The Duty to Mitigate: COVID-19

By Sean O’Donnell

These blog posts are meant to provide educational content and are not to be taken as legal advice.

The duty to mitigate requires a plaintiff who has suffered a loss as a result of a defendant’s breach of contract to take reasonable steps to lessen or alleviate that loss. In the employment context, this means that an employee who has suffered a termination of their employment has a legal obligation to take reasonable measures to find new employment. Subject to certain exceptions, any benefit derived from complying with the duty to mitigate must be deducted from damages in lieu of reasonable notice. As outlined in Reed Deer College v. Michaels (“Red Deer College”): 

“If the employee unavoidably remains idle, the loss of his pay is actually suffered without deduction. If, however, the employee can obtain other employment, he can avoid part at least of these damages. Therefore, in an action by the employee against the employer for wrongful discharge, a deduction of the net amount of what the employee earned, or what he might reasonably have earned in other employment of like nature, from what he would have received had there been no breach, furnishes the ordinary measure of damages”. 

The underlying policy reason behind why a dismissed employee has a legal obligation to seek new employment (i.e. to mitigate their damages) is because the purpose of providing notice is to give the employee the appropriate amount of time to find new work. It is wrong to assume that a notice period is to ‘reward’ the employee for its past service and/or ‘punish’ the employer for dismissing the employee.

The employer bears the evidentiary burden or proving that the employee failed to take reasonable steps to mitigate their damages. The employer must demonstrate, on a balance of probabilities, not only that the employee failed to take reasonable steps to mitigate, but that the employee could likely have obtained alternative employment. This is a heavy burden: as C.J.C. Laskin noted in Red Deer College, “…the burden which lies on the defendant of proving that the plaintiff has failed in his duty of mitigation is by no means a light one, for this is a case where a party already in breach of contract demands a positive action from one who is often innocent to blame”. The employer must show that the dismissed employee’s conduct was unreasonable, not in one respect, but in all respects. An important note, a dismissed employee is not obliged to accept employment that is not comparable to his or her former job.  

Further, the standard of mitigation is “reasonableness, not “perfection”. It is, therefore, inappropriate for an employer to pick away at a former employee’s mitigation performance with the bald suggestion that he or she could have done better. The law is satisfied if the party placed in a difficult situation by reason of the breach of duty owed has acted reasonably in the adoption of remedial measures, that party will not be held to be disentitled to recover the costs of such measures merely because the party in breach can suggest other measures less burdensome to him might have been taken.

The duty to act reasonably in seeking alternate employment is a duty not owed to the employer, but rather a duty that the employee owes to him or herself. How then, in the wake of the COVID-19 pandemic, can employees satisfy this duty? Many employers are currently contemplating and/or implementing temporary layoffs during this trying time, causing much speculation and uncertainty surrounding the application of constructive dismissal claims and, by natural consequence, the inherent duty of mitigation. How do these unique and unprecedented circumstances change the law of mitigation, if it all?

A simple, albeit frustrating answer, is we do not currently know. No judge or adjudicator has made a decision on this issue, and the courts are currently closed and ought to remain closed until circumstances suggest otherwise. How the court will view mitigation requirements in the face of a global pandemic remains undetermined, but common sense and jurisprudence tells us that the courts will take a measured and appropriate response to the factors at large, with a broad understanding that efforts to mitigate in these circumstances will, more often than not, be rendered fruitless exercises. 

Prior to the wake of COVID-19, a former employee is not, in law, expected to take alternative lower paid employment. During COVID-19, however, courts may be of the view that if reasonable means of employment were available to the employee, despite those means being less than previous employment, there may be an adjusted duty to the long-standing principle of not being required to accept a lower paid employment opportunity. 

The number of resumes a former employee delivers to prospective employers is not, necessarily, indicative of the employee’s attempts to mitigate. As expressed by Bouck J. in Macbride v. ICG Liquid Gas Ltd., “it would be unfair to the plaintiff in these circumstances to require him or her to submit himself to the added humiliation of further rejection when it is evident that mitigation is quite unrealistic”. In Cronk v. Canadian General Insurance, a clerical worker in the insurance industry was held not to have failed in her duty to mitigate when she did not send applications to other insurance companies in her home city when the insurance industry was in a depressed state and she had reviewed hundreds of listings at the local employment centre. With these cases in mind, and looking through the lens of a global pandemic, how will Canada’s courts apply the duty to mitigate? 

The current state of Canada’s economy and its future projections indicate that we are living through history. How the courts may treat an employee’s mitigation efforts relative to these unprecedented times remains to be seen. Might it be reasonable, in the current state of flux that is our job market, for the duty of mitigation to be altered? Might it be required for an employee to take a lower paying job in these trying circumstances? The courts have yet to provide us with any concrete guidance, however, common sense and foresight would indicate that if anything, the current mode of our economy and the evolution of this pandemic could, very well, move the needle when it comes to the duty to mitigate. 

What then are the key takeaways? If you are an employee who has been terminated during the COVID-19 pandemic, the duty to mitigate your damages and look for a job still remains. You should keep a record of your efforts, provided you need a record of proof in any future court proceedings. Any reasonable job offer should be carefully considered, and in light of the present circumstances facing our economy and job market, additional consideration should be given to opportunities that would otherwise, absent a global pandemic, be ‘unreasonable’ to accept. Failure to take a job in the face of COVID-19 might be viewed differently by a judge or an adjudicator in the months and years to come.

As of March 27, 2020, the federal government has implemented a significant increase to its originally proposed wage subsidy program for small and medium-sized businesses, increasing the subsidy from ten (10) percent to seventy-five (75) percent, a move that has been asked for by various businesses who have been forced to layoff their employees due to the financial impacts of COVID-19. As the Prime Minster of Canada, Justin Trudeau noted in his announcement on March 27, 2020, “For those of you who’ve already had to layoff workers, we hope you will consider rehiring them given this payroll support”. This new measure of a seventy-five (75) percent wage subsidy will be retroactive, applicable as of Sunday March 15, 2020. It is unclear, at the time of writing, how long this subsidy will apply and what sort of monthly cap per employee will be introduced. 

Nevertheless, and as a result of this announcement, employers who qualify for this subsidy should consider recalling employees to work. This announcement should be seen as a welcome development to both employees and employers in the face of mitigation efforts, as a majority of damages will be covered by the wage subsidy program, thereby reducing the incoming burden on our court system upon re-opening. 

If you require specific advice tailored to your employment situation, please contact us.