Employment termination is a complex journey for both employers and employees alike. In this dynamic interplay between departing employees and their former employers, understanding the principles of mitigation becomes paramount. Mitigation, in the context of employment termination, refers to an employee’s obligation to actively seek and secure new employment following the end of their tenure.

This blog will consider the requirements of employees to mitigate, as well as the onus on employer’s to establish that the employee could have found comparable employment had they undertaken reasonable search efforts.

Employer argues employee’s failure to mitigate justifies shorter notice period

In the case of Jimmy How Tein Fat v PRGX Canada Corp., the plaintiff employee (the “employee”) was terminated after 29 years of service with the defendant employer (the “employer”) due to restructuring. He was provided with 34 weeks of severance pay in accordance with the statutory amount. However, he claimed that as a “senior long-ime employee who is now 63” he was entitled to 24 months of notice and sought damages in lieu of the difference between what he was paid and what he believed he was entitled to.

On the other hand, the employer argued that he was not a senior employee and was only entitled to 16 to 18 months notice. The employer also alleged that the employee “failed to take steps to reasonably mitigate his losses because he did not seek out employment within the highly specialized field where he had worked for 29 years.” As a result, the employer argued that the notice period should be reduced to eight months.

Reasonable notice is intended to reflect adequate period for employee to secure comparable employment

The employee was one of the first employees hired by the employer and he had received several promotions over the years. In 2019, he was appointed as VP of North America Operations and Global Audit Innovation. The employer was described as operating in a “highly specialized and niche market” that had “very few, if any, comparable companies.”

When the matter came before the Court, the parties agreed that the issues could be resolved by way of summary judgment and the Court agreed. When it comes to reasonable notice, the amount provided to an employee is intended to reflect “an adequate period of time for the dismissed employee to find other comparable employment” by considering various factors, including, but not limited to:

• the employee’s age;
• tenure of employment;
• character of employment; and
• the ability to find similar employment.

Employee’s compensation structure reflects “years of service at a high level”

One argument in dispute involved the employee’s level of seniority at the company. While the employee asserted that he is “amongst the highest level of employee at the company” the employer noted that the employee did not directly report to the company’s Chief Executive Officer and was, therefore, not at the highest level of employees. The employer did, however, acknowledge that the employee had “an important geography-specific operations role” and oversaw retail operations accounting for 45% of the employer’s total revenue.

The Court found that although the employee might not have been the most senior employee, his “responsibilities and compensation establish that he is amongst the highest level of executive employees and that finding comparable employment would take more time.” The employee’s compensation structure consisted of an annual base salary of $413,753.60 and he was entitled to a substantial nondiscretionary annual incentive bonus. He also participated in a deferred compensation plan available to senior executives, which the Court found reflected “not just his value as a senior executive but his years of service at a high level.”

Onus on employer to prove that employee failed to mitigate losses

Upon review of the parties’ arguments and supporting evidence, the Court found that the employee was entitled to 24 months notice. It was then up to the Court to determine whether the notice period should be reduced. Before a court will reduce the notice period, the employer must prove that the employee failed to:

1. Take reasonable steps to search for a new job; and
2. That a comparable job could have been obtained had the employee undertaken a reasonable search.

The employer argued that the employee failed to take reasonable steps in his job search and did not look to the employer’s competitors for similar employment opportunities. However, the next closest competitor generated only 30% of the employer’s revenue. While the Court acknowledged that the employee could have commenced his job search in the industry earlier than he did, this did not render his search efforts unreasonable. The employee did search for senior level employment opportunities in various industries.

Additionally, the Court found that the employer did not seem genuinely interested in helping the employee mitigate his losses due to the termination, as a reference letter was offered but not provided, and the employer did not take steps to facilitate the employee’s contact with others in the industry to help him secure alternative employment. Further, the Court emphasized the fact that the employer did not provide evidence to suggest that comparable employment was available with any of their competitors, or anywhere else, since the time of the employee’s termination.

Court awards employee 24 months notice

Based on the employer’s failure to meet the burden of proof in establishing that the employee failed to mitigate his losses, the Court ultimately held that the employee was entitled to 24 months notice, and that the notice period was not to be reduced.

This case serves as an example to employers that they should be mindful of their efforts to assist a terminated employee in their search for new employment if they wish to argue that the employee failed to mitigate their losses. Such assistance may take the form of providing reference letters and/or outplacement assistance. It is not uncommon for employees to claim that they have difficulty finding comparable employment in a particular job market, however, if an employer wishes to challenge this argument, they must provide some form of evidence of comparable, available positions.

Contact the Toronto Employment Lawyers at Grosman Gale Fletcher Hopkins LLP for Advice on Mitigation

At Grosman Gale Fletcher Hopkins LLP, our trusted labour and employment lawyers frequently advise employers and employees on various issues resulting out of termination, including wrongful termination claims, mitigation requirements, and severance packages. If you have questions about mitigation following termination, contact us at 416.364.9599 or reach out online to schedule an initial consultation with a member of our team.