Mitigation Obligation Clarified: Employee Not Required To Seek Lesser-Paying Job

The Ontario Court of Appeal has clarified that a terminated employee is obligated to mitigate damages by seeking comparable employment to her previous job, not lesser jobs.

The Court set aside a previous decision to reduce the damages in a wrongful dismissal action for failure to mitigate. They found that the lower court erred when it determined that a dismissed employee must begin searching for lesser-paying jobs after spending a reasonable period attempting to find similar employment. The Court further clarified what an employer must consider when making a claim to reduce the reasonable notice period of a wrongfully dismissed employee.

In Lake v La Presse, the only issue on appeal was whether the lower court erred in reducing the employee's wrongful dismissal damages for failure to mitigate. The judge had awarded the employee eight months' reasonable notice but deducted two months for failure to mitigate and to account for compensation already paid by the employee over the notice period.

The employee, a general manager and the Toronto division's most senior employee, was employed for five and a half years when her employment was terminated without cause when the employer decided to close its Toronto office.

What the Courts Said

The lower court reduced the reasonable notice period, finding the employee waited too long to begin her job search, applied to very few jobs, and "aimed too high," having applied for only vice president roles.

The Court of Appeal allowed the appeal and determined that the lower court erred when they said that to mitigate, a dismissed employee must begin searching for a lesser-paying job after spending a reasonable period of time attempting to find similar employment. The Court of Appeal determined that an employee is required only to seek "comparable employment," which is typically comparable in status, hours, and remuneration at dismissal. As such, it was an error to conclude that the employee "aimed too high" when she applied for vice president positions. There was no obligation for the terminated employee to seek lesser-paying work, such as work as a sales representative. The Court of Appeal's view was that the lower court placed too much emphasis on the titles as opposed to the responsibilities of the positions, which were similar to her previous work experience.

Takeaways

As this decision is from Ontario's Court of Appeal, while certainly persuasive in Alberta, it would not be binding. Lake provides some guidance for employers in Alberta seeking to establish that a wrongfully dismissed employee's reasonable notice period should be reduced due to a failure to mitigate their losses. Employers should be cautioned to pay more attention to the substance of the positions employees are applying for, rather than the titles of the roles. Further considerations in establishing whether an employee mitigated their damages include:

1. The employee must not unreasonably delay the start of their job search;
2. The employee is obliged to seek only comparable employment and is not obliged to begin searching for lesser-paying jobs; and
3. Employers and Courts must look at proven facts when evaluating whether an employee would have had a greater chance of obtaining a comparable position had they expanded the parameters of their job search.

If you are an employer seeking to reduce the reasonable notice period of a wrongfully dismissed employee and would like advice as to whether such an argument would be successful, please contact Abbey Bartel in Edmonton, Steve Eichler in Calgary or any member of Field Law's Labour and Employment Group for guidance and assistance in this area.

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.