An employee who has been terminated is obligated to mitigate their damages by seeking new employment as soon as possible. The theory is that if the terminated employee is in a position to seek other employment and reduce any financial hardship, they must do so.
Impact of New Income
No reduction will be applied to the statutory sums of notice and severance if an employee is successful in finding a new role. These amounts can be substantial, to the maximum collectively, of 34 weeks pay. Even if new employment is found on day one after termination at the same or even higher compensation, these sums are still due in full.
If a court awards damages in excess of the amounts owing under the applicable legislation, any new comparable income earned will have the effect of reducing the claim. This much is clear.
If the new income is modest in comparison to the former position, it is likely that this amount will not reduce the claim.
A written contract that defines a fixed term of employment or a set severance sum must also have words in the agreement showing an obligation to mitigate damages. Failing to include this obligation means that it will not be imposed against the employee. In turn, any new income will not be applied against the damages awarded.
Once the employer asserts the duty to mitigate, any expenses incurred by the employee are then claimable. These can include job resume preparation costs, related travel expenses, possible relocation, counselling expenses and even moving expenses (particularly when the move has resulted in a reduction of the claim due to new employment).
The obligation to prove a failure to mitigate is that of the employer. The company has a tough row to hoe on this subject. The employer must demonstrate not only that the employee failed to look for a new position but also, and this second step is critical, it must show that had the employee been diligent in their job search, they likely would have found a comparable position.
It is a rare day when a company can satisfy this second component of the test. A possible exception would be a situation in which a new company does offer such a comparable position and the employee declines the offer.
A modern application of this principle was found in a recent decision in which the employee had done nothing at all to seek new employment. He was, however, 65 years of age, had been employed as a snowplow operator, had not finished high school and lived in a rural area and was not expected to move. In this case, a notice period of 14 months’ was awarded, but reduced to 12 months in view of the employee’s failure to take any steps to mitigate.
A fundamental understanding of the onus of proof will help the employer’s strategy. Some companies actually search newspapers and on-line positions to use as a test of a former employee’s diligence. All this being said, it is generally a tough position to win.
The employee should be aware of the statutory entitlements and the details as set out above, particularly the need to track job search expenses. It is a good exercise to keep accurate records. This is one aspect of the case entirely within the employee’s control.
Get Advice Before You Act
This is an important issue to understand on both sides. For advice on this and similar issues and, indeed, any employment issue, contact the offices of Toronto employment and labour lawyers atMallins Law. We regularly advise employees and employers on legal workplace issues. Contact us online or by phone at 647-792-0310 to schedule a consultation.