In the employment context, the duty to mitigate requires employees who have been terminated with or without notice to take all reasonable steps to minimize losses suffered as a result of the end of employment. Mitigation applies in the context of both constructive dismissal and wrongful dismissal.
The duty to mitigate becomes relevant where an employee challenges the notice period given on termination. If it can be shown that despite mitigation efforts the employee could not find comparable employment, the damages award will be based on the reasonable notice period determined by the courts. However, if it can be shown that the employee failed to mitigate, the notice period to which he or she may have otherwise been entitled will be reduced.
What are the employee’s obligations in mitigating loss?
The most common way for terminated employees to mitigate losses is to actively seek and take on new employment. However, they are not required to accept just any opportunity. The duty to mitigate is limited to accepting employment in a position comparable to the one from which the employee was terminated. Canadian case law indicates that if an employee is offered substantially similar employment, the duty to mitigate obliges him or her to accept it, and refusal of such an offer will deny him or her the damages as of the date of that offer.
This concept was highlighted in the recent Alberta Queen’s Bench decision in Nixdorf v Broadstreet Properties Ltd, 2017 ABQB 132. The Court held that although the employee had a responsibility in law to take reasonable steps in mitigation of his damages, he did not fail to take reasonable steps in mitigation by declining a job offer from a third party company which offered lower compensation and no prospects of advancement. The Court found that the employee made a reasoned decision based on his own best interests.
Employers bear the burden of proof to show failure to mitigate
When a notice period is challenged, the defendant employer must plead the failure to mitigate, and bears the onus of establishing that had the employee made efforts towards re-employment, he or she would have had a reasonable chance of success. It is therefore in an employer’s best interests to demonstrate that they too facilitated mitigation by assisting the employee in obtaining new employment. Providing letters of reference, job counselling or access to job recruiters to dismissed employees are practical steps an employer can take to help mitigate damages and thereby limit the employer’s own liability.