The Duty to Mitigate is better understood as the dismissed employee’s responsibility to find new employment after their termination.
Money earned through newly obtained employment may reduce the former employer’s obligation to pay wrongful dismissal damages.
The duty of a dismissed employee to mitigate damages allows the employer to forfeit their responsibility to pay the dismissed employee monetary compensation, that the employee could have otherwise earned on their own, through justifiable efforts.
Common Law Requirement of the Duty to Mitigate
The employee does not have to act on behalf of the employer’s interests. Further, the employee’s responsibility to mitigate applies only during the period of reasonable notice. A general rule regarding the duty to mitigate enables the income earned by a dismissed employee to be deducted from the award. However, that is not always the case.
While the court may deduct income earned from the damages from the termination of previous employment, different courts have calculated the deductions differently.
Does the Duty to Mitigate apply to Fixed Term Contracts?
While this is unclear territory (particularly because there has been contradicting decisions), the principles of mitigation generally do not apply to fixed-term contracts.
The courts ruled that mitigation is irrelevant in any case where an employment contract contained restricted entitlement on termination.
Examples where the duty to mitigate may be irrelevant include contracts that outline a fixed sum, or if the terminated employee has forfeited their entitlement to reasonable notice, or payment in lieu thereof, and as such, may be therefore are not entitled to damages.
Wallace-type Damages, are they exempt?
Wallace-type damages refer to the case Wallace v United Grain Growers where Canada’s Supreme Court ruled dismissals done in bad faith, or as a direct result from harassment and bullying from the employer, call for unique consideration for damages. An immaterial grievance may not be mitigated by obtaining new employment, therefore Wallace-type damages are not subject to mitigation.
For instance, if the employee is subjected to humiliation, embarrassment, harassment or any other unfair treatment throughout the dismissal, they may be entitled to compensation. The compensation does not occur as a result of the dismissal, rather the ways in which the dismissal is handled by the employer.
Mitigation with the Same Employer
Courts have previously and commonly ruled that the duty to mitigate does not require the dismissed employee to return to the employer. There have been rare cases where there is a reason to believe both the employee and employer can re-establish a harmonious relationship that does not jeopardize either party’s interests.
If there are no barriers to re-employment, it may be necessary for a dismissed employee to return to work for the employer to mitigate damages. Barriers may include previous harassment, humiliation or embarrassment. The non-tangible elements of the situation must be evaluated in determining if mitigation by returning to work is plausible.
If you are an employer who recently terminated or are about to terminate an employee, make sure you get in touch with us today at (647)946-6440, or email us at email@example.com to have your workplace in compliance with legal obligations as well as to make sure your terminated employee has little or no reason to question your termination package.
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