The duty to mitigate is the rule that individuals who are dismissed from work must look for a new job during their notice period. For example, if someone is dismissed from work and they ought to receive twelve months’ notice, then during that next twelve months, they must look for a new job as per their “duty to mitigate”.
If an individual finds a new job during their notice period, income earned at the new job reduces the pay in lieu of notice/severance that the ex-employer will owe the individual. If, however, the individual turns down a new position or fails to make reasonable efforts to find a new one, then the amount the employee would have earned at a comparable position is similarly deducted from his or her award.
Generally, all employees have an implied “duty to mitigate”. Only those rare employees who have fixed-term contracts have no duty to mitigate.
The rule that most individuals must mitigate comes from the age-old common law principle that a plaintiff cannot recover ‘damages’ that could have been reasonably avoided. Think of it this way: If you get in a car accident, and injure your hand, then you have to see a doctor, and you could be awarded less money from the insurance company if the doctor heals your hand fully. The same concept applies to employment law.
How Much Money Is Deducted From The Duty To Mitigate?
If a dismissed employee finds a new job, then he/she has “mitigated” his/her damages (also known as the amount of ‘severance’ or ‘pay in lieu notice’ they are owed), and therefore his/her damages/severance/pay in lieu of notice will be diminished by the amount of income he/she “mitigated”.
For example, if someone earned $100,000 per year at the job they were terminated from, and they ought to receive a twelve-month notice period (i.e., $100,000 in severance), and they work 4 months of the year the next year making $40,000, then $40,000 would be deducted from the amount of pay in lieu of notice the ex-employer would owe them.
Is All Income Deducted From The Duty To Mitigate?
Generally, all income earned by an ex-employee during the notice period will be deducted from his/her severance. However, the income that the ex-employee would have earned even if he/she wasn’t dismissed will not be deducted. For example, if an individual had two jobs when they were let go, the income from the second job will not be deducted from their severance.
In addition, income from a new job made during the statutory minimum notice period will not be deducted from someone’s severance. For example, if someone ought to receive 8 months’ severance, but the first two months of that severance period was the statutory minimum notice period, then any income earned in those first two months is not deducted by the duty to mitigate rule.
Lastly, there is conflicting case law that holds that some income from non-comparable, low-income work is not income that should be deducted under the duty to mitigate rule. The Ontario Court of Appeal’s recent decision in Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 stands for this proposition. The court stated in paragraph 159:
“If the trial judge finds that the new job is comparable to the old one, the earnings should be deducted as mitigation of damages. If the trial judge finds that the new job is vastly inferior to the old one, such that the employee would not be in breach of the duty to mitigate if she turned it down, the earnings should not be deducted [emphasis added].”Brake v. PJ-M2R Restaurant Inc.
What Happens If Someone Fails The Duty To Mitigate?
As discussed above, the duty to mitigate is a two-part rule. First, generally, most individuals must try to find new work to minimize their damages. Second, generally, any income earned if someone finds new work is deducted from their damages.
To that end, what if an individual fails in their duty to try and find new work? What if someone just refuses to look for or apply for new jobs?
As per the duty to mitigate, all individuals must act reasonably to find a new job. Individuals must be realistic; they cannot only pursue high-risk job search efforts.
If an employee fails to find a new job because they acted unreasonably, for example failing to apply to any jobs or only applying to unlikely jobs, then a judge should cut several months off their notice period. The judge should consider at what point the individual should have found comparable work by and end the notice period on that date.
Thus, for an individual to avoid losing severance because of failure of the duty to mitigate, they should make reasonable efforts to pursue comparable work and keep excellent records of all the activities they took to find new work, even if it is unsuccessful. Yes, even if someone fails to find new work, it is not a failure of the so-called duty to mitigate so long as they took reasonable steps to try to find new work.
Conclusion: Duty To Mitigate
The “duty to mitigate” in Ontario/Canada can be summarized as follows:
- Recently dismissed employees have to try to lessen their damages by looking for a new job.
- If the employee fails to look for a new job, he/she is said to have “failed to mitigate”, and the court will subtract from his/her damages some money for failing to mitigate.
- If the employee finds new work, then, generally, all the income earned at the new job will be subtracted from the damages/severance/pay in lieu of notice owed by the employer.
- If the employee diligently looks for new work but fails nonetheless, his/her damages will remain intact.
Jeff is a lawyer in Toronto who works for a technology startup. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles. Jeff is interested in Canadian business, technology and law, and this blog is his platform to share his views and tips in those areas.