Employment Law – Wrongful Dismissal – Mitigating Damages

Written by Arman Sabet Rasekh

Mitigation is an essential component in wrongful dismissal cases. A dismissed employee has a legal duty at common law to take reasonable steps to avoid or mitigate their damages. This means that an employee must seek and accept alternate employment to maintain their income and their position in their industry, trade, or profession. Whether you are an individual who has been dismissed from your employment or an employer who has dismissed an employee, the issue of mitigation can vary the amount to be awarded or settled substantially.

Who has the legal onus to prove mitigation or a failure to mitigate?

An employer has the legal onus to demonstrate that an employee has failed to take reasonable steps to mitigate their damages or that the employee has mitigated some or all of their alleged damages. The employer must not only show that the employee failed to take steps to mitigate but also that had the employee taken those steps, the employee could likely have found equivalent employment.

Examples of what would constitute reasonable steps to mitigate.

1. Retraining

A dismissal can be impactful for long-tenure employees who may not have undertaken or been provided with ongoing education and skills upgrading. These employees feel that on dismissal, an initial task is to undertake retraining to become employable in a competitive market. Retraining can be an acceptable form of attempting to mitigate. While the court will not relieve a dismissed employee from the duty to mitigate entirely, retraining after reasonable but unsuccessful attempts to find comparable employment will generally be acceptable to meet the duty.

2. Opening a business

Employees have wide latitude regarding the duty to mitigate. The courts have found that opening one’s own business can be a reasonable step to mitigate depending on the circumstances. For example, when a dismissed employee makes numerous applications for alternate comparable employment and no opportunities are forthcoming, the court has held that the decision to start a business is reasonable and not a failure to mitigate.

3. Re-employment or continuing employment with the dismissing employer

In some circumstances, the duty to mitigate may require employees to accept re-employment or, in the case of a constructive dismissal, continuing employment with the employer that has just terminated their employment. This would exist where an employer offers an employee the chance to mitigate damages by returning or continuing to work. The issue, however, becomes whether a reasonable person, in all the circumstances, would accept the opportunity.

A reasonable person may be expected to do so where the salary offered is the same, where the working conditions are not substantially different or demeaning, and where the personal relationships involved are not acrimonious.

A reasonable person may not be expected to do so where it would require them to work in an atmosphere of hostility, embarrassment, humiliation, or lack of trust in the employment relationship.

Additional factors to consider include the nature of the employer’s offer, the timing of the offer, and whether litigation has been commenced. Thus, although an objective standard is used to determine whether a reasonable person in the employee’s position would have accepted the employer’s offer, it is important to also consider elements such as work atmosphere and the nature and conditions of employment.

Conclusion

It is important for the employer and the dismissed employee in a wrongful dismissal action to take immediate steps on dismissal to deal with the issue of mitigation. A mitigation defense will be satisfied or fail based on facts and the strength of one party’s strategy over the other. Mitigation is an important component in wrongful dismissal cases and can have a significant impact on the extent of damages to be awarded or settled.

To learn more about mitigation or for assistance with other elements of your employment matter, get in touch with the experts at Linley Welwood.