As discussed in our blog post on wrongful dismissal, in Canada non-unionized employees can be let go at any time for almost any reason. Assuming there is no discrimination on a protected human rights ground, or other special circumstance, the only question is whether the employee has received the notice of termination and/or severance pay to which he or she is entitled. If they have, they still have a duty to mitigate.
This blog post describes some of an employee’s responsibilities after being terminated ‘without cause’, which may affect the severance pay they are owed.
If a terminated employee is entitled to reasonable notice under the common law, then it is very important for the employee to understand they have a duty to mitigate their damages. This means that they have a duty to take reasonable steps to find comparable employment.
For example, if someone is dismissed from their job and they are entitled to receive twelve months’ notice (or pay in lieu of notice), then during the next twelve months they must look for a new job as part of their “duty to mitigate”.
If the employee successfully finds a new job during the applicable ‘notice period’, then any income earned at the new job reduces the damages a court would award them. Further, if the employee turns down a comparable new position, or fails to make a reasonable effort to find one, then a court will also reduce his or her award.
Think of it this way: if after you are in an automobile accident, either you or your doctor fail to make any reasonable efforts to heal your injury, then the insurance company will likely owe you less money. The same principle applies in employment law after you are terminated.
“What do I need to do if I am terminated?”
Based on the above, there are two practical aspects to the duty to mitigate:
First, recall that a court may reduce your entitlement to severance pay if you do not take reasonable steps to find new employment. Therefore, we always recommend that our clients document all their job search efforts – for example, all networking activities, job applications, or time spent searching online. This way, if an employer alleges that the employee failed to take reasonable steps to find new employment, the employee can use their mitigation diary as evidence. Terminated employees should consult with an employment lawyer about what type of evidence would be suitable in your situation.
Second, if the employee does manage to find a new job, then his or her entitlement to notice will be reduced ‘dollar for dollar’ by the income earned from the new employment. It could therefore significantly affect the value of your claim. This often comes as a surprise to terminated employees.
“Is all new income deducted from what my former employer owes me?”
If a dismissed employee finds a new job, then he or she has “mitigated” the damage. Therefore, what their former employer owes them for notice or severance pay will usually be reduced by the amount of income they earned at the new job. For example, if you are owed twelve months’ notice of termination, and you earn $30,000 within the next twelve months, then $30,000 will be deducted from the amount your former employer would owe you.
Generally, all income earned by a former employee during the notice period will be deducted from their severance entitlement. However, any income that the employee would have earned even if they had not been dismissed will not be deducted. For example, if the person worked two jobs and they were let go from only one of them, the continuing income from the second job will not be deducted from their severance.
Importantly, income from a new job earned during the statutory minimum notice period will not be deducted from someone’s severance. For example, if under the Labour Standards Code you are owed a minimum of four weeks’ notice based on your length of service, any income earned in those first four weeks post termination will not be deducted.
Finally, courts in some provinces have held that if your new job is vastly inferior to your old one, income earned from such non-comparable or lower-income work should not be deducted under the duty to mitigate rule. For example, the duty to mitigate does not require a highly paid executive to take work as a low-wage service employee post-termination.
Who does the duty to mitigate apply to?
Almost all employees have an implied “duty to mitigate” upon termination. Generally, only employees who have “fixed-term contracts” have no duty to mitigate, and such employment contracts are rare.
What happens if I try but fail to find a new job?
Terminated employees must act reasonably to find a new job. You must be realistic and you should not restrict your job search to high-risk applications that are unlikely to succeed.
If an employee fails to find a new job because he or she acted unreasonably, then the judge will consider when that person should have found comparable work, and the notice period will end on that date. This means a judge will likely shave several months off the applicable notice period.
The key point is that, in order to avoid losing severance because of a failure to mitigate, terminated employees should make reasonable efforts to pursue comparable work. They should keep clear records of all the activities they undertook to find a new job, even if they are unsuccessful. They do not necessarily need to start a job search the day after being terminated, but they should not wait too long before they start looking.
If you are let go by your employer and you suspect you haven’t been offered enough severance, you should consult with an employment lawyer immediately to discuss your obligations and how this important mitigation principle applies to you. Contact us today to book a consultation with our employment lawyer, Daniel Wilband.
The above is provided for informational purposes only and does not constitute legal advice — contact a lawyer to discuss your personal circumstances and learn your options.
About the Author
This article was written by Daniel Wilband, one of our employment lawyers. To learn more about Daniel, please visit our about us page. To learn more about our services in employment law, please visit our employment law page.