Mitigation issues can save an employer months of termination pay and/or gut your termination case, depending on whether you are the employer or employee in a dispute. But what exactly is mitigation? This post sets out the basics.
What is Mitigation?
In Canadian employment law, mitigation refers to the legal obligation of an employee who has been terminated or laid off to make reasonable efforts to find comparable employment. This principle of "mitigating damages" is used to reduce the potential compensation or termination package an employer may be required to pay. For instance, if an employee is terminated and they find a new job within a short period, the courts will set off the new income from the amount that the previous employer may be required to pay because the employee has mitigated their loss of income.
What Counts as Mitigation?
What constitutes "reasonable efforts" and "comparable employment" can vary greatly depending on the circumstances, such as the employee's age, education, experience, and the availability of suitable jobs.
Mitigation includes:
1. Actively seeking new employment: This could involve applying for jobs, attending interviews, networking, etc.
2. Accepting a reasonable job offer: If a comparable job is offered, the employee is generally expected to accept it.
3. Undergoing retraining or upgrading skills: In some cases, the employee may be expected to take courses or undergo training to improve their employability.
4. Documenting job search efforts: The employee may need to provide evidence of their job search efforts, such as records of job applications or interviews.
5. Self-employment or freelance work: In some cases, efforts to start a business or work as a freelancer may count as mitigation.
If the employee fails to mitigate their losses, it may result in a reduction of their wrongful dismissal damages.
How does Mitigation Impact Your Employee's Termination Package?
In Canada, when an employee is terminated without cause, they are generally entitled to a termination package. The impact of mitigation on an employee's termination package can be significant. If the employee finds a new job quickly, the amount of their termination package may be reduced. This is because the purpose of the package is to compensate the employee for their loss of income during the period of unemployment. If the employee is able to mitigate their loss by finding new employment, their need for compensation is reduced. For example, if an employee is entitled to a termination package that includes 6 months of pay, but they find a new job after 2 months, they may only receive 2 months of pay from their termination package. The remaining 4 months would be considered mitigated by the new employment. However, it's important to note that the duty to mitigate does not require the employee to accept any job that comes along.
The new job must be comparable to the one they lost in terms of pay, location, hours, and other factors. In some cases, the employment contract or the termination agreement may specify whether and how the termination package will be affected by mitigation. Also, it's important to note that in all cases no employer can pay out less than what is required under their applicable employment standards legislation, regardless of any contractual or termination package terms. When proceeding with a termination, employers will want to keep this important legal concept on their radar and include mitigation terms within the termination settlement documents. Need a hand in contract drafting, reach out to our team today!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
