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Failure to Mitigate – A Tough Argument for an Employer to Make

Even where an employer is not alleging cause for termination and there is little or no dispute over the length of reasonable notice to which the employee is entitled, the employer will often still argue for a reduction in damages based on the employee’s failure to adequately mitigate her damages. The recent Ontario Superior Court of Justice decision in Aylsworth v. The Law Office of Harvey Storm, 2016 ONSC 3938 provides further clarification regarding the limits of this defence for employers.

Aylsworth had worked as a legal assistant for the defendant lawyer (the “Employer”) for over 15 years. As the Employer was approaching retirement, the defendant negotiated the merger of his office with another law firm, REL, and gave Aylsworth approximately 4 months’ working notice. Shortly before the end of the working notice period, REL made an offer of employment to Aylsworth on terms similar to her employment with the defendant. There were, however, some differences:

i. Aylsworth was being asked to sign a written agreement;

ii. she would not be entitled to a vacation in the summer months;

iii. sick days would be treated as vacation days;

iv. she would be subject to an initial probationary period; and

v. her severance entitlement would be limited to the statutory minimum.

In response to REL’s offer, Aylsworth attempted to negotiate a salary increase and requested additional information regarding the offer. REL treated her response as a rejection of their offer and withdrew it.

Aylsworth sued the Employer and brought a motion for summary judgment. The sole issue to be determined by the Court was mitigation and specifically, whether the employee was justified in her response to REL’s offer of alternate employment. In rendering his decision, the Motions Judge confirmed the legal principles relating to mitigation:

i. the onus is on the employer to establish the employee’s failure to mitigate;

ii. the employer must show that the employee’s conduct was unreasonable in all respects;

iii. the employee is entitled to a reasonable degree of latitude in considering her options; and

iv. the Court must be careful to avoid hindsight and must use common sense.

The Court found that the Employer had failed to discharge the onus on him to establish Aylsworth’s failure to mitigate and that Ayslworth’s actions vis-à-vis REL’s offer were understandable and reasonable. The Court was of the view that, although the salary offered by REL was the same, the other terms of REL’s offer were significantly less favourable than those of her prior employment. As a result, the Court decided that Aylsworth was justified in seeking clarification of certain issues and in attempting to negotiate an increase in salary from REL. She was therefore awarded damages for wrongful dismissal of $32,500.00.

The Employer appealed but the Divisional Court dismissed his appeal and upheld the decision of the Motions Judge. The case makes clear that, following termination, an employee may be justified in refusing an offer of alternate employment even at the same salary if the other conditions of the alternate employment differ sufficiently and in a negative way from the prior employment.

Written by Susanne Balpataky Susanne Balpataky is an experienced commercial litigator who has practiced at Speigel Nichols Fox LLP since joining the firm in 1991.