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The duty of an employee to mitigate damages after a termination of employment operates to help reduce the period of unemployment or underemployment over which the former employer may owe compensation for lost income to a dismissed employee. The intended purpose of this duty is to prevent individuals from incurring avoidable losses by requiring that they be actively seeking comparable employment following a dismissal.

The Duty to Mitigate

While often the focus of the parties is on whether an employer can demonstrate that an employee has failed to mitigate his or her damages, a recent case in the Ontario Superior Court of Justice reminds us of another scenario that can arise in the post-termination context and result in significant additional awards against an employer.

In Robinson v. H. J. Heinz Company of Canada LP, the Plaintiff, Ms. Karen Robinson, a long term employee of the Defendant, Heinz Canada Ltd., was found to have been constructively dismissed as a result of unilateral changes to the terms and conditions of her employment when the Defendant progressively stripped responsibilities from her position after a merger.

From the time that Ms. Robinson concluded that she had been constructively dismissed from her position at Heinz Canada Ltd., she was subject to the same obligations as any party who experiences a breach of their contractual rights: the duty to take reasonable steps to mitigate her losses. In Steinebach v. Clean Energy Compression Corp. the British Columbia Court of Appeal defined this duty in the employment law context as follows:

The duty to mitigate is not a duty owed to an employer, rather it is a duty an employee owes to conduct himself or herself as a reasonable person. In most cases, this necessarily means that the employee must take reasonable steps to find alternative employment upon dismissal.

In this case, Ms. Robinson received a serendipitous inquiry regarding a job opportunity elsewhere while still apparently employed by the Defendant. Despite the fact that Ms. Robinson was not actively looking for a job, this offer came at a time when her future at Heinz Canada was in doubt, and as per the court’s later finding, had effectively been terminated as a result of changes made by the Defendant to the essential terms of Ms. Robinson’s employment agreement.

Accordingly, Ms. Robinson was appropriately mitigating her losses when she accepted the position in another city and incurred the following costs:

  • $34,010.32 for expenses associated with the sale of her house in Mississauga,
  • $3,500.00 for land transfer taxes, legal fees and related fees associated with the purchase of a new home in Southwestern Ontario; and
  • $7,500.00 for moving expenses.

Justice Stinson concluded that the weight of authority in Ontario supported the recovery of real estate commissions, moving expenses, and legal fees incurred by an employee as a result of a wrongful dismissal. The decision also confirmed the Plaintiff’s broader entitlement to recover the value of all losses resulting from the employer’s failure to have given reasonable notice.

Justice Stinson further rejected the Defendant’s request for an offset of the capital gains on the sale of the Plaintiff’s Mississauga home against the expenses related to her move and asserted that it would be unfair for the Defendant to benefit from the increase in value to the property due to the Plaintiff’s home improvements and to a general rise in real estate values.

It is important to keep in mind that Justice Stinson’s judgment was influenced by several key facts that were unique to Ms. Robinson’s situation. For instance, much attention was dedicated to demonstrating that the Plaintiff’s decision to accept this position and move to Southwestern Ontario was in fact reasonable in the circumstances. Ms. Robinson had been induced to move to Mississauga from Southwestern Ontario to continue her employment in a more senior role with Heinz Canada in Toronto a few years prior so it was “reasonably foreseeable that if the Defendant breached their contract the Plaintiff’s damages would include the cost of relocating” closer to her new employment.

Take-Aways

Both employers and employees involved in a wrongful dismissal or constructive dismissal claim should consult employment counsel to determine if adequate measures are being taken to mitigate damages and to better understand how this mitigation income will be calculated.

Further, employees should take the time to save their receipts and document all expenses incurred in the course of their efforts to mitigate damages following a dismissal.

If you have any questions or would like further information regarding the duty to mitigate loss of income following a termination of employment, please contact Alexandra Hobson at Sultan Lawyers PC by telephone at 416-214-5111 or by email at ahobson@sultanlawyers.com.

 


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