Re-Employment Efforts - To Assist or Not
Absent a contractual term to the contrary, an employee who has been terminated from employment has a duty to mitigate and search for alternative employment. If a former employee secures new work, this reduces their severance entitlements. Importantly, if a terminated employee fails to reasonably search for new employment, their severance entitlements will also be reduced. The latter is known as a "failure to mitigate."
In the recent decision of Summers v. Oz Optics Limited [Summers], Mr. Paul Summers (the "Plaintiff") was terminated without cause by the Respondent, Oz Optics Limited (the "Employer" or the "Company"). The Court found that the employment agreement contravened the ESA, and the Plaintiff was entitled to enhanced wrongful dismissal damages. The Court also noted that the Plaintiff did not fail to mitigate, confirming that it is a good practice for employers to assist dismissed employees in their re-employment efforts.
The Plaintiff was 61 years of age and had been with the Company for almost 3.5 years when he was terminated. He sued his former employer for wrongful dismissal and continued to be unemployed - for 8 months and counting - at the time of the trial.
The Plaintiff argued that the employment agreement was unenforceable because the termination provisions were in contravention of the Employment Standards Act, 2000 (the "ESA"), hence he was entitled to common law reasonable notice of at least 8 months' pay.
On the other hand, the Employer argued that the Plaintiff was only entitled to the termination amounts specified in the employment contract. The Company also argued that the Plaintiff failed to mitigate his damages by not engaging in sufficient job search efforts.
General Legal Principle
In a wrongful dismissal action, terminated employees are expected to mitigate their damages by taking reasonable steps to actively search for alternative employment. Mitigation efforts must be reasonable, but not perfect. The employer has the "burden of proof" of establishing that the employee failed to make reasonable efforts to find work and, that the employee could have found employment of a similar kind, suited to the employee's abilities, if reasonable efforts were made.
What amounts to a failure to mitigate" is often a hotly contested topic. In recent Ontario decisions, employees that refused to accept comparable roles amounted to a failure to mitigate. Further, an unreasonable delay in applying for new jobs or the employee's decision to relocate to a smaller city centre - with less job prospects - was also considered a failure to mitigate.
Notably, the employer is not required to offer outplacement counseling and/or to bring available job advertisements to the former employee's attention, however Courts have taken the employer's actions (or inaction) into consideration when a company accuses a former employee of not taking adequate steps to secure alternate employment. In the decision of Maxwell v. United Rentals Canada Inc., the Ontario Superior Court of Justice said the following:
I am not suggesting that the employer has an obligation to provide outplacement counseling to a dismissed employee or to bring job opportunities to the intention of the former employee but if an employer intends to argue the failure to mitigate on the part of the former employee, it would be well advised to present evidence of assistance that was offered to the terminated employee during his or her job search.
The Court ruled that the Company failed to prove their former employee had failed to take reasonable steps to mitigate his damages, and the Plaintiff was awarded damages equivalent to pay in lieu of notice for a period of 6 months (totalling approximately $36,000).
The Court considered the fact that the Company did not provide any re-employment assistance to aid the Plaintiff in his job search. The Court stated the following:
15. As there is an issue concerning an alleged failure to mitigate, discussed below, I would note that the employer seems to have done nothing to assist the Applicant in transitioning to new employment. In particular, he was terminated summarily and escorted off the premises in front of other employees. This did not allow the Applicant an opportunity two preplan his job search or to investigate alternative employment in advance of termination. The employer has not provided a letter of reference nor was any assistance offered by way of career transition counseling. The employer has not offered to waive the non-solicitation provision in the employment agreement."
22 On the other hand, the record does make clear, as noted previously, that the Respondent has been of no assistance to the Applicant in his re-employment efforts."
The Bottom Line
This decision is a good reminder that, although employers do not have an obligation to bring available job advertisements and/or provide outplacement counseling to departing employees, they should still consider aiding in re-employment efforts, especially in situations where a former employee does not agree to sign a termination package.
Employers should also consider providing appropriate relocation counselling without having it tied to a Full and Final Release, pay out the ESA minimums immediately, and waive or at least limit any non-compete or non-solicit agreements (with the guidance of the employer's legal counsel), in order to potentially avoid litigation down the road.
At Hyde HR Law, we offer expert legal advice on effective termination strategies to ensure compliance with statutory obligations and to assess common law reasonable notice, if any. Please do not hesitate to contact us.