Contracts let employees off mitigation hook (Legal view)

Contractually set severance payments can remove dismissed worker’s duty to mitigate damages by looking for another job
By Nikolay Chsherbinin
|Canadian HR Reporter|Last Updated: 10/18/2009

As a general rule, dismissed employees have a duty to take reasonable steps to reduce or mitigate their loss by looking for another job. If an employment contract provides for a severance payment upon termination, the question is whether the employee is still obligated to mitigate her loss. Recently, the Ontario Court of Appeal touched on this issue in two cases: Soye v. Corinthian Colleges Inc. and Wronko v. Western Inventory Services.

It ultimately concluded that, when an employment contract expressly provides for a severance payout either immediately or very shortly after termination, it relieves an employee of the duty to mitigate her loss by looking for alternate employment.

In Wronko, Darrel Wronko was employed at Western Inventory as vice-president of national accounts and marketing. His employment contract included a severance provision for the payment of two years’ salary if he was terminated. The total amount of potential damages for his notice period of two years was $286,000. However, the court reduced his damages to $67,795 because he earned $218,205 in the two-year period following his termination.