Employment Termination Notice Including Notice Requiring Efforts to Mitigate Income LossesA Helpful Guide to Understanding the Employment Law Requirement to Minimize Loss of Income By Reasonable Effort to Find a New Job

The law in Canada often requires a harmed person to 'mitigate'.  Simply stated, the harmed person must act reasonably in a genuine effort to reduce the extent of the harm.  In the employment law context, this 'duty to mitigate' is imposed on the wrongfully terminated employee.  Frustratingly to many employees who misperceive that some form of punishment should be inflicted upon the employer, the employee is unable to simply sit around doing nothing all the while blaming the past employer for the employee's unemployed situation; and accordingly, when an employee sues an employer for terminating without proper notice or termination pay-in-lieu of proper notice, the employer often points back alleging that the employee failed to mitigate.  The requirement to make a reasonable effort to obtain new employment was recently well articulated in the case of Clark v. Township of Otonabee-South Monaghan, 2019 ONSC 6978 wherein it was said:

[18]  The defendant argues that the plaintiff has failed to properly mitigate his damages, citing the facts that he has made no applications for employment, has not sought the assistance of a professional employment agency, and has limited the scope of his search to “grader operator”.

[19]  The law relating to an employee’s duty to mitigate damages is described as follows in Evans v. Teamsters Local Union No. 31, 2008 SCC 20 (CanLII), [2008] 1 S.C.R. 661, at paras. 99f:

In Red Deer College, at p. 332, the Court held that the burden of proving that an employee has failed to mitigate his or her damages lies with the employer. Laskin C.J. cited Cheshire and Fifoot's The Law of Contract (8th ed. 1972), to explain the nature of the burden:

the burden which lies on the defendant of proving that the plaintiff has failed in his duty of mitigation is by no means a light one, for this is a case where a party already in breach of contract demands positive action from one who is often innocent of blame. [p. 599]

As this passage suggests, the burden of proof is onerous. This is consistent with the approach to [page705] mitigation as a principle in damages more generally. As Waddams observed: "In case of doubt, the plaintiff will usually receive the benefit, because it does not lie in the mouth of the defendant to be over-critical of good faith attempts by the plaintiff to avoid difficulty caused by the defendant's wrong" (15.140).

An employer alleging a failure to mitigate must prove two things: that the employee did not make a reasonable effort to find new work and that had the employee done so, he or she would likely have been able to obtain comparable alternative employment. In other words: that the loss was avoidable.

[20]  While I agree that the plaintiff’s efforts at mitigation seem, at least on the surface, to be somewhat lacklustre, this may very well be a factor of the limited availability of comparable jobs where he lives, and has worked. In any event, there is no evidence to suggest that the plaintiff could have obtained comparable alternative employment had he put more effort into the search.

[21]  In the result, I find that the defendant has failed to satisfy its onus of proving that the plaintiff has failed in his duty of mitigation.

When a wrongful dismissal occurs, that is when an employer fails to provide reasonable notice of termination or proper pay-in-lieu of notice, an employee is generally granted some time to get over the initial shock of unemployment as well as to prepare and implement a job seeking strategy.  A few weeks to a few months, depending on the situation, as a grieving period is generally granted by the courts.  However, if an employee fails to seek new employment within a reasonable period of time, or fails to keep proof of the effort, the employer may become excused from liability.

Surprising, the law sometimes requires the dismissed employee to mitigate by staying on with the very employer that is terminating the employee.  This requirement, where the dismissing employer makes a clear offer for the employee to work out the notice period, or a portion of, was stated in Evans v. Teamsters Local Union No.  31[2008] 1 S.C.R.  661 at 29 to 31 by the Supreme Court.  While unusual that an employer desires a dismissed employee to stay on and work out the notice period, where the employee is at low risk to commit sabotage, breach confidentiality, or cause other difficulties, the employer might make the offer to stay on.  If there is nothing humiliating or embarassing or unduly oppressive or indignifying, the employee may have the duty to stay on and work out the notice period. 

As a means of protecting employees from employers that may allege that an employee failed to accept a notice period position, the Ontario Court of Appeal stated in Farwell v. Citair (General Coach Canada)2014 ONCA 177 at 20 that the employer must offer a, "...  clear opportunity ..." to mitigate.  Incredulously, if the employee was constructively terminated whereas the employer unilaterally made substantial changes to the employee's position and the employee turned down this new 'alternate position' and advising that the employee is deeming the change as a constructive termination, the employer is required to retable the offer.  Essentially, in such a situation, the employer must make the offer twice - the first time when offering the employee the 'alternate employment position' that was turned down and deemed a constructive termination and then again for the second time as a 'mitigation position'.  It is important to note that the offer of the 'mitigation position' must happen after the employee declines the 'alternate employment position' that triggered the constructive termination situation.  While seemingly odd that the employer must offer the position twice, this actually makes logical legal sense, even if not common sense, simply because the duty to mitigate - and an opportunity to mitigate - fails to exist until after termination occurs.  Accordingly, if the event that culminates in termination is the offer of an 'alternate employment position' consistent with a constructive termination, then this offer was originally in the context of employment rather than mitigation.  If the employer wishes to rely on a 'failure to mitigate' defence, the employer is required to clearly re-offer the position in the context of a chance to mitigate; as again, the duty to mitigate and a chance to mitigate are unable to exist until after termination first occurs.

Summary Comment

When an employee is dismissed and brings a wrongful dismissal case seeking compensation for insufficient notice or pay-in-lieu of notice, the employee is required to make a reasonable effort to minimize losses by taking reasonable steps to a new job (substitute employment).  If the employee unreasonably delays the search for a replacement position, the compensation due to the employee may be reduced.  While the employee bears the duty to seek new work, the employee is allowed a reasonable period of time to get over the initial shock of unemployment.  Of special note, it is the employer that bears the burden to prove that the employee failed to mitigate which includes the burden to prove that an opportunity to obtain a suitably comparable position was available.  Of further interest, in some situations, the employee may have a duty to mitigate with the employer that is terminating the employee.

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