While an employer is entitled to terminate an employee at any time without cause, the employee may bring a wrongful dismissal action if the employer does not provide sufficient notice or pay in lieu of notice, as required by law. 

However, employees have a duty to make reasonable efforts to obtain comparable alternate employment, known as the duty to mitigate. This is based on a rule in breach of contract cases that a wronged plaintiff is entitled to be put in as good a position as they would have been in if there had been proper performance by the defendant but cannot obtain avoidable losses. 

This article looks at five basic things that employees and employers should know about the employee’s duty to mitigate following a without cause termination. You should consult with an experienced employment lawyer for advice on your specific circumstances.

1. When does the duty to mitigate apply? 

The duty to mitigate applies when an employee seeks compensation for wrongful dismissal through the courts, for example, reasonable notice under the common law. If an employee is constructively dismissed, they are also subject to the duty to mitigate.

Rights provided under the Employment Standards Act 2000, such as the statutory minimum notice period, are not subject to the duty to mitigate. 

2. How might employment contracts affect the duty to mitigate?

If an employment contract contains a termination clause that specifies a fixed notice period in the event of termination without cause but is silent with respect to a duty to mitigate, the Court of Appeal for Ontario has held that there is no obligation on the employee to mitigate their damages. 

Similarly, if the employment contract is for a fixed-term and does not include a provision for early termination without cause, the employee may be entitled to the wages they would have received until the end of the term of the contract and have no obligation to mitigate. 

3. What does the employee need to do to comply with the duty to mitigate?

Where the duty to mitigate applies, employees have a duty to make reasonable efforts to obtain comparable alternate employment. This has been described as involving a “constant and assiduous application for alternate employment and exploration of what is available through all means.” Employees are required to search for and accept reasonably comparable employment. 

When does the job search need to start?

It is up to the court to decide what is reasonable in the circumstances. Courts have held that it is not reasonable to assume that the day after an employee has gone through the trauma of being fired that he or she must immediately seek alternate employment and that it is appropriate to give the employee a period of adjustment and recovery. 

What kind of position does the employee need to accept?

The employee does not need to accept any available position, only those that are comparable to their former employment. Comparable employment does not mean identical employment but a comparable position reasonably adapted to the employee’s abilities.

Courts have assessed comparable positions by comparing a range of factors, such as geographical location, nature of the work and compensation. 

Does the employee need to accept a position with their former employer?

In cases of constructive dismissal, it is possible that employees may be required to mitigate their damages by returning to work for the dismissing employer if the employer offers the employee a chance to return to work. 

The central issue is whether a reasonable person would accept the opportunity to return to work. Courts have said that a reasonable person should be expected to do so where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious. However, the employee is not obliged to mitigate their damages by working in “an atmosphere of hostility, embarrassment or humiliation”.

4. Who bears the burden of proof in relation to the duty to mitigate?

The onus is on the employer to establish a failure on the part of the employee to make reasonable efforts to mitigate. This has been described as “by no means a light one”, with the courts requiring an employer to prove that the employee did not take reasonable steps to find a comparable position and would likely have found a comparable position if they had done so.

Dismissed employees often keep a journal or record of their job search efforts, which can be useful in rebutting an employer’s claim that they have not taken reasonable steps to mitigate. 

5. What are the implications of complying or failing to comply with the duty to mitigate?

The court will deduct from the employee’s damages any actual earnings during the period of reasonable notice. In other words, the court will determine the employee’s reasonable notice period and reduce the compensation by the amount of employment income earned by the employee during that period.

If an employee does not make reasonable efforts to mitigate, the court will reduce the notice period awarded to the employee, thereby reducing their amount of damages. If the court determines that the employee was offered a comparable position that they did not accept, the court may end the notice period at the point that the employee was offered the comparable position. 

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination and the Duty to Mitigate

Haynes Law Firm helps employers and employees throughout Ontario achieve effective solutions to legal issues and conflict management in employment law and civil litigation. We ensure our employee clients leave nothing on the table when negotiating the terms of their dismissal so they have the resources they need while they seek new employment. We also help employers manage employee terminations to limit their exposure to legal claims. Please contact us online or call us at 416.593.2731.