The importance of an employee’s duty to mitigate their damages by taking reasonable steps to find new employment cannot be overstated. Where an employee is found to have failed to mitigate their damages, their entitlement to damages may be significantly reduced.
So what happens if an employee is too sick to look for new work? Does that count as a failure to mitigate?
In a recent case, the employee had not made any meaningful effort to search for a job during the 29 month period from the time he had been dismissed to the time that he had been reinstated. The adjudicator found that he was too sick to work or find a new job for 22 of the 29 months, and awarded him his full salary during this time. However, for the remaining seven months, there was no explanation for his failure to make reasonable efforts to look for work. As a result, the adjudicator reduced the employee’s damages by 25%.
Facts and analysis
In Maticevic v Bank of Montreal, the employee brought a complaint under section 240 of the Canada Labour Code (the “Code”), alleging that the bank unjustly dismissed him from his employment. At the time of his dismissal, he was employed as a Financial Planner.
Adjudicator Marvy found that the employee was unjustly dismissed. The dismissal occurred on July 20, 2017 and he was reinstated on December 17, 2019. The main issue was the amount of damages owing to the employee.
The employee sought full backpay but the bank argued that any entitlement should be reduced by 60% for his failure to mitigate.
In assessing the issue of mitigation, the Adjudicator found that the evidence showed no efforts to mitigate before July 3, 2019, which was nearly two years after dismissal. The bank argued that he failed to mitigate his losses, but the employee asserted that there should not be any deductions since he had several health complications which made it impractical for him to find new employment.
The Adjudicator found that for a period of time after dismissal, the employee “was in a vulnerable position when he was terminated two weeks after he returned from his disability leave, and, as a result, it would have been difficult for him to immediately begin mitigation attempts”. The Adjudicator also found that during the time he had an E. Coli infection, it was reasonable for him not to apply for work.
However, there were time periods during which “there is nothing to explain why [he] did not make some reasonable efforts to look for and apply for work”.
The Adjudicator found that he had “no record of [him] applying for any positions, and no reasonable reason for not doing so” for approximately seven months during the 29-month period. Accordingly, the Adjudicator reduced his compensation by 25% due to his failure to mitigate.
The bank further argued that, alternatively, if his health issues prevented him from mitigating, then any periods of illness must be set off against any amounts owing. However, the Adjudicator found that he was “clearly still entitled to the salary he would have earned during this period.” The Adjudicator cited the Supreme Court of Canada’s decision in Sylvester v British Columbia, where the Court found that an employee who was on a disability leave at the time of dismissal was not entitled to both his disability payments and reasonable notice damages, but rather the salary he would have earned during the notice period:
“[T]he damages are assessed by calculating the salary the employee would have received had he or she worked during the notice period, notwithstanding that the employee may, in fact, have been prevented from doing so. The damages are based on the premise that the employee would have worked during the notice period.” [Emphasis added]
This decision serves as a helpful reminder for both employees and employers.
Employees must remember that they have a common law duty to mitigate their damages, and if they fail to take reasonable steps to find new employment, their damages can be significantly reduced. They would be wise to log all of their job search efforts and any reasons they are unable to look for work during certain time periods, as well as keep the relevant documentation, in case the employer alleges a failure to mitigate.
Employers must be mindful that an employee’s entitlement to wrongful dismissal damages may not be reduced if they fail to make efforts to mitigate as a result of illness.
By Nadia Zaman