What is an Employee's Duty to Mitigate?

Under basic legal principles, if a party to a contact (such as an employment contract) suffers a violation of its terms known as a breach of contract, a court will typically award them damages (or financial compensation) to put them in the position they would have been in had the other party to the contract performed its obligations in full. However, there is an exception to this rule called the “duty to mitigate” losses.

Basically, while a party that breaches a contract will be obligated to compensate the innocent party for any financial losses suffered, that obligation ends at the point where the innocent party could reasonably have avoided. In simple terms, this means that an employee has to take reasonable steps to look for and apply to new comparable jobs (i.e., not identical jobs or jobs that are inferior to the one previously held, in terms of job title, responsibilities, compensation, work location, etc.).

While the impact of the duty to mitigate in a wrongful dismissal case will typically help employers avoid having to provide an employee with a larger severance package than necessary (particularly since an employee who starts a new job is not entitled to more severance pay from an employer beyond that date), it does not mean this duty is owed to the employer. In other words, is is not intended to benefit an employer’s interests, but rather it is thought of as an employee’s requirement to do whatever is necessary to protect his or her own interests by finding a new job to maintain their income and career.

Duty to Mitigate Applies to Common Law Notice Period Severance Package

It is important to note that the duty to mitigate only applies to an employee’s full entitlement to a severance package under common law that goes beyond their statutory minimum entitlements under the Ontario Employment Standards Act, 2000. For instance, if an employee is terminated without cause after 5 years of work, the employer owes them a guaranteed amount of 5 weeks prior notice of termination, or 5 weeks termination pay (and potentially additional 5 weeks of severance pay), regardless of whether they find a new job during that time period. However, if the employee wants to obtain a severance package with additional compensation (e.g., 4 months of pay), they will have to keep reasonably looking for new employment and satisfy a court that they deserve more compensation than the minimum 5 weeks of termination pay because they were unemployed for the entire 4 months after their termination.

Duty to Mitigate May Require an Employee to Accept Re-Employment with the Same Employer (In Some Cases)

In some circumstances of a wrongful dismissal or constructive dismissal, the courts may require dismissed employee to accept an employer’s offer to return to work, but only if there are no barriers to re-employment, such that an employer can prove the working relationship was one of “a situation 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.”

However, in many cases while an employee may be under a duty to accept re-employment on a temporary basis in some circumstances, this will rarely because case since often the working relationship relationship will have become so frayed that a reasonable person would not expect both sides to work together again in harmony,” especially if (objectively speaking) the employee would be forced to return to a work environment of hostility, embarrassment or humiliation.

Duty to Mitigate May Result in New Employment Income being Reduced from Severance Package

Generally, the contract law rule is that all income earned by the wrongfully dismissed employee during the notice period will be deducted from the award of damages (or severance package). However, this rule will typically not apply to income that the employee would have received regardless of being dismissed, such as employment income from a part-time job the employee held at the same time, or their minimum statutory entitlements under the Ontario Employment Standards Act, 2000.

Call Now if You Are Looking for Employment Lawyer in Toronto

If you are an employee who believes they were wrongfully terminated from your employment, it is important to speak with an experienced Toronto wrongful dismissal lawyer as soon as you are told by your employer that their employment will be terminated. Likewise, if you are an employee who believes you have been wrongfully dismissed and the decision to terminate was unjust or discriminatory, please speak with our experienced wrongful dismissal lawyer in Toronto regarding your options, including negotiating your severance package to obtain the severance compensation you deserve, as well as wrongful dismissal claim.

Contact us 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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