The basic rule of mitigation is that a plaintiff is not entitled to recover compensation for losses that could have been avoided if he or she had made reasonable efforts to do so.  An individual who has recently lost his or her job, therefore, usually has an obligation to take steps to find replacement income.  This may be accomplished in one of two main ways: (1) by looking for work elsewhere; or (2) by staying and accepting work offered by the employer.  This article focuses on the latter scenario.

Mitigation by staying may be attractive to an employee for the same reason that working notice is often preferable; it helps to avoid any embarrassment that may come with being unemployed and, practically speaking, it is easier to find a job from a job.  Similarly, for the employer, keeping an employee earning income may help to limit exposure to damages and facilitate the transition of the employee to another employer.

That being said, though, there are also some potential negatives.  An employee who has been terminated may not feel welcome or valued by the terminating employer.  It may thus be difficult for the employee to return to work.  It may also be problematic or even impossible, depending on the circumstances, for the employer to have that employee return.

The usual situations in which an employee’s position is terminated and he or she is then offered re-employment fall into three categories: (1) to correct a termination that was made by mistake (for example, attempting to lay off an employee where there is no ability to do so); (2) to reduce exposure to damages where constructive dismissal is alleged; and (3) to set the stage for a future argument that the employee has failed to mitigate.  This third category belongs to the risk-tolerant employers, who are betting that the terminated employee will not accept the offer.

It is clear that, in some circumstances, a terminated employee is required to accept an offer of re-employment in fulfilment of his or her duty to mitigate damages.  This principle applies to both wrongfully dismissed and constructively dismissed employees.  As we have recently been reminded, however, the timing of the offer of re-employment is critical, especially where constructive dismissal is alleged.

In March of this year, in Farwell v. Citair, the Ontario Court of Appeal made it clear that an offer of re-employment is only operative if it is made after the termination has occurred.  While this may seem obvious in the context of an actual termination (i.e., where the employee is told that his or her services are no longer required), it was less so in the context of an alleged constructive dismissal.  Employer counsel would routinely argue that, where an employee alleged constructive dismissal and left the workplace, the employee had not met the duty to mitigate because he or she had not simply stayed and continued to work in the disputed position.

Farwell removed this argument from the employer’s arsenal.  An employer must now actively re-offer a position to the terminated employee after the termination has been communicated.  Where constructive dismissal is alleged, the offer must be made after the employee communicates an intention to treat the employment relationship as at an end.

Timing is not the employer’s only hurdle.  The other, and often more pressing, challenge is that the re-employment must be such that it would be reasonable to require the employee to accept it.  The offer of re-employment must be one that a reasonable person in the position of the terminated employee would accept.  There is thus an objective component to the analysis, as well as subjective/contextual considerations.  At a minimum, the compensation and working conditions should be comparable to the lost position and the workplace relationships should not be acrimonious.  There should be no humiliation or loss of dignity in the return.

The employer bears the burden of proving inadequate effort on the part of the terminated employee.  This includes, where an offer of re-employment is made, proving that a reasonable person in the position of the terminated employee would have accepted the offer.  It is therefore important that employers receive legal advice early in the termination process.