As we have written previously, employees have a duty to mitigate their losses. This means making reasonable efforts to obtain comparable alternate employment after being terminated. Failure to do this may result in reduced damages in a claim against the employer for wrongful or constructive dismissal.
It can be difficult for an employer to prove that the employee still needs to mitigate losses. The recent decision of the Court of Appeal for Ontario in Lake v La Presse shows us why.
Employer needs to show the employee failed to take reasonable steps to mitigate and therefore did not secure a comparable position
The onus is on the employer to establish that the employee has failed to mitigate reasonably. This has been described as “by no means a light one.” The employer must prove the following two things.
Employee failed to take reasonable steps to mitigate damages
Firstly, the employer must show that the employee did not make reasonable efforts to obtain comparable alternate employment. The employee needs to search and apply for comparable positions. Waiting too long to start the job search after being terminated and only applying for positions above their previous role is likely to count against the employee.
However, the employee need only accept a position comparable to their former employment. This means a comparable position reasonably adapted to the employee’s abilities. Courts have assessed comparable positions by comparing a range of factors, including geographical location, nature of the work and compensation.
Employee would have been expected to obtain a comparable position if they made reasonable efforts
The second step requires the employer to show that, if reasonable steps had been taken, the employee would likely have found a comparable position during the reasonable notice period. This is necessary because a breach of the employee’s duty is only relevant if it contributes to their loss.
The employer may show that specific comparable positions were available at the time. It is also possible to meet this step’s requirements by inference from proven facts. For example, if the employee delayed the start of their job search and then found a comparable position quickly, the employee’s notice period may be reduced.
Employee had two months’ damages deducted for failure to mitigate
Turning to the recent decision of the Court of Appeal, the plaintiff was employed by an online French-language newspaper as general manager. She was the most senior employee in Toronto and reported to a vice president in Montreal. She managed a sales team that generated advertising revenue.
The plaintiff was dismissed after the employer decided to close the Toronto office. She brought a wrongful dismissal action and was awarded damages equivalent to an eight-month notice period, less than two months for failure to mitigate. The employee appealed, arguing that the damages should not have been reduced for failure to mitigate.
Did the employee take reasonable steps to mitigate her damages?
The motion judge decided that the steps taken by the employee were not reasonable in the following three ways.
Employee waited too long before starting job search
The employee was notified in March 2019 that her employment would end on May 30. She stopped working on April 30. The motion judge concluded that the plaintiff did little to look for work until June and that this constituted waiting too long. The Court of Appeal agreed.
Employee did not need to apply to lower-paying positions after a period
The motion judge decided that after a reasonable period of trying to find similar employment, an employee needs to start searching for a lower-paying job. The judge found that the plaintiff should have applied for sales representative roles.
The Court of Appeal disagreed, saying:
“The obligation of a terminated employee in mitigation is to seek “comparable employment”, which typically is employment that is comparable in status, hours and remuneration to the position held at the time of dismissal … There was no obligation for the [plaintiff], to seek out less remunerative work, including by working as a sales representative.”
Employee did not “aim too high” by applying for senior roles
The motion judge found that the plaintiff aimed too high by applying for vice-president positions. The Court of Appeal disagreed again, finding that the plaintiff searched regularly and did not limit herself to positions that would have been a promotion over her prior position. She applied for 20 suitable positions that matched her work experience and qualifications. The plaintiff took reasonable steps to mitigate her damages in the circumstances.
Would she have found comparable employment if the employee had taken reasonable steps?
Turning to the second step, the motion judge inferred that had the plaintiff expanded her job search and applied for more positions, her chances would have improved. It was reasonable to assume that comparable positions existed.
The Court of Appeal disagreed with the motion judge again. While it is possible to draw a reasonable inference from proven facts, in this case, there was no evidence to support an inference that, if the plaintiff applied for other positions, she would have found comparable employment. Furthermore, the inference drawn by the motion judge did not satisfy the test – the existence of positions does not mean that the plaintiff would have obtained one during the notice period.
Due to these errors, the Court of Appeal granted the plaintiff eight months’ notice, with no deduction for failure to mitigate.
Contact Haynes Law Firm in Toronto for Guidance on Employee Termination and the Duty to Mitigate
The duty to mitigate is a complex area of law and difficult for employers to prove. It is important for both employers and employees to seek advice from an experienced employment lawyer when either defending or bringing a claim after being terminated. Haynes Law Firm helps achieve effective solutions to legal issues and conflict management in employment law and civil litigation. Please contact us online or call us at 416.593.2731.
