Picky, picky: How selective can a dismissed employee be in mitigation efforts?

March 14, 2014 Earl Altman Employee Relations, Employment/Labour Standards, HR Policies and Procedures, Human Resources, Notice, Damages and Settlements, Payroll, Wages and Compensation

When advising a wrongfully terminated employee as to her legal rights and obligations, I always point out that a wrongful dismissal claim is not like winning the lottery. While employers are obligated to provide reasonable notice of termination or payment in lieu of such notice, terminated employees must make “reasonable efforts” to find new employment. As is often the case, the devil is in the details. What must a dismissed employee do to meet her obligation to mitigate? What have courts determined to be reasonable steps? What conduct has been held to be unreasonable? From whose perspective will reasonableness be judged–the employers or the employees?

Where failure to mitigate is alleged by the employer, it has the onus of proving that the employee failed to take reasonable steps to find a job, and, that had the employee done so, he likely would have found satisfactory employment.

In a decision of the British Columbia Court of Appeal in 1989, the court held that the assessment of the reasonableness of an employee’s mitigation efforts must be made from the employee’s perspective–i.e., what steps should that employee reasonably have taken to maintain his income and his position in his industry, trade or profession. The Court of Appeal emphasized that there is more to consider than solely the income of the position, and that the security of that position, and prospects for advancement, are also relevant.

The Ontario Court of Appeal further refined the analysis in a 2000 decision of Gryba v. Minetta Porcupine Mines. The plaintiff, who was 49 years old at the time of his dismissal, had been working for Minetta Porcupine for 9 years and had held the position of president at the time of his dismissal. The plaintiff’s experience was primarily in the mining industry, and that is where he focused his mitigation efforts. Due to conditions in that industry, he concluded that his best prospects lay in starting a junior mining company on which he spent a great deal of time and money. As part of these efforts, he staked a number of possible mining claims. Unfortunately, his efforts to start a new company were not fruitful and he ended up taking a position as president of another mining company. As part of his compensation package with that company, he received 400,000 shares in the company in consideration of the transfer of his mining stakes.

At trial, the defendant raised the issue of the value of the shares received in exchange for his mining interests, and the impact of that value on his claim for losses. The trial judge held that the value of the shares were not “compensation for services rendered by the plaintiff…” and should not be deducted from his losses. The defendant appealed this finding and the Court of Appeal agreed with the defendant. The court found that the plaintiff’s mitigation efforts, including the transfer of his mining claims, resulted in a complete mitigation of his losses and accordingly, granted the appeal and dismissed the claim. As the Court of Appeal stated in its reasons “this is a case that should never have gone to trial”.

Courts have not shied away from second guessing the reasonableness of an employee’s mitigation choices. Dismissed employees frequently view their dismissal as an opportunity to take their careers in a different direction often trying to start their own business. While perhaps admirable as a lifestyle choice, the courts have generally declined to allow employees to do so on their employer’s nickel. One field that seems to attract dismissed employees is the sale of real estate, presumably due to the ease of entry into that profession. One court, in considering the decision of a dismissed senior manager to try his hand at real estate, found that this decision was not reasonable, given the employee’s lack of experience or contacts in that field. The court therefore dismissed his claim on the basis of failure to mitigate.

In a subsequent decision, in a case of clear misplaced snobbery, the plaintiff was terminated from his position at a Ferrari dealership and had his damages reduced at trial as a result of his failure to mitigate. The evidence showed that the plaintiff had received an offer to develop a Lamborghini dealership which he rejected. There was also evidence that he had been recruited by a Jaguar dealership which he rejected as well. The trial judge found that the plaintiff would have found a job sooner had he not insisted on pursuing the possibility of a new Ferrari dealership opening in his market. Yet the trial judge dismissed the defence of failure to mitigate. In allowing the appeal and reducing the plaintiff’s damages, he Court of Appeal stated “personal preferences and career objectives are a consideration in deciding whether an employee is entitled to turn down alternative employment, but they are not decisive”. In this case, the court concluded that the opportunities presented to the plaintiff were of equal value as the position that he had held, and that his duty to mitigate required that he accept them.

Finally, in a recent decision of the Ontario Superior Court, the court considered whether the plaintiff’s refusal to accept a job offer based on the belief of a better offer to come was justifiable, and within his duty to mitigate. In this case, the plaintiff had been offered a job by a small accounting firm but declined it in the hope of receiving an offer from one of the large firms to do international tax. The plaintiff testified that he made this assessment based on advice from the recruiter with whom he was working that such opportunities would open imminently. The court in fact agreed with the plaintiff. The judge relied on the fact that the first offer came only five months into the plaintiff’s job search. As he put it “at that point in time, the prospects for an international tax position with a large public accounting firm had not yet been exhausted”. The court concluded that the plaintiff was entitled to wait to see if a position which he felt was appropriate to his level of expertise would become available within a reasonable time following his termination. In this case, the court therefore rejected the defendant’s argument of failure to mitigate and ordered the defendant to pay the plaintiff compensation equal to 10 months’ salary and benefits, totaling $93,284.

Earl Altman
Partner
Garfinkle, Biderman LLP

British Columbia Court of Appeal, compensation, dismissed employee, duty to mitigate, employee failed to take reasonable steps to find a job, employee’s mitigation choices, employee’s mitigation efforts, employment law, failure to mitigate, mitigation efforts, payment in lieu, reasonable notice of termination, refusal to accept a job offer, termination, terminations, trade or profession, wrongfully terminated employee

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