The principle of mitigation in employment law is clear—an employee, dismissed without cause, must take reasonable steps to secure comparable alternative employment to minimize the loss resulting from the termination. The principle of mitigation minimizes an employer’s loss arising from a breach of an employment contract and can be used to reduce damage awards for the wrongful dismissal of an employee.
Onus on Employers to Prove Employee Failed to Mitigate
Mitigation demands action by a dismissed employee. However the onus of proof is on an employer to establish that the employee failed to properly mitigate. It is important to note that the obligation to mitigate applies to common law damages only. The statutory severance required under British Columbia’s Employment Standards Act is not subject to an employee’s duty to mitigate.
An employer faces a considerable burden of proof to establish an employee’s failure to mitigate and a recent Ontario Court of Appeal case, Link v. Venture Steel Inc., confirms that this onus remains, even when an employee admits that he has taken no steps whatsoever to mitigate his loss.
William Link relied on non-competition clauses in his contract to justify his actions. A closer examination of the trial judge’s reasoning, however, shows that a court is willing to enforce the duty to mitigate—even with a contractual non-competition clause—if the employer can provide evidence of comparable positions available to the employee.
Mitigation in Link v. Venture Steel Inc.
The facts of Link are not complicated. In 1996 Mr. Link was involved in setting up Venture Steel Inc., working in sales. He became the vice-president of sales and a shareholder of the company. In February 2005, the company dismissed Mr. Link with cause, alleging serious misconduct, including dishonesty and stealing from the company. In response, Mr. Link successfully sued for damages in the Ontario Superior Court of Justice and received compensation for a 12-month notice period. Venture Steel sought, unsuccessfully, to have this damage award reduced on the basis that Mr. Link did not mitigate his damages.
Mr. Link did find new employment 18 months after his dismissal but admitted that he had not looked for work for a full year. He defended the reasonableness of his actions by relying on the non-solicitation and non-competition clauses in his employment contract, which restricted his ability to perform employment in the steel industry for a period of twelve months. He argued that had he been found to have breached these contractual obligations he risked losing millions of dollars.
At trial the judge had accepted that Mr. Link had a real concern that by accepting another position he might be violating his contractual obligations. However, the trial judge concluded that the existence of a non-competition obligation should not, automatically, relieve an employee from his or her obligation to mitigate. The court recognized that, if undue consideration is given to such contractual clauses, an employee could potentially achieve a double recovery. Mr. Link’s specific concern could have been eliminated if he had asked for a waiver or if Venture Steel had relieved him from his contractual conditions. Neither occurred.
The court, noting there were many employment opportunities Mr. Link could have pursued without breaching the non-competition clauses, appeared to be searching for a way to limit the damages. In the end, however, it found that it could not do so because Venture Steel had not led evidence that Mr. Link had failed to reasonably mitigate his losses. The Court of Appeal upheld the trial judge’s decision and the reasoning behind it.
British Columbia’s Courts and Mitigation
B.C. courts have not considered the issue of mitigation in the context of non-competition clauses at length. However, it appears they may be open to the reasoning in Link as they have previously rejected a plaintiff’s argument in a 2008 decision, Davies v. Fraser Collection Services Ltd., that a non-competition clause justified his failure to seek other employment.
The decision in Link demonstrates two considerations. The courts continue to recognize the importance of enforcing the employee’s duty to mitigate and are not willing to give employees a free pass on mitigation, even when contractual non-competition clauses are in place. Employers, however, must do their part by providing the court with evidence showing that, if a fired employee takes reasonable steps to mitigate, he or she can find comparable employment. In short, if an employee fails in their obligation to mitigate, the onus still remains on the employer to provide evidence of that failure.
For more information on mitigation by dismissed employees and employment law in general, please contact Barbara Cornish or Debra Rusnak.
Read other articles from the Spring 2011 Letter of the Law:
• Possession Is Not Nine Tenths of the Law by Michael Hewitt
• New Temporary Foreign Worker Regulations by Melanie Samuels
• Proposed Limitation Act Changes by Steven Lesiuk
• Simple Socializing May Have Complex Perils by Scott Brearley
• Insurance Brokers’ Liability by Derek Brindle Q.C.
• Editor’s Note by David Perry
• US@SU Celebrating A Quarter Century of Accomplishments