MITIGATION FOR EMPLOYEES

When your employer ends your employment, they are legally required to pay you, at the very least, the amounts set out in your province’s employment standards legislation. Your written employment contract may say one of two things: it may set out a prescribed period of time that the company will continue paying you (either just those legal minimum periods, or often something longer than that), wherein you can keep earning income under the employment contract that you both signed. The other option, if your contract says nothing or you do not have a written contract, is that your employer then owes you ‘reasonable notice’- which is a rough estimate of how long it might reasonably take you to find a new job.

For your employer’s part though, they are not responsible for paying you out forever. They are only obligated to keep you whole until you can reasonably be expected to find comparable work, at a comparable wage to what you were earning before. If you find something sooner, they may have a provision within your severance package that states that you must let them know, and are then only eligible to earn 50% of whatever amount is remaining. If you still cannot find something within what the law considers a reasonable period of time, then your best recourse is likely Employment Insurance while you continue your search. 

We regularly have clients who phone us on the way home from their termination meeting, and are understandably in various emotional states as they process the news. We always advise people to go home, take a day to work through the news, and then contact us the next day to review things with a clearer head.

Just like our consultations, the duty to mitigate does not mean that you need to start perusing the classified ads the moment you get home from your termination meeting. Employers are looking to see that employees are making ‘reasonable’ efforts, so that means that a few days off to clear your head is not a crime. Additionally, if your exit package includes transitional services or if you have been out of the job market for a long time, then it may take you and/or a counselling service several weeks to work on your resume and interview skills before you even begin your search.

In short, taking 4 or 5 days to rest and recover likely will not be held against you. Taking 4 or 5 months before you begin searching, though, might count as a strike against your chances of recovery. 

We regularly advise our employee clients to keep a detailed chart of their job search efforts. This can easily be done in a spreadsheet where you can log the positions that you’ve applied to, the networking events that you’ve attended, the phone calls and interviews that have come about, etc. 

You do not have to share details of your job search voluntarily, but you do need to keep them handy. If the employer or their lawyer asks about your job search then yes, we are obliged to share details, but not before they ask the question. Remember, their goal is to see you re-employed as quickly as possible to lower their financial burden, so some employers will even collect job postings from within the industry to send our way. While this may seem generous, their end goal is to show you, us, and the courts if needed that there is plenty of other work available. 

Like many questions in law, the answer is – it depends. In this instance, the better question is ‘how much income are you earning while you are looking for work?’

Generally speaking, the rule is that any employment income will be deducted from your severance entitlement. If you are able to find something at exactly the same status as you had before, with the same wages, benefits and everything else, that of course is considered mitigation income. The reality though is that your new job may not be 100% of what you had before – your salary may drop by 5 or 10%, or your benefits package may not be as strong. This is still considered mitigation income, but as your lawyers we may argue that you should be compensated for the difference.

However, suppose you are having zero luck finding anything remotely comparable, and the only thing you’ve been able to find is low skilled work at a fraction of your former income. In one noted case in Ontario for example, a former restaurant manager had gone from her high-status position, to working as an overnight manager at a hardware store at roughly minimum wage. In that instance, the Courts ruled that the significantly lower income that she was earning, which she needed to merely survive, should not be held against her.

There are times where an employer will decide to end your current employment, but offer you something else within the company at a lower title and a lower salary. Whether or not you are required to accept that offer in order to mitigate depends entirely on the circumstances, but if that new offer is an insult to your seniority and experience then there is good law on your side to not take it. 

In the case of that restaurant manager mentioned above, her working relationship with her employer was already deteriorating when they attempted to demote her from manager to First Assistant. She refused, believing it to be a humiliating move, and the Ontario Court of Appeal in that case agreed. They cited an earlier Supreme Court decision which stated that, “The employee is not obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation.  The non-tangible elements of the situation, including work atmosphere, stigma and loss of dignity, as well as the tangible elements, such as the nature and conditions of employment, must be considered in determining whether the objective standard has been met.”

To put it simply, the test is a reasonable one. If it would be unreasonable to accept an offer because of the shame and humiliation that surrounds the new position then the law may well be on your side. 

There is no problem with you deciding to start your own business after losing your job, but know that a court would treat the situation as though you had found new employment. The same principles outlined earlier would still apply.

If your business takes off fairly quickly, and you are effectively able to replace your previous income (or at least the majority of it), that amount will likely be counted against any money your employer may owe you as a result of your termination. If however your business is unsuccessful, or earns a small fraction of what you were making previously, then it will likely not count against you unless a court finds that your decision is completely unreasonable and that you have failed to mitigate your damages.

There are many individuals who view the loss of a job as a sign that they need to return to school, whether to enhance their credentials for a job search or simply to ‘buy some time’ until the job market improves. What a former employer might owe you, however, depends on when you make that decision. 

The general principle is that an employee needs to make ‘reasonable efforts’ to look for new work. In the past courts have agreed that if a terminated employee spends several months making an earnest effort to find new work, and then decides to return to school because they simply cannot find anything, then they should not be penalized. If, however, you decide to jump into an educational program right away and then later turn around and sue for wrongful dismissal, courts can find that you have not made the necessary efforts to look for work after your termination. 

Courts have long taken the position that an employee’s job search needs to be reasonable. This takes into account the reality that if a person is too sick to look for work or to start new work, it should not be held against them. 

In a recent Ontario case, an employee’s settlement with his former employer was partially contingent on his searching for new work. However he became seriously ill after making only one job search phone call, and subsequently went into kidney failure. The court ruled for the employee, stating that the employee was required to make reasonable efforts to look for work “as long as he was capable of doing so.” While his health meant that he was no longer obligated to continue his job search, it did not erase the employer’s requirement to pay out their agreement. That said, if the evidence is that you would not have been able to work even if you still had a job, a court can reduce your severance.

The duty to mitigate may be on you as the employee, but the burden of proof is on your employer as to whether or not you have taken reasonable measures to find new employment. This is why we tell employees to keep a log of their search, and why we help our employer clients to make regular inquiries as to how that search is going.

If the employer alleges that you have failed to mitigate, they have a high burden of proof to show that you have not lived up to your responsibilities. However, courts have ruled on cases where the employee has barely made an effort because they believed that their partner’s wages provided sufficient household income, or they only began looking over a year after being let go. In these cases courts have reduced the notice period the employee is owed, ruling that while an employee is allowed to make their own choices in these instances, employers should not be required to foot the bill for those choices. 

Even despite best efforts, there are times when the job search can feel absolutely hopeless and you may just want to walk away. Do not despair! A frustrating job market could work in your favour when it comes to your termination settlement. 

While your employer may be legally obligated to pay until you could ‘reasonably’ be able to find new work according to your circumstances, the fact that you cannot find new work will not be held against you if you can prove that you’re making a valiant effort. If you intentionally stop looking for a long period, or if you’re refusing to apply for jobs that are well within your skills and capabilities, it will be harder for us to make your case. However, if you keep applying, keep interviewing, and are still coming up empty handed then we routinely use that information as proof that you are deserving of your notice period.