Duty to Mitigate: What happens when your wrongful dismissal case gets to court and you are still unemployed?

Feb 18, 2016

The Basics

A wrongful dismissal occurs when an employer does not provide enough notice of termination. An employee can claim damages equal to the remuneration the employee would have earned during the applicable notice period. During the notice period, an employee is subject to the “duty to mitigate”, which means she must look for alternative employment. Notice periods can be as long as 24 months, and even longer in exceptional circumstances. Increasingly, wrongful dismissal cases are getting to court before the reasonable notice period has expired because lawyers are now bringing summary judgement motions. In these cases, the employee is still subject to the duty to mitigate for the balance of the notice period. Ontario judges have applied at least 4 different approaches in these kinds of cases, namely:

The Contingency Approach: Under this approach, the employee’s damages are reduced based on the possibility (or contingency) that the employee will find a new position before the expiration of the notice period. The damages may be reduced by a percentage (e.g. deducting 5% of total money award) or by months (e.g. deducting a month from the total notice period period).

The Trust and Accounting Approach: Under this approach, the employee is granted judgment in the form of a lump sum, but a trust in favour of the employer is impressed on any earnings of the plaintiff for the balance of the notice period. Therefore, the employee is under an obligation to account for any earnings and pay any proceeds received from new employment to the employer.

The Partial Summary Judgment Approach: Under this approach, the employee is granted a partial summary judgment and the parties return to court during or at the end of the notice period for further payments subject to the duty to mitigate.

The Hybrid Approach: In the recent case of Lalani v Canadian Standards Association (Lalani), the judge crafted a hybrid approach between the Trust and Accounting Approach and the Partial Summary Judgment approach. The judge ordered that a trust in favour of the employer be impressed upon the damages award paid to the employee during the balance of the notice period, but the employee would be required to account to the employer on a monthly basis with respect to his mitigation efforts and any mitigation income which he earns. This approach relies on the employee’s transparency in accounting to avoid the impracticality of having the parties return to court.

Lessons to be Learned

As Lalani shows, there is no consensus on which approach an Ontario judge will follow when a wrongful dismissal case is decided before the end of the reasonable notice period. It is important to consult with a lawyer before deciding whether to start a wrongful dismissal action,  and whether to proceed by way of summary judgment,. The lawyer can also explain the extent of your obligation to mitigate (look for work) throughout the litigation process.

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

k

Recent Posts

Short service, long notice

Employees with only a few years (or even months) of service tend to believe that they aren’t entitled to much notice or pay in lieu of notice upon termination. As we have written before, we have seen a trend of longer notice periods being awarded to employees in...

read more

Toronto Office

702 - 2 Bloor Street West,
Toronto, ON M4W 3E2

Barrie Office

277 - 92 Caplan Avenue,
Barrie, ON L4N 9J2

Collingwood Office

220 - 1 First Street
Collingwood, ON
L9Y 1A1

Contact

Phone

+1 (888) 640-1728

Fax

(866) 883-8445

Email

[email protected]

Toronto Office

702 - 2 Bloor Street West, Toronto ON M4W 3E2

Barrie Office

277 - 92 Caplan Avenue, Barrie ON L4N 9J2

Collingwood Office

220 - 1 First Street, Collingwood, ON L9Y 1A1

Translate

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!