Can Your Severance Be Reduced If You Don’t Try to Find a New Job?
In Ontario, mitigation in employment law refers to a dismissed employee’s legal obligation to make reasonable efforts to find new employment following their wrongful dismissal.
What is Mitigation?
Employees who are terminated without just cause are typically entitled to reasonable notice of termination or pay in lieu of that notice. However, this entitlement is not absolute. The common law requires employees to “mitigate” their losses by seeking comparable employment. The rationale is simple: damages awarded in a wrongful dismissal case are meant to compensate for the loss, not to provide a windfall.
Why is Mitigation Important?
Mitigation ensures fairness between employers and employees. It balances the rights of the employee to be compensated for wrongful dismissal against the broader principle that parties must take reasonable steps to limit their losses.
In wrongful dismissal cases, the court will analyze whether the employee made a reasonable and diligent effort to find comparable work. If they did and could not secure new employment, their damages may remain unchanged. However, if the court finds the employee failed to mitigate, the court may reduce the notice period.
Employee’s Responsibilities
The primary duty of mitigation lies with the dismissed employee. They are expected to:
- Actively search for comparable employment;
- Maintain records of job applications and responses;
- Accept reasonable job offers, even if they are not ideal or slightly different from the previous role.
Employees are not required to accept a vastly inferior or demeaning job, but courts expect them to be realistic and proactive. The standard is not perfection, but reasonableness in the context of the job market and the individual’s circumstances.
Employer’s Responsibilities
The employer has the burden of proof to show that the employee failed to mitigate. This involves demonstrating that:
- Comparable employment opportunities were reasonably available;
- The employee did not pursue these opportunities diligently;
- A reasonable person in the employee’s position would have accepted or at least pursued such opportunities.
In some cases, employers may even offer re-employment as part of mitigation. Courts will scrutinize such offers to ensure they are genuine, not humiliating, and not made in bad faith.
Consequences of Failing to Mitigate
If an employee does not make reasonable efforts to mitigate, the court may reduce or even eliminate the damages awarded. For instance, if a comparable job was available and the employee chose not to apply or accept it without good reason, the court may find that they failed to mitigate and reduce an award of damages.
However, courts heavily burden employers who attempt to prove an employee’s failure to mitigate damages. In Jimmy How Tein Fat v. PRGX Canada Corp., 2023 ONSC 6374, an employer tried to allege that an employee failed to mitigate his damages by not making sufficient efforts to secure comparable employment within his specialized field and therefore should receive a lesser notice period.
To determine whether the employee had failed to mitigate, the court examined his job search efforts and whether comparable positions were available. The employee presented a log of his job search, detailing contacts he had contacted and efforts to upgrade his skills. Although the court noted that he could have started his job search earlier, it emphasized that the standard for mitigation is not perfection. The employee’s log demonstrated a sustained effort to seek senior-level employment.
The court noted that the employer failed to prove that comparable jobs were available during the notice period. The employer did not provide job postings, industry reports, or expert testimony to suggest the employee could have secured a comparable position had he tried harder. Additionally, the employer had not offered any assistance to help the employee find work, which weakened its argument that he had failed to mitigate. As a result, the court did not deduct any of the damages awarded for a failure to mitigate.
Final Thoughts
Mitigation is vital in Ontario employment law, ensuring that dismissed employees are fairly compensated while encouraging accountability in how they respond to job loss. Both employees and employers must understand their obligations to navigate wrongful dismissal claims effectively. However, employers must be aware that to demonstrate that an employee failed to mitigate, they must prove that there were available roles, the employee did not pursue these roles, and that a reasonable person would have pursued and/or accepted them.
Author – Jordan Cantor