If an employee is dismissed but asked to work out their notice period, is it reasonable to expect them to look for new work to potentially reduce the notice period?
Question: If an employee is dismissed but asked to work out their notice period, is it reasonable to expect them to look for new work to potentially reduce the notice period?
Answer: At common law, an employee who is dismissed without cause and without receiving reasonable working notice has been “wrongfully dismissed.” What is wrongful about the dismissal is not the termination of employment but rather the employer’s failure to comply with its implied common law obligation to provide reasonable working notice of dismissal.
It is well established that, at common law, an employee who is seeking damages for wrongful dismissal has an obligation to take reasonable steps to mitigate their damages by searching for similar employment and accepting such employment if it is available. If a dismissed employee finds new employment during the notice period, the damages the employer is required to pay will be reduced by the amount of loss the employee avoided in the earnings from their new employment. If an employer can demonstrate that the employee was offered other reasonable employment or could have found such employment if they had made reasonable efforts, the employee’s damages will be reduced accordingly. However, an employer cannot merely demonstrate that an employee made no efforts to mitigate their loss. To succeed with a mitigation defence, the employer needs to show that the employee would have been successful in finding comparable employment if a reasonable job search had been conducted.
Statutory severance compensation is not usually subject to any deduction for mitigation earnings. Also, severance compensation that is required by the express terms of an employee’s employment agreement may not be subject to a mitigation deduction, depending on the terms of the agreement.
In most situations, an employer can avoid its obligation to provide severance compensation by giving an employee the appropriate amount of working notice of dismissal. Where this occurs, it is often good practice to give the employee a positive letter of reference and provide a reasonable amount of time off during the working notice period to attend job interviews. If the employee finds a new job and quits during the working notice period, this can create a win-win scenario and reduce the employer’s monetary liability.
The issue here, however, is whether an employer can require an employee to conduct a reasonable job search during the working notice period. This is a potentially challenging point, because the duty to mitigate arises only where an employee has been wrongfully dismissed. The employee may argue that if the required amount of working notice has been provided, there is no obligation to look for other employment.
An interesting Alberta decision on this point is Deputat v. Edmonton School District No 7. The employee was an engineering technician who was provided with 12 months of working notice of dismissal. The employee worked out the 12-month period and then sued the employer for wrongful dismissal. At trial, the employee was awarded damages based on a notice period of 18 months. The employer took the position that the employee had failed to mitigate because he didn’t start a job search until five months before the end of his 12-month notice period. The trial judge rejected this argument and found that under the circumstances the employee had acted reasonably. The Alberta Court of Appeal disagreed:
“The assumption in the reasons is that the respondent had no duty to look for a new job which would start before the old one finished. That is not the law. Mitigation need not be perfect, and there is more than one way to reduce a loss. A new permanent job would be better than the old job which was certain to end inside a year. Indeed, a new job might have better pay or working conditions than the old one. The respondent had a duty to look for a new job, even if a good one might have to be started before the 12 months were up.”
The Appeal Court reduced the employee’s damages by 50 per cent on the ground that he had failed to take reasonable steps to mitigate.
The principle that arises from Deputat is that if an employee who has been given working notice of dismissal claims their notice was insufficient and intends to pursue a wrongful dismissal action, the employee has an obligation to start a reasonable job search during the working notice period.
For more information, see:
• Deputat v. Edmonton School District No 7, 2008 ABCA 13 (Alta. C.A.).
Colin Gibson is a partner with Harris and Company in Vancouver. He can be reached at (604) 891-2212 or firstname.lastname@example.org.