Knowing how mitigation works can be crucial for both employers and employees
If there is one area of wrongful dismissal law that is most difficult to assess, it is the concept of mitigation.
With a termination of employment, at least it is usually clear that the contract of employment has ended, and it is a matter of simple factual verification to determine whether the employer either has, or hasn’t, given correct notice or severance as required by that contract.
These basic facts of a dismissal are usually clear and verifiable at the point of dismissal.
It can be determined whether there has been a wrongful dismissal or not and, if there has been, what the likely damages claim for the notice period would be.
Since monetary damages for wrongful dismissal claims are assessed from dismissal forward in time, however, the concept of mitigation becomes crucial to the outcome of the case.
Mitigation is a duty on the dismissed employee that – if not handled correctly by the employee – can reduce or eliminate the damages claim for wrongful dismissal.
As a result, close attention should be paid to the requirements of the duty to mitigate.
So what is mitigation?
It is a duty placed by the law upon a wrongfully dismissed employee to act reasonably in seeking and accepting equivalent alternate employment where it is available.
It is a duty whereby the dismissed employee is expected by law to act reasonably in his or her own interest to minimize the damage done to him or her by the dismissal. In other words, to try to maintain his or her income and position in the business world.
The duty to mitigate arises after the dismissal, and continues – unless otherwise interrupted – for the period of notice that the employer owes to the dismissed employee.
The duty to mitigate is not a duty that the wrongfully dismissed employee owes to the dismissing employer.
The employee has no obligation to act in the employer’s best interests. Thus, the employer has no right to expect the employee to take significantly lesser work, or work with doubtful prospects, or work which is clearly inappropriate in the circumstances.
The employee does not have a duty to accept any work. Rather, the duty relates to similar or equivalent work.
Mitigation can have various effects on a wrongful dismissal damages claim:
∑Where the dismissed employee fully discharges his or her duty to mitigate, and no employment is found despite the reasonable efforts having been made, mitigation has no effect in reducing damages. In fact, in some cases, it can increase damages.
∑Where the dismissed employee fully discharges his or her duty to mitigate, and new employment is commenced within the notice period, then the earnings from the new employment act to diminish the damages owed by the dismissing employer.
∑ If new employment is begun half-way through the notice period, and the new employment pays less than the old employment, then the damages claim becomes half the notice period at full pay, and then the difference between the rate of pay from the commencement of the new employment, for the balance of the notice period.
∑ If the employee fails to make reasonable efforts to mitigate his or her loss, then the damages claim will be reduced for this failure to mitigate. For example, if the employee fails to mitigate, and would otherwise be owed a notice period of 10 months, that notice period claim will be reduced to the point in time where the court finds the failure to mitigate to have commenced.
Typically, courts are somewhat flexible with wrongfully dismissed employees, allowing a short time of inactivity in terms of an employment search to allow the employee to adjust to the trauma of dismissal, where circumstances warrant.
But, where a reasonable adjustment time slides into a failure to make reasonable mitigation efforts, the court may find that such failure leads to the premature end of the notice claim for the employee.
The onus to prove a failure to mitigate lays on the wrongfully dismissing employer. Most employers, however, use mitigation as a bargaining lever to reduce offers of severance pay.
Due to the uncertainties of mitigation, the employer will often offer a fraction of the correct notice or payment in place of notice, and will give as their reason that the employee is a good candidate for re-employment in the near term.
But the duty to mitigate does not require the wrongfully dismissed employee to bargain or negotiate the term of notice.
Notice is established at law, not by the employer, and not by the principles of mitigation.
Mitigation is a duty the employee owes to him or herself that the court will enforce under appropriate circumstances.
Mitigation has nothing to do with the wrongfully dismissing employer, although at the end of the day, the employer may benefit from its effects.
But, at the outset, when the dismissal has just occurred, mitigation should not be a factor in determining the appropriate period of notice owed for the dismissal.