Mitigation in Canadian Employment Law: Just Claiming It Not Enough

When a dismissed employee files a wrongful dismissal claim in the Canadian courts, one of the invariable responses from the defendant employer is to claim that the amount of notice which is actually owed is less on account of mitigation. This theory is based on the concept, which the courts have widely accepted, that damages owed by the former employer will be reduced by earnings during the notice period, with scope also for a reduction based on a failure to mitigate.

A recent decision of the Ontario Court of Appeal confirms, however, that a reduction in damages on account of mitigation must be based on proven facts which are presented to the courts.

In  Lake v. La Presse, 2022 ONCA 742,  the dismissed employee successfully appealed a decision of the lower Court, which had reduced the award for wrongful dismissal damages dues to a failure to mitigate. The Ontario Court of Appeal set aside the decision of the Ontario Superior Court of Justice, which had reduced the eight months notice period to six months based on a failure to mitigate.

Merida Lake work for La Presse, a daily online French language newspaper, as general manager. At the time of termination, she was 52 years old and has 5.6 years of service with the employer.

At trial, the lower court determined the notice period to be eight months based on the usual criteria, include age, compensation, position and length of service.

The reduced notice period of six months was awarded by the trial judge based on the following findings: (1) the employee waited too long to start her job search; (2) the positions applied for were more senior than her experience and skill set warranted; and (3) she waited too long to actually apply for jobs, and also did not apply to enough positions. When taken together, the lower court essentially found that the employee could have found a job within six months of termination had the job search been more prompt, focussed and comprehensive.

The Court of Appeal’s decision to disallow the reduction based on failing to mitigate provides useful guidance about applicable principles. The starting point for the Court’s analysis is that mitigation in dismissal cases is a subset of the contract principles which apply in all cases – employers are not responsible for losses (in this case lost income) which could have been reasonably avoided. For employee terminations, however, the key is that the employer which has the burden to show that: (1) the dismissed employee failed to take reasonable steps to mitigate, meaning the job search efforts were deficient; and (2) if the individual’s mitigation efforts had been reasonable, they would have been expected to find a comparable position.

The focus in Lake’s case was that the Court of Appeal found that it was a legal error to have found that the job search efforts were inadequate. One notable point in this area is that the lower court was found to have put too much emphasis on job titles as opposed to responsibilities, which meant that the positions applied for where in fact reasonable opportunities in the opinion of the Court of Appeal. On the second prong of the mitigation test, the appeal court also focussed on the fact that the lower court did not actually have evidence before it that the employee would have secured comparable employment if the mitigation efforts had been different.

Takeaways for Employers

Most Canadian employers will want to reduce the amount of damages claimed or owing to a dismissed employee based on mitigation. This decision still confirms the possibility of such a reduction, provided that there is actual evidence that the employee has not taken reasonable steps to find alternate employment and that lack of diligence resulted in a lost opportunity to find a new role within the notice period claimed. Employee mitigation efforts will continue to be the subject of court scrutiny, but the courts are also not going to simply accept bald-faced assertions that the employee’s job search efforts were not adequate. Instead, this issue requires a close focus on the actual facts of the case, including the specific duties and responsibilities of the roles being applied for, measured against the dismissed employee’s qualifications and experience. Employers will only succeed with a failure to mitigate argument if they marshall and present actual facts about what an adequate job search should have looked like, and the likely success of such a search had it been undertaken.