An Employee’s Duty to Mitigate in Wrongful Dismissal Cases

In Ontario employment law, the general rule is that an employee has a legal obligation to look for (and accept) comparable employment. This is called the “duty to mitigate” income losses. How does this rule work in practice?

This duty to mitigate means an employee has to put reasonable efforts to look for and applying for similar jobs in his or her industry, trade or profession. Therefore, following a wrongful dismissal (or constructive dismissal), employers will usually argue they can reduce all income earned by a dismissed employee during the common law reasonable notice period any award of damages (apart from any income that the employee would have received regardless of being dismissed, such as from simultaneous employment).

Mitigation with the Same Employer

In the employment law context, Ontario courts have generally held that an employee’s duty to mitigate does not require a dismissed employee to return to the same employer that terminated their employment, except in those relatively rare cases where there the employer and employee can still maintain a relationship of “mutual understanding and respect, and a situation where neither the employer nor the employee is likely to put the other’s interests in jeopardy” (Farquhar v. Butler Brothers Supplies Ltd., 1988 CanLII 185 (BC CA)).

In other words, unless an employer can establish there is no hostility or acrimony, an employee will usually not be required to accept re-employment with the same employer, since a termination of employment will often involve a frayed employment relationship. In fact, some courts have gone so far as to suggest that, in the case of a wrongfully dismissed employee, the plaintiff need not mitigate their losses by going back to the employer who fired him or her. For instance, in Evans v. Teamsters Local Union No. 31, 2008 SCC 20, the Supreme Court of Canada had this to say:

” … when an employee is fired without cause and without reasonable notice, the dismissal is, at law, “wrongful”. The employee is immediately entitled to an action in damages. He or she has lost the job, period. That means, to use the language of Professor Fudge, that the employer has lost the “right of control” and the employee has lost the “open-ended duty of obedience” (p. 530).

But even if one can assert that a wrongfully dismissed employee’s duty to mitigate may include returning to the workplace, I agree with Gower J. (and the existing jurisprudence) that it would only be in “the rare case” that such an expectation would be reasonable (para. 93). The rarity of expecting a dismissed employee to mitigate damages in the same workplace is already well recognized in the case of constructive dismissals. The reason such an expectation should remain a remote and exceptional possibility…

Surely the employee should not be kept on the employer’s strings, having to respond at the slightest whim of the same company that deliberately rejected him by the act of dismissal.”

So, it is generally appropriate to assume that (objectively speaking) in the absence of conditions rendering the return to work unreasonable, a dismissed employee can be expected to mitigate damages by returning to work for the dismissing employer. In other words, in some circumstances, “where there are no barriers to re-employment,” a wrongfully dismissed (or constructively dismissed) will be required to mitigate his or her damages by returning to work for the same employer. This can only be determined on a case-by-case basis. In the case of Mifsud v. MacMillan Bathurst Inc., 1989 CanLII 260 (ON CA), the Ontario Court of Appeal specifically stated:

“The fact that the transfer to a new position may constitute in law a constructive dismissal does not eliminate the obligation of the employee to look at the new position offered and evaluate it as a means of mitigating damages. In all cases, comparison should be made to the contractual entitlement of the employer to give reasonable notice and leave the employee in his current position while a search is made for alternative employment. Where 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 (as in this case) it is reasonable to expect the employee to accept the position offered in mitigation of damages during a reasonable notice period, or until he finds acceptable employment elsewhere.”

In order to determine whether an employee has “barriers to re-employment,” or whether there are “conditions rendering the return to work unreasonable,” the courts have offered the following guidance:

“other relevant factors include the history and nature of the employment, whether or not the employee has commenced litigation, and 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 (paras. 12-18). In my view, the foregoing elements all underline the importance of a multi-factored and contextual analysis. The critical element is that an employee “not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation” (Farquhar, at p.94), and it is that factor which must be at the forefront of the inquiry into what is reasonable. Thus, although an objective standard must be used to evaluate whether a reasonable person in the employee’s position would have accepted the employer’s offer (Reibl v. Hughes, 1980 CanLII 23 (SCC), [1980] 2 S.C.R. 880), it is extremely important that the non-tangible elements of the situation — including work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, the tangible elements — be included in the evaluation.”

In that decision, the court noted that the requirement to evaluate “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… because the circumstances surrounding the termination of their contract may be far less personal than when dismissal relates more directly to the individuals themselves.”

For example, in a case called Chandran v. National Bank of Canada, 2012 ONCA 205 (CanLII), the Ontario found that a constructively dismissed senior bank manager was not required to mitigate his damages by accepting a lower non-supervisory position offered by the bank (despite but at the same salary and level). In particular, the court agreed with the employee that the employer’s decision to impose “serious discipline” and the serious findings of misconduct indicated that mitigation in these circumstances would have subjected the employee to “an atmosphere of embarrassment or humiliation, as well as a real fragility in his continuing employment.”

Lake v. La Presse

In a more recent case called Lake v. La Presse, 2022 ONCA 742, an Ontario court provided further guidance on a wrongfully dismissed employee’s requirement to accept re-employment with the same employer. In that case, the employee appealed an earlier summary judgment in a wrongful dismissal action, where the first court awarded damages equivalent to 6 months’ reasonable notice after deducting 2 months for failure to mitigate. The main issue on appeal was whether the lower-level court erred in reducing the employee’s wrongful dismissal damages for failure to mitigate.

Facts

The employee was hired in August 2013 and worked for the employer for 5.5 years as General Manager, reporting to the Vice President of Sales and Operations. In her job, she earned compensation consisting of an annual base salary of $185,000, along with a car allowance, annual bonus, pension, and other benefits. She was 52 years old at the date of her wrongful dismissal. On March 25, 2019, the employer notified her that it was terminating her employment, effective May 30, 2019. After the termination of her employment, the employee conducted a job search, but she remained unemployed at the date of the summary judgment motion, which was 2 years after her wrongful dismissal. In the first hearing, the court reduced her notice period of 8 months by 2 months to account for the employee’s failure to take reasonable steps to mitigate her damages, specifically on the basis that she “aimed too high” by not applying for lower-level jobs, and “waited too long” and “applied to very few jobs”.

Appeal

The Court of Appeal allowed the appeal and held that the employee was entitled to damages for the full 8-month reasonable notice period. By relying on its earlier decision in Carter v. 1657593 Ontario Inc., 2015 ONCA 823, the court held that the obligation of a wrongfully terminated employee to mitigate their damages is to seek “comparable employment.” This means an employee is only required to apply for jobs that are similar in status, hours, and remuneration to the position they held at the time of wrongful dismissal. As such, there is no obligation for a wrongfully dismissed employee to seek out a lower-paying job.

Employment Lawyer in Toronto

If you are an employee who believes you have been wrongfully dismissed, please speak with our experienced employment lawyer in Toronto regarding your options, including negotiating your severance package to obtain the severance compensation you deserve, as well as wrongful dismissal claim.

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