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The bar is high, but within reach – How to establish (and benefit from) an employee’s failure to mitigate their losses

January 1, 2023 | Natalie C. Nicholson

In August 2021, we wrote about a decision of the Ontario Superior Court of Justice, Lake v La Presse (2018) Inc.1 In the decision, a dismissed employee’s mitigation efforts were found to be unreasonable because she waited too long to begin her job search, applied for too few jobs and unreasonably limited her search by aiming “too high”. The Court of Appeal for Ontario (“ONCA”) recently set aside that ruling2 and while the appeal decision may, at first glance, appear to strip away the good news derived from the lower court’s decision, a closer analysis reveals important and positive reminders for employers.

Court of Appeal decision

ONCA held Merida Lake (“Lake”) was entitled to an eight-month notice period, without reduction for failure to mitigate.

While ONCA agreed with the lower court that Lake unreasonably delayed her job search by waiting several months when she ought to have begun to search one month after being dismissed, ONCA held the lower court judge erred in three ways:

  • By holding that Lake was required to search for lesser paying jobs, including jobs for which she was overqualified, when she was unable to find comparable replacement income.
  • By placing too much emphasis on the title of the positions for which Lake applied, rather than their true nature, which led to those positions being characterized as “promotions” over her former role.
  • By speculating that Lake likely would have found comparable employment if she had taken reasonable and appropriate steps to mitigate, without any evidence from the employer regarding the true nature of the positions available at the time.

Viewed together, the lower court and appeal decision provide important reminders about the law of mitigation in the context of a dismissal without cause.

While an employer is not responsible for losses a dismissed employee could reasonably have avoided,3 an employee’s duty to act reasonably in seeking and accepting alternate employment is not an obligation to act in the employer’s interests. It is a duty to take the steps a reasonable person in the same position would take to protect the employee’s own interests.4 This distinction underpins the high onus an employer (the party in breach of contract) must discharge to benefit from positive action on the part of an employee (who, in the eyes of the court, is the innocent party).

The employer, not the dismissed employee, has the onus of demonstrating the employee failed to take reasonable steps to mitigate, on a balance of probabilities. While a court may infer a dismissed employee could have found comparable employment if they had taken reasonable and appropriate steps to do so, such inferences must be drawn from proven facts, not speculation.

In this case, Lake asserted the positions for which she applied had more senior titles but were substantially similar to the positions she previously held, though she provided no evidence (e.g., job descriptions). Unfortunately, the employer did not lead evidence to refute Lake’s assertions, choosing to rely only on the various job titles. ONCA held the lower court could not speculate based on job titles alone. While this uneven playing field may be a source of frustration for employers, it is further evidence of the principles highlighted above.

Best practices for employers

To successfully challenge a dismissed employee’s mitigation efforts in future litigation, an employer must be intentional in gathering evidence throughout the anticipated notice period. Failure to do so will make it difficult to discharge the employer’s burden at trial and benefit from an employee’s failure to mitigate, even if such failure occurred.

As noted in our previous article, while the bar to success may be high, an employer can put itself in a stronger position to challenge a former employee’s mitigation efforts by taking the following steps:

  • Offer the employee outplacement counselling. Provide an employee the tools to obtain new employment as quickly as possible. If the employee fails to use the tools at their disposal, an employer can rely on this as evidence of a failure to take reasonable steps to mitigate.
  • Be diligent from the outset. Search for available positions suitable to the employee and save evidence of those job postings throughout the anticipated notice period. Share the job postings with the dismissed employee (or their counsel) to ensure they are aware of them.
  • Look beyond the job titles. Analyze the nature of the available positions, including the duties and responsibilities, both when gathering evidence of suitable job postings and assessing the reasonableness of an employee’s mitigation efforts. Just as an employee need not limit their job search, an employer should not limit its job search.
  • Watch the clock. Time is an objective, persuasive factor upon which an employer can rely. Consider when the employee started making meaningful efforts to find new employment (i.e., applying, not just searching/browsing) and how soon after they obtained it.

To learn more and for assistance, contact a member of the Sherrard Kuzz LLP team.

12021 ONSC 3506 (CanLII)
22022 ONCA 742 (CanLII)
3Red Deer College v Michaels, [1976] 2 SCR 324
4Forshaw v Aluminex Extrusions Ltd, 1989 CanLII 234 (BCCA)

Natalie C. Nicholson Direct: 416.603.6770
Natalie C. Nicholson Sherrard Kuzz LLP


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