It pays to seek advice when it comes to the duty of mitigation

Employment/Labour /
Ellen Low
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By Tony Poland, LegalMatters Staff • The duty to mitigate is not always an easy rule to interpret and both employees and employers would be wise to guard against making assumptions that could be costly in the long run, says Toronto employment lawyer Ellen Low.

Low, principal of Ellen Low & Co., explains the duty to mitigate is the common law principle requiring a terminated worker to minimize their losses by making a reasonable effort to find a new job during their notice period.

“Mitigation is a common argument and the discussion turns to whether the steps the employee took were sufficient,” she tells LegalMattersCanada.ca. “That extends to factors such as the timing of job search efforts. There are different pieces of the mitigation puzzle that can be really tricky.  

“When I am counselling a client on a termination, the talk centres on what the employee is owed or what employer is required to pay.  One of the things we spend a great deal of time on is this concept of the duty to mitigate,” Low adds. “From my experience, it confuses people because under ordinary principles of contract law, the terminated employee is entitled to be put in as good a position as they would have been in had there been proper performance. But it is subject to the qualification that the employer cannot be required to pay for losses the plaintiff could have avoided.”

Duty to mitigate can be misinterpreted

It is not uncommon for “the doctrine of mitigation” to be misinterpreted, Low says.

“What makes this duty interesting is that it is not an obligation owed by the dismissed employee to the former employer,” she says. “Rather, it is a requirement that a dismissed employee take appropriate steps in order to maintain their income and position in the industry. It is an obligation by the employee to act in their own best interest. But, of course, it also translates into avoiding damages or losses by the employer.”

Low says determining what is reasonable can be challenging.

“Mitigation is often a hotly contested issue in the course of employment litigation because judges have a fair amount of discretion about what they can do,” she says. “ There are multiple tests, and multiple steps to the test, all of which the employer must prove on a balance of probabilities.”

Low cites Okano v Cathay Pacific Airways Limited as a recent example of how an employee’s job-hunting decisions can affect their severance. 

Downturn in industry led to dismissal

The Court was told a 61-year-old woman who had worked for Cathay Pacific for 35 years was being terminated due to the unprecedented downturn in the airline industry due to the pandemic.

The woman failed to seek other employment during her notice period from October to December 2022. In fact, it was several months later that she started her job search. However, the court found that her position with Cathay Pacific “was a significant feature of her identity” and in such cases, “employees should be given a reasonable period of time to process the shock of the termination.”

When she did apply for jobs, it was for 50 positions outside of the airline industry. The woman had stated, “I put 35 years into the airline industry, and so, at this point in time, I believe, after 35 years, in choosing my next career, I should be able to choose something that I feel I have the heart to do.”

But Low, who was not involved in the case but comments generally, says employees likely have an obligation to seek work in their chosen field during the notice period, or, face what happened here, a court-reduced severance entitlement. Here the court reduced Okano’s severance entitlement by three months.

‘She was effectively penalized’

“When she chose not to look at other positions in the airline industry, she was effectively penalized,” she says, “If she had said she no longer wanted to work in the airline industry following the notice period, then that is really none of the business of her former employer or the judge, although during the notice period, it may be a different story.”

However, even if an employee refuses to look for work during the notice period it does not necessarily mean courts will rule in favour of an employer who is seeking to limit severance, says Low, pointing to Hucsko v. A.O. Smith Enterprises.

In the case, a man was awarded 20 months of service after being dismissed for just cause in July 2017.  Court was told he decided his prospects for finding work were limited because he was 60-year-old so he decided to build a sailboat instead of sending resumés out.

“He was very forthright in that he made next to no effort to try and find another job,” says Low.

In his ruling Justice G.E. Taylor writes he has “no difficulty in concluding that the plaintiff failed to make reasonable efforts to find alternate employment.”

Failed to test the job market

“He decided, without even testing the job market, that he would be unable to secure alternate employment,” Taylor states.

However, Taylor went on to say the onus is on the employer “to prove, on a balance of probabilities, that the plaintiff failed to make reasonable efforts to find alternate employment.”

“[The employer] has not discharged its burden of proving that if reasonable job search efforts had been made, the plaintiff would have found another job at a similar level of remuneration as he was receiving at the time of the termination of employment,” writes Taylor. “The defendant provided no assistance to the plaintiff to find alternate employment. Outplacement counselling was not offered. No reference letter was offered. There was no evidence that alternate employment was available in the plaintiff’s field within a reasonable distance of the plaintiff’s residence.”

Burden of proof is on employer

Low says it is the employer’s responsibility to prove the employee failed to make reasonable efforts to find work, not the other way around. She also advises the employer to be proactive when dealing with terminated workers.

“When you are an employer, it is best practice to send a terminated employee a letter of reference and job listings that you think are comparable or that the plaintiff might be interested in. If you are facing litigation, you can potentially demonstrate that the worker failed to make those necessary reasonable efforts,” says Low.

In the end, she says both employers and workers should seek legal advice when it comes to the duty to mitigate.

“If you have been dismissed, you should be keeping careful records with respect to your mitigation efforts. Where are you looking for work? Who are you talking to?” says Low. “On the other side of the fence, if you are the employer, you should be ensuring the employee is taking steps to mitigate the job loss. You need to seek disclosure of those efforts.”