What Ontario employers need to know about ‘mitigation’

by Sheryl Johnson

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Lake v. La Presse (2018) and its recent appeal help shed light on the subject. Photo credit: Pexels/Sora Shimazaki

 

When we speak of wrongful dismissal damages, assuming there are no contractual provisions limiting such damages or their calculation, we speak of an employee’s “reasonable notice entitlements” under the common law. Such “entitlements” amount to the total value of the lost employment compensation package (e.g., salary, average bonus, benefits, and perquisites of employment) for the duration of what is assessed to be the employee’s reasonable notice period.    

Quantifying such entitlements requires application of the “Bardal factors”.  These factors are:

  • the character of the employee’s employment;
  • the length of the employee’s service;
  • the employee’s age at the time of termination; and
  • and the availability of similar employment, having regard to their experience, training, and qualifications.

Such damages are not a terminated employee’s “right” in and of themselves like statutory entitlements, they are subject to “mitigation”.  

What does that mean?  

1) If a terminated employee finds new employment during their reasonable notice period, then they have “mitigated” their wrongful dismissal damages. Mitigation has no impact on an employee’s statutory entitlements to termination (if not in a working notice period or severance pay under the ESA). When it comes to reasonable notice claims, these are reduced by the amount of the mitigation income. Meaning, an employee gets 100 per cent of their wrongful dismissal damages up and until the point of mitigation. After mitigating, the employee gets the difference between the old and new compensation (what I refer to as the “delta”) for the remainder of their reasonable notice period where the employee is earning less than their pre-termination income; if the employee is earning the same or better, their wrongful dismissal damages come to an end.  

2) If a terminated employee fails to find new employment during their reasonable notice period, the employer can argue that the employee failed to take reasonable steps to mitigate.  Meaning, the employee should not receive the full amount of their wrongful dismissal damages as the employer should not be responsible for losses that the employee could reasonably have avoided. Whether an employee took reasonable steps to mitigate, including whether such failure caused any part of the employee’s losses, is largely a question of fact. The employer bears the burden of proving that the employee failed to take reasonable steps to mitigate their damages. 

In Lake v. La Presse (2018) Inc., 2021 ONSC, the employee’s assessed reasonable notice period of eight months was reduced by two months for failure to mitigate. Herein the court inferred that, had the employee expanded the parameters of her job search and not unreasonably limited her search to senior roles, searched earlier, and applied for more positions, her chances of obtaining a position would have improved significantly. These conclusions were admittedly made without any direct evidence to support them. This reduction was overturned by the Ontario Court of Appeal (OCA).  

The only issue on appeal in Lake v. La Presse, 2022 ONCA 742 was whether the lower court erred in reducing the employee’s wrongful dismissal damages for failure to mitigate. The OCA determined that while the lower court did not err in finding that the employee unreasonably delayed the start of her job search (by one month), it did err when it concluded that: 

– The employee failed to take reasonable steps to mitigate; 

– In order to mitigate, a dismissed employee must begin searching for a lesser-paying job than that they received at the time of dismissal after spending a reasonable period of time attempting to find similar or “comparable” employment. 

– The employee aimed too high in her mitigation efforts and placed too much emphasis on the titles, erroneously assuming that the positions were not comparable.

– The employee would have found comparable employment if she had taken reasonable steps and inferred that had the employee expanded the parameters of her job search, searched earlier, and applied for more positions, she would have had a significantly greater chance of obtaining a position. There was no evidence in this case to support this inference. 

Bottom line for employers

This case clarifies that:

  • The employee must not unreasonably delay the start of their job search. While there may be a delay, it may not be unreasonable.
  • The employee is obliged to seek only “comparable employment” (i.e., status, hours and remuneration). An employee is not obliged to begin searching for a “lesser” job after spending a reasonable period attempting to find similar employment (to that which they had at the time of termination).
  • Don’t assume. If the employee applies for a position with a title that is more senior than their previous title, one needs to focus on the responsibilities of the position applied for rather than its title to make the appropriate assessment.
  • Suppositions are not enough. It is only from proven facts that an employer and a court may draw a reasonable inference that had the employee expanded the parameters of their job search, searched earlier, and applied for more positions, they would have had a significantly greater chance of obtaining a comparable position.

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