Mitigation

An employer may terminate indefinite (not term) employment at any time upon reasonable notice or pay in lieu of notice. Once fired, an employee is required at common law to make reasonable and diligent efforts to "mitigate" or cut their losses, as this is required by the common law. Mitigation income is deducted from any damages for wrongful dismissal at trial. The question then is how does one mitigate his/her losses in this situation? What steps must one take in order to avoid the finding at trial that they "failed to mitigate" their damages?

Firstly, the common law requires a dismissed employee to make "reasonable and diligent efforts" to replace their income. At trial, the employer is the one charged with the onus of proving a "failure to mitigate". A court will find someone failed to mitigate if he/she refused to accept an offer of alternative employment that was reasonable for him/her to have taken. The other way to fail to mitigate is to make no efforts to replace their income. The employer bears the burden at trial to prove a failure to mitigate.

The most obvious way to mitigate one's damages is to become similarly employed elsewhere. But what about employees who start their own company or change careers following their dismissal both of which options often involving a delay in earning replacement income. And is the employee required to re-locate in order to mitigate?

In determining the issue of mitigation the court will carefully examine the employee's reasons for starting a company or changing careers. The court wants to know whether the decision was reasonable in the circumstances. The court will inquire into the employee's rationale. Where the employee is older or has less marketable skills, the courts usually find that starting a company was acceptable. An employee facing a very poor job market and few similar positions in their particularly field will not be penalized by starting a company.

The same reasoning applies for changing careers. Courts are more apt to not reduce damages at trial where the economy is slow or where there are very few positions available for the particular employee. That said, some courts have reduced the damages for wrongful dismissal where the employee used the notice period to re-qualify to earn future income.

The cases on whether an employee must relocate to mitigate have similar results. The courts will examine whether it was reasonable for the employee to re-locate. In one case involving an engineer in an industry where relocation was customary, the court found that the plaintiff should have moved from Vancouver to Calgary to take a position offered to him. In another case, an employee who was offered a position that required a taxi-ride costing much of her pay-cheque was not required to accept such position. Much will depend on what the court finds is reasonable in the circumstances.

If you have been fired and need information on your next steps, please contact me.