I LOST MY JOB – EMPLOYMENT INSURANCE AND MITIGATION

Blog Post by Brian Grootendorst,
Lawrence Smith and Daniel Sorensen
Sorensen Smith LLP, Legal Counsel
February 15, 2019

I LOST MY JOB – EMPLOYMENT INSURANCE AND MITIGATION

Are you considering pursuing a wrongful dismissal case against your previous employer?

In a wrongful dismissal case, the main form of damages is “pay in lieu of notice.” What employment lawyers will negotiate, and what the court may ultimately be asked to decide, is how many weeks or months of notice of the termination of their employment an employee is entitled to. This is referred to as the “notice period.” Pay in lieu of notice therefore is the wages that employee would have earned, and any benefit that employee would have collected, during that notice period.

Generally, there are two ways a notice period can be calculated: pursuant to the Employment Standards Act, and pursuant to the common law. Calculating an employee’s entitlement to severance is a topic all its own. For the purposes of this post it is important to know that Employment Insurance and Mitigation only apply to notice periods calculated at Common Law.

Employment Insurance

If an employee is awarded damages as “pay in lieu of notice,” either by way of settlement, or after trial, the government considers this sum of money to be wages or salary collected by the employee over their notice period. Importantly, if an employee has been collecting pay from Employment Insurance (“EI”) during the notice period they will be obligated to pay the EI amounts collected during that notice period back to the government.

When starting an action for wrongful dismissal, an employee should be cognizant of their responsibilities should they ultimately end up collecting both EI benefits as well as pay in lieu of notice.

Mitigation

It is a general principle of law that a plaintiff cannot sit back and let their condition worsen and then seek to be compensated by a defendant for those additional losses. Instead, generally a plaintiff must mitigate their loss by taking reasonable steps to ensure that they do not incur any additional losses.

In the employment context, when an employee has been dismissed, that employee is legally obligated to mitigate their loss by taking reasonable steps to find new, similar, employment. The key words here are “reasonable” and “similar.”

The British Columbia Court of Appeal states the law very clearly:

The duty to “act reasonably”, in seeking and accepting alternate employment, cannot be a duty to take such steps as will reduce the claim against the defaulting former employer, but must be a duty to take such steps as a reasonable person in the dismissed employee’s position would take in his own interests—to maintain his income and his position in his industry, trade or profession. The question whether or not the employee has acted reasonably must be judged in relation to his own position, and not in relation to that of the employer who has wrongfully dismissed him. The former employer cannot have any right to expect that the former employee will accept lower-paying alternate employment with doubtful prospects, and then sue for the difference between what he makes in that work and what he would have made had he received the notice to which he was entitled.ⁱ

(emphasis my own)

If an employee is successful in finding a position with a new employer, all wages they earn from that new employer during the notice period will be deducted from their entitlement to pay during the notice period.

Reasonable steps a dismissed employee can take generally will include reviewing online job boards and newspapers and applying for all reasonably similar positions to their previous position. An employee should keep a record of all jobs they have applied for, and all steps taken to try and find reasonably similar employment. It may also be prudent for an employee to record reasons why they did not apply for certain positions. An employer may take it upon themselves to research available jobs and notify the dismissed employee of these positions. If that dismissed employee fails to apply for some or all of these postings, this can be argued to be a failure to mitigate on the part of the employee. A failure to mitigate on the part of an employee can result in the notice period being reduced.

One unique situation arises where, after termination, there remains “a situation of mutual understanding and respect, and a situation where neither the employer nor the employee is likely to put the other’s interests in jeopardy.”ⁱⁱ If this is the case, an employer may offer the dismissed employee temporary re-employment on the same terms they were subject to prior to termination. Should the employee unreasonably refuse re-employment with their previous employer, the British Columbia courts have found this to be a failure to mitigate and reduced that employee’s notice period accordingly.

However, this duty of the employee to accept re-employment arises infrequently, and it must be reasonable for the employee to accept re-employment. Where there has been significant damage to the employee/employer relationship it will not be reasonable for an employee to return.

Conclusion

It is important for an employee to note that damages in wrongful dismissal cases are unique in that they are considered wages paid over a certain period of time. Since they are considered wages, an employee cannot “double dip” by collecting both EI compensation and wages.

It is also important for employees to keep in mind both their obligation to seek alternative employment following their termination, and the effect that mitigation could have on their potential damages award.

Mitigation, and when or if an employee receives new employment, plays a very large role in a wrongful dismissal case. Often employees will find employment that pays the same or a similar salary as their previous employment within weeks or months after their previous employment was terminated. This will seriously affect how much pay in lieu of notice a dismissed employee may be entitled to, and employees should seriously consider the impacts of mitigation when considering whether to proceed with a lawsuit or not.

We recommend that you always obtain legal advice, as your particular facts may make your situation unique.  Please contact us at 604-705-0022 for a consultation and we will be happy to assist you.