As we have written elsewhere, if you’ve been wrongfully dismissed or forced to quit, you
may be entitled to severance pay. If you find yourself in that unfortunate situation, you may be inclined against looking for work during the notice period. You may wonder if you have to look for work immediately.
If you seek employment insurance benefits, they are going to require you to take reasonable steps to find new work.
General rule
Regardless, the law requires you to “mitigate” your losses – which means take reasonable steps to reduce your losses, for any breach of contract including breach of an employment contract. That means, in most cases, you need to look for work. You are not required to settle for just any job, but you should be looking for reasonably similar work. That can mean a similar position, in the same field, with similar pay, in the same geographic area. If you have questions about that, you should seek legal advice. The employer has the burden in any court case to prove available suitable alternate employment; but employees should keep job search records.
If an employee finds alternate work, then their severance pay will be reduced correspondingly. However, if an employee fails to seek alternate employment, and it is shown suitable alternate employment was available, a court may cut off the notice period at the time the suitable employment came available. Courts may excuse an employee’s modest delay in search of alternate employment, perhaps a week or two, to recover from being dismissed.
Dismissed employees face a choice of potentially having their severance pay reduced because they found a job or potentially having their severance reduced because they didn’t look for a job. A wise employee would look for suitable alternate work – if it works out they’ll have another job and they’ll have avoided potential losses.
Constructive dismissal
As we have written elsewhere, there may be times where the employer has mistreated you to the point you have been constructively dismissed. A common ground for constructive dismissal is demotion. The question arises: does the duty to mitigate require an employee to accept the demotion? There are several factors to consider: whether the compensationis the same, whether the working conditions are substantially different or not, whether the employee has commenced litigation, when the offer was made, and whether the employee would be returning to work in an atmosphere that is hostile, embarrassing or humiliating. Employers need to know to handle demotions delicately, and with legal advice; employees need to seek legal advice about whether failure to accept a demotion may be a constructive dismissal.
Fixed term contracts
The law across Canada is somewhat divided on whether there is a duty of an employee to mitigate damages before the expiration of a fixed term of employment. Both employers and employees need to know what applies to them.
In a 1988 decision involving former Vancouver Canucks head coach Roger Nielson, the BC Court of Appeal held if an employee found alternate work during the currency of a breached fixed contract, then those actual earnings would be deducted from any damages award. In 1999, the Supreme Court of Canada took that decision another step and held, “as a contractual claim, the usual rules relating to mitigation of damages apply” to fixed term contracts.
However, in 2012 and 2016 cases, the Ontario Court of Appeal ruled employment contracts with fixed terms should be held treated as fixing liquidated damages or a contractual amount,” and hence the duty to mitigate did not apply. These decisions do not directly reconcile the Supreme Court of Canada’s decision
referred to above. Those decisions have been held in BC and Saskatchewan to mean mitigation earnings should be deducted, but there is no positive obligation to mitigate during a fixed term contract. Neither case has attempted to reconcile the 1999 Supreme Court of Canada with the 2012 and 2016 Ontario Court of Appeal decisions.
Summary
Employees are typically expected to look for work upon termination, possibly even if they have been demoted or employed on a fixed term of employment and may have their severance pay reduced if they don’t.