CAN EMPLOYERS PAY LESS SEVERANCE IF EMPLOYEES FAIL TO MITIGATE?

Authors: Elliot Saccucci (Partner); Tahir Khorasanee (Associate); Lauren Tzogas (Student)

Successfully proving employees’ failure to mitigate can save companies considerable amounts of money. The employer receives a dollar-for-dollar credit for income earned during the notice period, or income which could have been earned had the employee acted reasonably. However, failure to mitigate is difficult to prove because the duty is generally misunderstood.  

As a result:  

• Employers should thoroughly analyze an employee’s mitigation efforts; and   
  

• Employers should proactively participate in the employee’s job search efforts.
  

An employee’s duty to mitigate is not a duty owed to an employer, but rather a duty the employee owes to themself, to conduct themself like a reasonable person and take the necessary steps to find alternate, comparable employment once dismissed.

Lake v. La Presse (2022 ONCA 742)  

The Court of Appeal’s recent decision in Lake v. La Presse (2022 ONCA 742) renewed the debate regarding an employee’s duty to mitigate. In this case, Ms. Lake, the general manager of an online French newspaper, and the most senior employee in the company’s Toronto division, was dismissed without cause after 5 ½ years. She was 52 years old and earning $185,000/year. 

The Ontario Superior Court of Justice reduced Ms. Lake’s notice period by two months, after she became despondent with the fruitless job search process and simply stopped applying. The Court relied on Gingerich v. Kobe Sportswear Inc., (2008) CanLII 2749 (ON SC), where the employee’s refusal to lower their job search expectations constituted a failure to mitigate.¹This same view was echoed in Neilipovitz v. ICI Paints (Canada) Inc., ([2002] O.T.C. 371 (S.C.J.)) at para. 25: 

“the employee must at some point lower her sights and aspirations and either take a lesser paying job or attempt to use her managerial skills in a perhaps unrelated industry”.²

The Court of Appeal rejected this finding, reinstating Lake’s original notice period, confirming that a failure to accept any job did not constitute a failure to mitigate as the employee was entitled to find comparable employment. In addition, there was no evidence to support the inference that she would have eventually find comparable employment had she kept applying.

What Does This Mean for Employers?  

While it is not mandatory for employers to furnish evidence of alternate, comparable job openings to reduce the damages award, that remains the best way to discharge the employer’s burden.

Here are a few additional cases to consider:   

Delayed Start to Search of Comparable Employment

Although Lake v La Presse (2022) decision does not prohibit courts from inferring a failure to mitigate, this occurs very rarely. In Parks v. Vancouver International Airport Authority (2005 BCSC 1883), for example, Mr. Parks was terminated from his position as a Superintendent with the Vancouver International Airport Authority after a company-wide reorganization unilaterally altered his role within the organization. Although the Airport Authority failed to put forth any evidence of available alternate positions, the court reduced Mr. Parks notice period by 2 months as he delayed the start of his job search by 3 months and immediately found a job after a two-month search.³ 

Upgrading Skills Instead of Applying for Jobs  

In Benjamin v. Cascades Canada ULC (2017 ONSC 2583), an unskilled labourer with 28 years of service was dismissed without cause when the production line at the company’s Scarborough location was eliminated. The Court found that Mr. Benjamin failed to mitigate his losses when he opted to enroll in a full-time welding program instead of looking for alternate employment or replying to postings the company sent him regarding job openings at their other locations. The Court held that the decision to undergo skills training on its own did not constitute a failure to mitigate damages but opting to retrain while comparable jobs were available did as the employee cannot “charge” their new career path to the employer.⁴ The Courts, however, have found retraining to be reasonable in the face of industry downsizing,⁵  or  changing technology.⁶ Therefore, training to maintain one’s position and income level within the same industry is reasonable,⁷ but the claim for wrongful dismissal ends on the date the employee decides to forgo applying for an available, comparable position in order to obtain a job in a new industry.⁸

Failure arising out of a Narrow Geographic Search Area 

In Brckovic v. Tsambalieros, (2001) CanLII 20222 (ON LRB), the Labour Relations Board reduced a dental hygienist’s damages by 10% as they found her failure to accept extended workdays and expand her job search to Toronto unreasonable.⁹  Even though the employee previously worked in Mississauga, and one recruitment agency revealed that her commute may pose a problem for Toronto employers,  the Court found that the employee’s efforts were “wanting” as she should have explored the larger Toronto job market as the added travel time to Toronto would be negligible since she already travelled from Beamsville to Mississauga for employment.¹⁰

Refused Transfer to a New Position with the Existing Employer 

In Mifsud v. MacMillan Bathurst Inc, (1989) CanLII 260 (ON CA), the Court held that an employee failed to mitigate damages when they refused a transfer to a lower-level position within the same company after the company became unhappy with his quality of work.¹¹ Mr. Mifsud had been employed as a Superintendent with the company at their Etobicoke location for a period of 18 years when the employer transferred him to their Rexdale location as a Foreman after repeatedly speaking with him about issues with his work.¹²The Court found that since the quality of work and pay for the new position were substantially similar, and given the absence of acrimony in the workplace, it was reasonable for the employee to accept the transfer until they found alternate employment.¹³

 

For questions, please contact Elliot Saccucci (Partner) at esaccucci@loonix.com or Tahir Khorasanee (Associate) at tkhorasanee@loonix.com.