For important and up-to-date information on COVID-19 and Employment Law - Click Here
Back to blog

Failure to Mitigate Damages Results in “Discounted” Severance Entitlement

When an employee is terminated from their employment, they have a duty to mitigate their damages – meaning that the individual needs to take active and demonstrable steps to apply for and attempt to secure alternative employment. If the employee finds alternative employment in the reasonable notice period, then the amounts earned are generally discounted from the reasonable notice requirement. However, if a terminated employee fails to mitigate at all or if the mitigation efforts are lacking, the court can disentitle the terminated employee to their full reasonable notice entitlement and at worst, award nothing.

In a recent case of the British Columbia Supreme Court, an employee with 26 years of service, who would have otherwise been entitled to 20 month reasonable notice for his without cause termination had the over-all severance entitlement reduced to 17 months due to a “failure to adequately mitigate his losses.”

In Moore v. Instow Enterprises Ltd. et al., carrying on business as Kal Tire, 2021 BCSC 930, the British Columbia Supreme Court addressed the issue of a 52 year employee with a lengthy work history who was terminated due to a downturn in business in light of the COVID-19 pandemic. Post-termination, Moore created a resume and did computer searches for available jobs however, whether he actually applied for those jobs was speculative. Additionally, while some resumes without cover letters were sent to various tire service business, Moore failed to follow up on applications or reach out to his contacts in the industry to inquire about positions. According to the Court,

[39] A job search is an active prospect, and it can be a difficult and onerous one. It requires more than creating a resume and conducting computer searches. Looking at job postings, absent further action, is not sufficient to fulfill the requirement that a person undertake a reasonable job search. A reasonable job search may include activities such as reaching out to contacts within the industry, writing cover letters setting out why you qualify for a position, following up with telephone calls, or email correspondence.

[40] Understandably, Mr. Moore has experienced difficulty in searching for new employment. He was employed with Kal Tire for over 26 years – nearly half of his life. Searching for employment at any age is hard. Searching for employment when you were a senior and successful sales representative of a company for over 26 years undoubtedly has added difficulties. The added difficulty with searching for employment after being laid off from a lengthy and successful career does not diminish Mr. Moore’s obligation to do so.

[41] Mr. Moore has an obligation to mitigate his damages and to actively search for alternative employment. He has not done so. His obligation is not limited to searching for exactly the same, or a nearly identical, job that he has been terminated from. I find Mr. Moore limiting his search to solely commercial sales in the tire sector to be unreasonable in the circumstances. A reasonable job search requires a willingness to explore how one’s experience and skills may be portable to other industries or areas. Reasonably similar employment could encompass senior sales jobs in other industries, another job in the same industry, or a job with a different title or in a different industry that makes use of similar skill sets, aptitude, and experience. In determining what employment is reasonably similar, some flexibility is required.

[44] I find that Mr. Moore has failed to mitigate his losses. His job search efforts were not active, were unduly restrictive to a niche-role in one industry, and were not reasonable in the circumstances. I reduce the notice period by three months. [emphasis added].

In the Moore case, the plaintiff argued that he took reasonable steps to mitigate but was not able to find similar employment within the same industry. To this extent, Moore started his own business, Essential Wood Creations, to offset his income, but his efforts had, to date, failed to produce income commiserate with his Kal Tire renumeration. Relying on Dodge v. Signature Automotive Group Ltd., 2014 BCSC 1452,

It is never easy to pound the pavement and knock on doors after one has been let go from a job, particularly after many years. But it is, nonetheless, the duty of a plaintiff employee to act reasonably so as to secure new work if it is available. In my view, it was impossible for the Plaintiff to know what the job market held for [them] when [they] did not do enough to learn what the prospects really were. Literally knocking on doors, leaving resumes, asking to have lunch and taking other such steps are necessary…

According to the Court in Moore, “passive, limited and unduly narrow” job search efforts cannot be considered mitigation of losses and a terminated employee should apply for, or seriously consider, any employment opportunities available, even if outside one’s skillset or expertise, although the job search should be for similarly comparable positions, even if the employee was in a highly specialized position.

Ultimately, although Moore would have been entitled to 20 months’ notice on termination largely due to his length of service, the court reduced the entitlement to 17 months to account for inadequacies in the plaintiff’s mitigation efforts post-termination.

What does this mean for employees and employers?

For terminated employees, the lesson is clear that the court will expect you to be able to prove an active job search and applications for reasonably similar positions, albeit in different fields of expertise in order to be able to demonstrate adequate mitigation efforts. Failure to adequately mitigate can result in loss of all or part of severance pay that the employee may otherwise been entitled to.

For the employers, the lessons are a little more complicated – while all employers should request full mitigation efforts from any plaintiff asserting wrongful termination, employers who have a claim against them will want to inquire further of the nature of the applications made, a complete list of jobs located and those applied for, a detailed record of the plaintiff’s follow up efforts on each application, a detailed list of job offers and reasons for refusing the offer, etc. in order to demonstrate inadequate mitigation. A plaintiff’s failure to mitigate can result in a tremendous savings on severance pay requirements of the former employer, so holding a plaintiff to task on mitigation efforts is highly recommended.

Scott Chambers, is an employment and human resources lawyer and partner at Doak Shirreff Lawyers LLP in Kelowna BC and a Certified Professional in Human Resources (CPHR). Scott can be reached at 250-979-2527 or [email protected]

 

This work was originally published by The Lawyer’s Daily a division of LexisNexis Canada.