed employee’s position would take in her own interests, that is, to maintain her income and comparable position in his industry, trade or profession.

The duty to mitigate only requires a wrongfully dismissed employee to “act reasonably” by seeking and accepting alternate comparable employment. As such, it does not require an employee to act in the employer’s interests or take steps that will reduce the wrongful damages claim against the employer (that is, the amount of the severance package). This means, among other things, an employee is not required to accept any or the first job that comes along, or even a lower-paying alternate employment with doubtful prospects.

Following a wrongful dismissal, an employee need not immediately look for or apply for new employment, but can take some “recovery time” to deal with the emotional impact of the termination. In fact, the courts have recognized a two to three month period before a job search has to begin in earnest, depending of course, upon what the evidence is as to emotional impact the loss of the job had on the particular employee. Additionally, an employee is also justified in not looking for new employment due to a physical ailment or medical condition causing loss of mobility (Systad v. Ray-Mont Logistics Canada Inc., 2011 BCSC 1202).

Returning to the Same Employer to Mitigate

In some cases, an employee in a wrongful dismissal or constructive dismissal may be required to return to the same employer in order to mitigate their damages if there are otherwise no barriers to re-employment. In fact, in Mifsud v. MacMillan Bathurst Inc., 1989 CanLII 260, the Court held that a reasonable person would, for example, be expected to accept an opportunity to return working for the same employer if the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious. Also, with respect to what is meant by “barriers to re-employment” and “conditions rendering the return to work unreasonable,” the courts have considered some of the following factors:

the history, nature and conditions of the employment
whether or not the employee has commenced litigation (e.g., a wrongful dismissal claim, constructive dismissal claim, discrimination claim, etc.)
work atmosphere, stigma and loss of dignity
whether the offer of re-employment was made while the employee was still working for the employer or only after he or she had already left

In effect, the courts apply a contextual analysis to ensure that, in determining whether an employee failed in their duty to mitigate by not returning to the same employer after a wrongful dismissal, they are forcing the employee to return to “an atmosphere of hostility, embarrassment or humiliation”, which is the most important factor at the forefront of the inquiry into what is reasonable. As one court concluded, the require to consider:

“the non-tangible elements of the situation” including “work atmosphere, stigma and loss of dignity” increases the likelihood that “individuals who are dismissed as a result of a change to their position (motivated, for example, by legitimate business needs rather than by concerns about performance) will be required to mitigate by returning to the same employer more often than those employees who are terminated for some other reason… this is not … because these individuals have been constructively dismissed rather than wrongfully dismissed, but rather because the circumstances surrounding the termination of their contract may be far less personal than when dismissal relates more directly to the individuals themselves.”

Deductions for Mitigation

The general rule is that all income earned by a wrongfully dismissed employee during the reasonable notice period will be deducted from the award of damages. However, there are exceptions, including the following:

income from sources that the employee would have received even if he or she had not been wrongfully dismissed, such as from a simultaneous part-time business an employee ran on the side of his regular employment at the same time (although significantly additional income could be deducted as mitigation of loss of earnings)
amounts required under the Ontario Employment Standards Act, 2000, specifically termination pay in lieu of notice and severance pay
in some cases, income earned from an inferior new job in terms of salary (Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402; MacKenzie v. 1785863 Ontario Ltd., 2018 ONSC 3442; and McLean v Dynacast Ltd, 2019 ONSC 7146).

Contact an Experienced Employment Lawyer

In Ontario employment law, it is always prudent for employers (and employees) to speak with an experienced employment lawyer when they would like to know what legal rights you have as an employer or employee in Ontario. If you are an employee who believes you were wrongfully dismissed or want to negotiate your severance package, please speak with our experienced wrongful termination lawyer in Toronto regarding your legal rights and options as an employee, including negotiating your severance package to obtain the severance compensation you deserve, as well as wrongful dismissal claim.

Contact a Toronto human rights lawyer by phone 647-822-5492 or fill out the contact form to the side. Our employment lawyer in Toronto would be happy to assist in your employment law matter as quickly as possible.

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