Losing a job can be one of the most traumatic events that a person may experience in the course of one’s life, sometimes even being on par with a family breakdown or the loss of a loved one. That’s because we all know that work is more than just a “contract”, and it’s certainly more than a paycheck. Our co-workers are not just colleagues, they are friends, collaborators and mentors. Many people will spend more time awake at the office than they will with their family. In many ways, work defines who we are, as our Supreme Court once eloquently stated nearly 30 years ago:
Work is now considered one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.
Like any significant loss, people facing termination are allowed time to decompress, get some advice and contemplate their options. However, at some point there will be an expectation that everyone who has lost employment will make reasonable efforts to find a new job. This process is called the duty to mitigate, and has important implications on claims for wrongful dismissal.
Mitigation will Impact Damages
Under ordinary principles of contract law, a wronged plaintiff is entitled to recover damages for breach of contract for all losses that could not have been reasonably avoided. In the context of employment law, we recognize a contractual term in all employment relationships to provide “reasonable notice of termination”, or as it is often called, severance.
Assessing reasonable notice is often an imperfect science, but one of its primary functions is to provide a terminated employee time and resources to secure alternate employment. Naturally, this imposes a duty on the worker to seek out alternate work, or as the BC Court of Appeal stated in Forshaw v. Aluminex Extrusions Ltd., 1989 CanLII 234: “a duty to take such steps as a reasonable person in the dismissed employee’s position would take in his own interests – to maintain his income and his position in his industry, trade or profession”.
This suggests that all income earned by the dismissed employee during the notice period will be deducted from the award of damages. To use a simple example, if a court awards a plaintiff 12 months reasonable notice of termination, but the employee finds work that pays the same amount after only 4 months, there is a strong argument that the employee will only be entitled to 4 months lost wages. If this same plaintiff finds a new job that pays $1,000 a month less than his pre-termination employment after 4 months, the employee will be entitled to 4 months lost wages plus the difference in salary for the remaining 8 months.
Failing to Mitigate will Impact Damages
Similarly, if a terminated worker does not make reasonable efforts to find comparable employment, there can be significant impacts on damages the employee is entitled to receive. As stated in the recent decision Steinebach v. Clean Energy Compression Corp., 2016 BCCA 112:
A dismissed employee’s duty to mitigate is to take reasonable steps to find alternative employment, that is, to secure employment that will replace the employee’s lost income. If the employee fails to take any steps to do so, the result may be no damages. Where the employee takes some, albeit inadequate, steps to do so, damages may be reduced to take that into account. Similarly, where an employee opts to take employment at a lower income when employment could have been secured to replace fully the lost income, damages may be reduced to take that fact into account.
Accordingly, employee decisions which serve to take the employee out of the job-hunt can have significant implications on damages. In the past, our courts have found that prolonged vacations following termination, returning to school shortly after termination and even starting a small business can amount to a failure to mitigate depending on the circumstances (although returning to school and becoming self-employed have in other cases been viewed as appropriate).
Failing to Mitigate is the Employer’s Burden of Proof
Employers have the difficult onus of proving that a terminated employee has not made reasonable efforts to find alternate employment. To successfully do this, the employer will need to judiciously audit any efforts the employee had made to find comparable work, will need to carefully monitor the job market for appropriate positions, and will need to submit comprehensive evidence. Furthermore, proving a failure to mitigate will require employer’s counsel to vigorously cross-examine the plaintiff on any evidence presented on mitigation.
From the plaintiff’s perspective, it is imperative to have detailed records of any efforts to find employment. This should include a mitigation journal where daily entries on search efforts are recorded, as well as preparing a mitigation binder, where copies of cover letters, resumes and application forms are preserved.
For a recently terminated employee, it way seem like the employer is the beneficiary of any efforts to find to find new work. After all, if the plaintiff finds new work quickly, the company pays less while the employee makes no more.
I like to caution against this type of thinking. As previously noted, work is so much more than a paycheck. It contributes to our self-esteem, identity and emotional well-being. It provides structure, cammaraderie and purpose. To put it simply, we are better off when we are working, contributing, collaborating and growing. And so if the right opportunity comes along, I always encourage people to think hard about it, even if it means that the company pays less at the end of the day.