Making efforts to mitigate is a must

Mitigation is a critical concept when dealing with severance entitlements. Terminated employees are required to actively look for comparable new work. If they secure new work, this reduces their severance entitlements. Importantly, if an employee fails to reasonably search for new work, their severance entitlements will also be reduced. The latter is known as a "failure to mitigate."

The issue of what does and does not amount to a failure to mitigate remains a live topic. While the Ontario courts have made clear that an employee need only take reasonable steps, not perfect steps, to mitigate, what is reasonable is often hotly contested.

Fortunately, we have had a number of recent Ontario decisions which provide guidance on what may amount to a failure to mitigate.

1. Refusing a comparable role

In Humphrey v. Mene Inc., 2022 ONCA 531 ("Humphrey v. Mene") the Ontario Court of Appeal reconfirmed that if an employee refuses to accept a comparable role that may amount to a failure to mitigate.

In this case, the employee was terminated from her role as Chief Operating Officer. Seven months after her termination, she was offered a role as a Vice President of E-commerce with compensation that was comparable or greater than what she had earned at her previous employer. The employee declined on the basis it was not a "broad-based senior leadership role."

At trial, the judge did not significantly fault the employee for not accepting the role, noting that the employer had not provided the Court with evidence that the position was comparable in terms of role, as well as in terms of all aspects of remuneration.

The Court of Appeal disagreed. It held the trial judge had imposed too high of a hurdle on the employer. The employer was entitled to rely on evidence that the employee had been offered a senior management position with comparable compensation. It concluded that as the employee turned down a comparable role that could reasonably have mitigated her damages, her notice period should be reduced accordingly.

2. Delay in applying for jobs

It is well established that employees are allowed an adjustment period following termination, during which they aren't expected to be vigorously applying for new work. However, unreasonable delay in applying for new jobs may impact an employee's severance entitlements.

In Humphrey v. Mene the Court of Appeal emphasized there is no precise formula for determining the effect of delay in mitigation on the employee's damages. It upheld the trial judge's finding that waiting 6 months to send out job applications was too long, and the corresponding 1-month reduction to the employee's reasonable notice entitlements, noting that the reduction of only 1-month was very generous.

Cumulatively, in Humphrey v. Mene, the employee's delay in applying for jobs and her failure to accept a comparable role meant her 12-month damage award was ultimately reduced to only 6-months.

3. Relocating to smaller centre

Many employees choose where to live at least in part based on where they work. So, when work no longer ties them to a location, it may seem like a prime time to relocate. However, this could impact severance entitlements.

In the recent case of Quesnelle v. Camus Hydronics Ltd., 2022 ONSC 6156, the employee lived in Oshawa and commuted an hour to work in Mississauga as a HVAC technician. One month after his employment ended, the employee relocated to Omemee to live with his partner. Subsequently, the employer offered the employee his job back on materially the same terms. The employee refused as he had sold his Oshawa home and the new commute of 90 minutes to 2 hours was too long.

The employer argued that the employee failed to mitigate as (1) the employee refused to accept his old job back, and (2) Omemee had far fewer HVAC job opportunities than the Greater Toronto Area (GTA), where the employee had previously resided.

The Court held the employee did not act unreasonably in declining his job back – the employee was free to move, and the employer's offer simply came too late. The employee was not obliged to remain in Oshawa in the hopes his employer would offer re-employment.

On the flipside, the Court held that the employee's decision to move away from the GTA should result in a reduction to his reasonable notice entitlements. While the employee was free to move, that had consequences on his job prospects and the consequences should not be borne by the employer. This was compounded by the fact the employee waited two months to search for new work. Accordingly, the employee's damages were reduced by 30%, from 10 months to 7 months.

A similar conclusion was reached in the recent case of Henderson v. Slakin et al, 2022 ONSC 2964 where an employee's failure to apply for jobs during her 6-month working notice period, relocation to a smaller centre where it was harder to find work, and failure to apply to dental or oral dental surgeon offices despite that being where she had work experience, resulted in a 3-month reduction to the employee's reasonable notice period.

Takeaways:

These recent cases remind us of the importance of mitigation. Employees should be aware that while they are free to take their time in applying for new work, to wait for that "perfect job", or to relocate following a termination, these decisions may have consequences on their reasonable notice entitlements. On the other hand, while employers cannot control when an employee will secure new work, they may be able to limit liability by offering an employee assistance in finding a job and documenting the availability of comparable roles.

If you have questions about termination of employment, mitigation, or other workplace law concerns, please reach out to one of the members of the Lee Workplace Law team. We would be pleased to assist you.