A constant source of confusion for clients who have lost their jobs are the questions of how to approach their job search and how accepting a new job will impact their separation package. The answer to these questions are multifaceted.
First, let’s provide some context. If you lose your job and sue your former employer, you are essentially arguing that the initial package offered by your employer on the day you were fired failed to provide you with sufficient financial protection to carry you through the period of unemployment you are now facing. If you take your wrongful termination claim all the way to court and win, a judge will calculate the amount owed to you (your “damages”) based, in part, on how long they forecast it would take you to find a comparable job.
If the court thinks it would take someone in your shoes eight months to secure a new role, then the court will order your previous employer to pay you eight months of your compensation. The idea is to bridge the expected gap between the old job and the new job.
But what happens if you get a new job faster than the court had forecast? In that case, the court will say that you have mitigated your damages and that your damages have “crystallized.” In layman’s terms: you’ve cut your losses you no longer have to argue how long it will for you to find new employment. And because you have cut your losses, your previous employer will not necessarily be on the hook to pay out the full amount of damages that you would have been owed had you remained unemployed for the entirety of the court’s estimated notice period.
To many employees, this feels unfair. It can seem like your old employer is off the hook and you are being punished for good behaviour in finding and commencing a new job. Indeed, what is good for you (ie finding new employment to return to the workforce and continue in your career) is bad for your case. Yet the courts aren’t interested in giving you a windfall where you’re collecting two pay cheques simultaneously. They’re interested in ensuring that you are protected for the period of unemployment. For this reason, it is sometimes mused that the worst thing as employment lawyer can hear is that their client has found new employment.
The legal principle we are discussing here is called the “duty to mitigate”. In essence, the common law expects terminated employees to look for a new job. If they find one, their losses will be trimmed and damages decreased. Here are some other important aspects of this duty to mitigate:
1. If you lose your job, you are entitled to a brief breather. Losing your job is an immensely distressing experience. You are not expected to be interviewing left and right within hours of being fired. You can take some time to collect yourself and think about what you’re looking for in the next chapter of your career. A good rule of thumb is to start the search in some form within one to two weeks (see: Bustos v Celestica International Inc, 2005 CanLII 24598 (ON SC), in which the court recognized that the plaintiff was entitled to an ‘appropriate amount of time’ to adjust to his termination, but not the twelve week break that he took)
2. However, you can’t just sit on your hands indefinitely. Under the common law, the courts expect that employees make reasonable efforts to find a new job after they’ve been let go. This is where the ‘duty’ in ‘duty to mitigate’ comes from. If you fail to make sufficient efforts to find new employment, the total damages owing from your previous employer can be reduced by the court (see: Humphrey v Mene, 2022 ONCA 531, in which the court reduced an employee’s notice period from 12 months to 6 months after she declined a job offer received 7 months post-termination)
3. Log your job search efforts and maintain records. If your case proceeds to litigation, you will have to disclose evidence demonstrating the steps you took to comply with your duty to mitigate. Work with your employment lawyer to track your job search efforts on an ongoing basis to make the disclosure process as painless as possible. Evidence of your mitigation efforts such as email confirmations of applications, cover letters and versions of your resume should be retained in the event that it must be disclosed.
4. The new role should be comparable. The court is not expecting you to look for a lower-paying job or one that represents a significant step down in status relative to your previous role. If you’ve worked as a physician, you don’t need to take a telemarketing job that gets offered to you to comply with your duty to mitigate. In contrast, however, the law would suggest that this is also not the time to hold out for your dream position of NHL commissioner. If you are offered a comparable job of similar seniority, duties and compensation and you decline the role, absent a reasonable explanation, the former employer may argue that the rejection of the offer amounts to a “failure to mitigate.”
5. Your old employer may try to “help” you find a new role. The sooner you mitigate, the lower the potential damages owed by your previous employer. As a result, it is in your former employer’s interests for you to lock down a new job. This might mean a heightened willingness to provide a positive reference letter, but it also might mean your previous employer sends job openings for similar positions which can feel like an attempt to add salt to the wounds after a termination. Your old boss may even reach out to their contacts to inquire about available jobs and advise that you might be a great fit.
6. Generally, the court will engage in a dollar-for-dollar setoff of damages. Let’s imagine the court estimates that it will take you eight months to find a new job, but you end up doing it in five. In quantifying the money owed to you by your former employer, the court will typically subtract the money earned during the eight-month notice period on a dollar-for-dollar basis. If the new role pays 25% less than the previous role, the court will order your former employer to pay you 100% of your compensation for the five months of unemployment, plus a 25% top-up for the three months after you started in the new job in order to “make you whole.”
Even if you do not commence litigation and hire an employment lawyer to negotiate a settlement instead, both your lawyer and your former employer’s lawyer will be factoring in your duty to mitigate and the possibility that you may not meet the duty or, on the contrary, that you mitigate your damages. In this way, the court casts a large shadow within which you are maneuvering. Oftentimes, this motivates the employee’s lawyer to negotiate quickly and aggressively before the client finds a new job by setting tight response deadlines and chasing the employer for a response. Conversely, in a settlement negotiation, some employers may use delay tactics to slow the negotiation down and bide their time until the former employee finds new employment.
During a settlement negotiation, the employer’s lawyer may inquire into your mitigation efforts and may even request a summary as well as the supporting evidence. While they are not entitled to it absent a lawsuit, they may still ask and if you have met your duty and would be a credible plaintiff, disclosing the efforts on the advice of your lawyer can help to reach a better deal. The dubious client in an acrimonious relationship with their former employers may hesitate to share all their job prospects out of fear that the employer will ruthlessly sabotage their efforts. Arrangements can be made in those circumstances also to redact certain information and concealing the identity of potential future employers.
A client’s mitigation situation can sometimes present a thorny scenario if the terms of a settlement proposed by the former employer include a confirmation that the client has not, for example, commenced new employment, received an offer of employment, earned income or that the client does not even anticipate a possible offer of employment since their termination. For this reason, individuals require competent legal advice and rapid strategizing.
Navigating the duty to mitigate can get tricky. If you’re looking to negotiate a more generous separation package from your old employer, Zubas Flett Liberatore Law LLP would be happy to help at 416-593-5844 or questions@employment-lawyers.ca.