Employee Mitigation in Ontario Wrongful Dismissal Claims

Mitigation of damages is a crucial concept in employment law, which can have a significant impact on termination pay and the outcome of termination disputes, depending on whether you’re the employer or the employee. But what does “mitigation” mean in this context? This article outlines the essentials of mitigation in Canadian employment law.

What is Mitigation in Employment Law?

In the context of Ontario employment law, mitigation refers to the legal duty of an employee who has been dismissed or laid off to take reasonable steps to reduce their financial loss by seeking (and applying for) similar new jobs. This duty aims to lessen the employer’s potential liability in terms of severance or termination pay. For example, if a terminated employee quickly secures a new job, the income they earn from that job may reduce the amount of termination pay the employer is required to provide. Essentially, the purpose of an employee’s duty to mitigate their wrongful dismissal damages is to prevent employees from unnecessarily prolonging their unemployment or seeking excessive compensation when they could have reduced their losses through reasonable efforts.

What is Considered Mitigation?

The concept of mitigation involves several key elements, and the definition of “reasonable efforts” can vary based on several factors, including the employee’s age, qualifications, work experience, and the state of the job market. The type of work an employee is seeking must also be taken into account.

Generally, the following activities are considered part of an employee’s duty to mitigate their losses:

Actively Seeking Comparable New Employment: This could include applying for jobs, attending job interviews, networking to find out about potential new job opportunities, and other reasonable efforts to secure new work.
Accepting a Reasonable Job Offer: Employees are typically expected under employment law rules to accept a comparable position when it is offered. If a similar role with similar compensation is available, an employer will likely argue that by refusing it, the employee failed to mitigate.
Updating Career Skills, Education and Qualifications: In some situations, employees may be expected to take educational or job training courses, attend workshops, or otherwise enhance their skills in order to improve their chances of finding new employment.
Keeping Track of all Job Search Activities: Employees may be required to keep records of their job search efforts, including proof of applications and interviews.
Starting a Business or Freelance Work: In some cases, self-employment or freelance work can be considered valid efforts to mitigate damages, especially if comparable work in the employee’s field is not immediately available.

If an employee does not make reasonable efforts to mitigate their damages, the amount they can claim as part of a wrongful dismissal suit may be reduced.

How Mitigation Affects an Employee’s Termination Package

In Ontario, when an employee is terminated without cause, they are generally entitled to a severance package. Mitigation plays a significant role in how this package is calculated. The goal of an employee’s severance package is to compensate them for the loss of income during the period of unemployment. As a result of the mitigation rule, if an employee finds new employment quickly, the employer’s financial obligation is reduced accordingly since the employee’s period of lost income has been shortened.

For example, if an employee is entitled to 18 months’ salary in severance but secures a comparable new job after 8 months, the employer may only need to pay the employee’s full compensation for the 8 months of unemployment, as the employee’s financial loss has been mitigated. However, the employer may be able to avoid paying the employee the remaining 10 months of severance as the comparable new job effectively reduces the employee’s claim for damages.

However, the employee is not legally required to accept any job in order to mitigate damages. Rather, the new job must be considered comparable to the one that was lost. The courts look at various factors to determine whether a job is comparable, such as:

Pay – The salary or compensation must be similar to the previous position.
Location – The new job’s location should not be excessively distant, unless travel is reasonable or customary in the industry.
Job Title, Reporting Structure, Hours, and Duties and Responsibilities – The new role should not significantly alter the terms and conditions of the employee’s role, including job title, reporting relationship, job responsibilities, or working hours.

If an employee accepts a job that is not comparable to their previous position, it may still be considered a reasonable attempt to mitigate, but the employer may not receive the full benefit of reducing termination pay. For instance, if an employee is successful in a wrongful dismissal claim and is entitled to receive 20 months of compensation, but had previously obtained an inferior new job within 12 months after termination, the employer may be able to reduce (offset) the income the employee earned from their new job for the remaining 8 months of the notice period.

Employer Considerations and Employment Standards

Employers should always keep the concept of mitigation in mind when navigating the termination process. While mitigation can reduce the amount owed to an employee in severance pay, it is important to note that the Ontario Employment Standards Act (or similar applicable employment legislation) outlines minimum termination entitlements. An employer cannot reduce an employee’s severance below the statutory minimum, even if the employee finds new work soon after termination.

Additionally, many employment contracts or termination agreements will specifically address how mitigation will affect an employee’s severance pay. These agreements may set out particular expectations regarding the employee’s job search efforts, or they may provide specific terms regarding how mitigation is to be handled.

Employers can also help ensure that the mitigation process is handled correctly by including clear mitigation-related terms in the termination agreement or settlement documents. This can help both parties understand their rights and obligations, reducing the likelihood of disputes.

Conclusion

Mitigation is a key principle in Ontario employment law that can significantly affect both the termination pay an employee receives and the employer’s financial obligations. Employees have a legal duty to make reasonable efforts to find new employment and reduce their financial losses following termination. For employers, understanding mitigation and how it impacts the severance process can help avoid unnecessary liabilities and ensure compliance with legal requirements. By keeping these principles in mind, both parties can navigate termination disputes more effectively.

Book a Consultation with an Employment Lawyer in Toronto

At Bune Law, we understand and are familiar the complexities of workplace law and are committed to helping both employers and employees navigate these challenges, including understanding just cause vs. wilful misconduct. Whether you are an employer or employee dealing with employment contracts, workplace disputes like a wrongful dismissal or constructive dismissal, or simply need guidance on your rights and obligations for a severance package review and negotiation, our experienced employment lawyer is here to assist you.

Book a confidential consultation with our Toronto employment law firm to protect your legal rights to understand your options and protect your rights.

Why Choose Bune Law When You Need an Ontario Employment Lawyer?

Experience in all areas of workplace law, including wrongful dismissal claims, constructive dismissal claims, severance package reviews, severance package negotiations, discrimination and human rights disputes, and employment contract reviews, including navigating the important issue between just cause vs. wilful misconduct in Ontario employment law.
Proven track record of successfully resolving workplace disputes through negotiation, mediation, and employment litigation.
Compassionate and personalized approach to each case, ensuring tailored solutions that meet your specific needs.

If you need a Toronto employment lawyer who is committed to delivering strong results and proactive solutions, please contact Bune Law online or by phone today at 647-822-5492.