When Do Employees Not Have a Duty to Mitigate Damages After a Wrongful or Constructive Dismissal?
Under Ontario employment law, employees who have been wrongfully dismissed or constructively dismissed typically have a duty to mitigate their damages. In other words, an employer is generally entitled to a deduction for income earned by the dismissed employee from other sources during the common law notice period.
This requirement means they are required to make reasonable efforts to find new employment in order to reduce the financial losses they suffered as a result of the dismissal. However, there are several exceptions to this general rule where employees may not be required to mitigate their damages. Understanding these exceptions is essential for employees who may be facing a wrongful dismissal or constructive dismissal claim. If you find yourself in this situation, it’s advisable to seek legal guidance from an employment lawyer in Toronto.
In this blog post, we will delve into the circumstances where employees do not have a duty to mitigate damages after a wrongful or constructive dismissal. We will also explore how an experienced wrongful dismissal lawyer can help you navigate these complex legal waters and secure the compensation you deserve, including assistance with your severance package review.
1. When the Employee Is Unable to Work Due to Illness or Disability
A key exception to the duty to mitigate damages is when the employee is unable to work due to illness, injury, or a disability. If an employee is wrongfully dismissed and subsequently faces a medical condition, whether temporary or long-term, they may not be in a position to actively seek alternative employment. Employment law recognizes that individuals with health issues should not be expected to return to work or accept new employment if it exacerbates their condition. In other words, if an employee is dismissed while suffering from a medical condition or disability that prevents them from seeking new employment or performing certain types of work, they are not required to mitigate damages during the period of their incapacity.
For example, if an employee has been let go while on medical leave or after sustaining a workplace injury, they may not be expected to actively seek new employment during their recovery. The duty to mitigate damages is relaxed in such cases to account for the employee’s inability to engage in a job search due to health reasons. However, they may be entitled to claim damages for the period they were unable to work due to their health issues.
If you are dealing with health issues after a dismissal, it is critical to discuss your case with a wrongful dismissal lawyer to determine how your medical condition impacts your legal rights and duties.
In one case called Fenos v Manulife, 2019 ONSC 6861, the Plaintiff settled a wrongful dismissal with the employer.The settlement provided that Fenos had to continue to search for jobs, and if one was secured, the settlement amount would be reduced. Fenos subsequently became seriously ill and was unable to search for new employment as he was totally disabled.
In rejecting the employer’s argument that the employee was capable of searching for work, but chose not do so (resulting in a wilful failure to mitigate), the court held that:
“That is not what happened. Fenos did not willfully fail to comply. He became unable to do so. I find that his disability and resulting incapacity was not within the reasonable contemplation of the parties at the time of the agreement. Fenos would not logically agree to a condition that required him to do that which was physically impossible. Similarly, the company could not, in good faith, have imposed such a condition without clearly stipulating that that was their intent. The only rational inference is that both the employee and the employer contemplated that Fenos would be required to seek reasonable alternate employment so long as he was capable of doing so. This qualification is an implied term of the agreement, reasonably expected by the parties, and not overridden by the language of the agreement.”
If you are facing health challenges after a wrongful dismissal or constructive dismissal claim, a wrongful dismissal lawyer can assess whether your medical condition impacts your ability to mitigate damages and help you seek compensation for lost income.
2. Income Earned from Previously Existing, Simultaneous Employment
If an employee has committed herself to full-time employment with one employer, but her employment contract permits for simultaneous employment with another employer, and the first employer terminates her without notice, any income from the second employer that she could have earned while continuing with the first is not deductible from her damages. However, the rule is that if this simultaneous income exceeds an amount that could reasonably be considered as “supplementary” and, therefore, not in substitution for her employment income, the exception would not apply (i.e., an employer may be able to deduct it from wrongful dismissal damages).
This was made clear in a few cases. For example, in one case, an economist was wrongfully dismissed from his position. During the notice period, he taught an evening class in economics for which he was paid the sum of $3,674. The trial judge did not deduct that sum from the damages award because Mr. McIntosh “could have taught this evening course if he had remained in the respondent’s employ”.
Likewise, in another case, an employee had worked a second job as a cashier at Sobey’s while working full-time as a manager at McDonald’s before she was terminated, which the court found were “not mutually exclusive.” In other words, had the employee stayed employed with McDonald’s, she could have continued to supplement her income through part-time work at Sobey’s. Therefore, the court refused to deduct the income that she received from Sobey’s during the balance of the notice period from the damages award.
3. Employment Income Earned During the Statutory Entitlement Period is Not Subject to Mitigation
An employee’s duty to mitigate does not apply to the minimums set out by the Employment Standards Act, 2000 as it only applies to the common law reasonable notice period. In other words, an employee is entitled to receive all statutory minimum entitlements regardless of any mitigatory earnings.
In a leading Ontario employment law case called Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402, the court confirmed that an employee’s duty to mitigate does not apply to alternate employment income in the statutory entitlement period. As such, the court found that the employee was still entitled to receive all of her severance package entitlements regardless of the fact that she also receive income received from other sources during the statutory notice period. The court’s made clear its reasoning for finding that statutory entitlements are not subject to mitigation and cannot be deducted from wrongful dismissal damages:
“Ms. Brake was entitled to receive her statutory entitlements even if she secured a new full-time job the day after the appellant terminated her employment. Therefore, the income that Ms. Brake earned during her statutory entitlement period is not subject to deduction as “mitigation income”.
At the Ontario Court of Appeal, Gillese J.A. also found that the income Ms. Brake earned from Sobeys was not deductible as mitigatory earnings from the reasonable notice period. The Court determined that Ms. Brake’s employment at Sobeys and McDonald’s were not mutually exclusive. As such, had she continued to be employed by McDonald’s, Ms. Brake could have continued to supplement her income through part-time work at Sobeys.
Specifically, an employee who has had their employment terminated without cause has the duty to search for reasonably comparable employment and to accept that employment if it becomes available. However, if the available employment is substantially different from the employee’s former role, the employee may not be required to accept it.
4. Early Termination of Fixed-Term Employment
Employees on a fixed-term contract are generally not required to mitigate their damages, unless there is a clear mitigation requirement expressly set out in the employment contract.
5. When a New Job Offer Is Not Comparable
An employee is generally required to accept employment that is reasonably comparable to their previous position in terms of duties, pay, status, and other relevant conditions. Therefore, if the job offer is substantially inferior or incompatible with the employee’s previous role, the employee may not be required to accept it.
For example, if an employee was working as a senior executive and is offered a role that is a significant downgrade in terms of responsibilities or salary, they may not be required to accept the job in order to mitigate damages. The employee can reject the offer without it affecting their wrongful dismissal claim, especially if the offer is incompatible with their professional standing.
This concept applies particularly in the case of constructive dismissal, where an employee has been forced to resign due to a significant change in their job terms (such as demotion or a reduction in salary), and any alternative position offered is considered unsuitable (typically done by employers as a strategy to argue the employed failed to mitigate).
A wrongful dismissal lawyer can help determine whether the alternative job you have been offered is truly comparable and whether you are rightfully entitled to reject it.
6. When the Job Offered Is a Demotion or Forces the Employee to Work in a Hostile Environment
Another exception to the duty to mitigate is when an employer extends a job offer after firing an employee, which usually amounts to a demotion or forces them to work in a hostile, demeaning or humiliating environment.
In cases of constructive dismissal, where the employer’s actions make it impossible for the employee to continue in their original role, the employee may be offered an alternative position within the company. However, if the new position is significantly inferior to the employee’s original role—whether in terms of status, responsibilities, or salary—the employee may not be obligated to accept the job offer.
Similarly, if the job offer is to accept a job with the same employer by returning to a work environment that remains toxic, demeaning, or embarrassing—such as through bullying, discrimination, or harassment—the employee may also reject the position. The legal standard is whether a reasonable person in the same position would perceive the offered work environment as intolerable or humiliating.
For example, if an employee was a senior manager and is offered a far more junior, entry-level role with fewer responsibilities or a significant salary cut, they would likely not be required to accept this position. Similarly, if the new job is in an environment where the employee faces continuous hostility, embarrassment, or humiliation (such as ongoing workplace harassment or discrimination), they may be justified in rejecting the offer without affecting their wrongful dismissal claim.
If you find yourself in such a situation, consulting with an experienced wrongful dismissal lawyer can help you assess whether the offer is indeed a demotion or a hostile work environment, and whether it’s reasonable to reject it.
An employment lawyer in Toronto can provide valuable legal advice in determining whether a job offer is truly incompatible and help you understand your rights in a wrongful dismissal claim.
Conclusion
While employees are generally expected to mitigate their damages after a wrongful or constructive dismissal, there are several potential exceptions to this rule, including:
- the duty to mitigate does not apply to the minimums set out by the Employment Standards Act, 2000; rather, it only applies to an employee’s common law reasonable notice period entitlements.
- an employee who had a pre-existing secondary source of income is not required to deduct the money earned by the secondary source of income from the wrongful dismissal damages. However, if the employee has subsequently increased their earning potential due to the loss of their primary employment, an employer may be able to deduct the additional earnings from their wrongful dismissal damages.
- the only jobs available employment are substantially different from the employee’s former role, which may permit an employee to reject it.
- employees on a fixed-term contract are not required to mitigate their damages, unless expressly set out in the employment agreement.
If you have been wrongfully or constructively dismissed, it is crucial to consult with an experienced wrongful dismissal lawyer who can help assess your specific situation, review your severance package, and advise you on how to proceed. With the right legal guidance, you can ensure that your rights are protected and that you receive the compensation you deserve.
If an employee is unsure about whether they need to take a particular action in order to mitigate their damages, they should seek out legal advice.
Whether you need a severance package review, assistance with a wrongful dismissal claim, or legal advice regarding mitigation of damages, the team at Bune Law is here to help. Reach out to us today to discuss your case with an employment lawyer in Toronto.
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If you were terminated from your employment with or without severance package, call today to discuss your options. As an employment law firm in Toronto, Bune Law has reviewed many severance packages and are skilled at negotiating improvements. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.