Back to Basics: An Employee’s Duty to Mitigate in a Wrongful Dismissal

The recent British Columbia Court of Appeal decision,  Steinebach v. Clean Energy Compression Corp., provides a thorough overview of how the duty to mitigate impacts the assessment of damages in wrongful dismissal cases.

Steinebach was terminated from his employment as a salesman with Clean Energy Compression Corp. after he did not accept the company’s offer to take on a newly-created position. He initially sought similar employment in a senior level role in a comparable company, but was unsuccessful. After taking steps to obtain employment as a financial investment advisor, he began working approximately eight months after his termination.

At trial, the court found that Steinebach had been wrongfully dismissed and was entitled to 16 months’ notice. However, the trial judge also found that Steinebach did not adequately mitigate his damages because he had quickly chosen to abandon his efforts to find a new job in his previous area of employment and instead focused on pursuing a new career altogether. As a result, the trial judge reduced the notice period by three months. The employer appealed, arguing that the court improperly assessed Steinebach’s notice period and damages.

The Court of Appeal unanimously allowed the employer’s appeal, finding that the trial judge erred by reducing Steinebach’s notice period by three months without any substantive justification or explanation as to how it arrived at that number. The Court emphasized that the determination of an employee’s reasonable notice period is a separate consideration from the assessment of damages that flow from an employer’s failure to provide such notice. The duty to mitigate impacts the latter assessment, not the former.

Ultimately, a new trial was necessary because the trial judge had made no finding of when alternative employment might have been obtained had the employee devoted more effort to acquiring employment in his established field. In the words of the Court of Appeal, this was “essential to support the conclusion that the respondent did not act reasonably and to support any reduction in damages based on a failure to mitigate for a period of time.”

In reaching this conclusion, the Court of Appeal highlighted a number of key principles regarding the duty to mitigate:

• Damages for wrongful dismissal and the duty to mitigate can be dictated by the terms of the employment contract itself.
• If not addressed in the employment contract, a wrongfully dismissed employee is entitled to claim damages for all the remuneration he or she would have earned during the period of reasonable notice, including fringe benefits.
• All employment-related income earned by the dismissed employee during the notice period (except income that he or she would have received regardless of being dismissed) will be deducted from the award of wrongful dismissal damages.
• The onus is on the employer to establish that the dismissed employee failed to mitigate because he or she acted unreasonably. This requires proof that:
  • The employee failed to take reasonable steps to find replacement work; and
  • Suitable replacement work could have been found prior to the expiry of the reasonable notice period had the employee taken reasonable steps.
• Reasonableness is assessed from the perspective of the dismissed employee’s best interests, not the employer’s. The duty is to take such steps as a reasonable person in the dismissed employee's position would take in an effort to maintain his or her income and position in the relevant industry, trade or profession.

Given the high onus of proof, employers must be prepared to take a proactive approach to demonstrating that an employee has failed to adequately mitigate. Proving that a “reasonable” person would have done more to search for new employment is only half the battle. In most cases, some evidence will also be necessary to establish that the dismissed employee would have likely secured a new job within the notice period had he or she acted reasonably. That can rarely be presumed, particularly in poor economic times when the job market is highly competitive.

As a result, proving a failure to reasonably mitigate often requires evidence of a number of specific job postings published during the notice period for which the dismissed employee was highly qualified but did not apply. It may even require an expert opinion from a witness specializing in the area of job search and career counseling. It is therefore not surprising that many employers choose to get out in front of the issue of mitigation by making career counseling services available to the employee at the time of termination. The provision of such services not only increases the likelihood that the dismissed employee will in fact mitigate, but it also provides the employer with a natural starting point should it prove necessary to investigate the reasonableness of the employee’s efforts to find new work.