Most people understand that if they lose their job, they have a right to receive severance from their employer. Generally speaking, what reflects fair severance for a person will depend on a number of factors such as whether the individual has a written employment contract, their age, their tenure of service, their formal education and the availability of comparable jobs in the local market.
Less well-known is the fact that while employers are required to pay severance, as a corollary, dismissed employees are generally required to look for alternate, comparable work. This requirement is a legal concept referred to as the “duty to mitigate”. Essentially, as the purpose of severance is to bridge the gap from when an employee is fired until he/she becomes re-employed, the duty to mitigate operates to help reduce this gap, by requiring individuals to actively look for work and thus not incur otherwise avoidable loss.
Frequently, when an individual is unable to agree a fair severance package with his/her former employer, we help our clients by bringing a court claim for wrongful dismissal, seeking compensation in the form of unpaid severance.
As part of bringing a successful claim, we encourage our clients to track and record their mitigation efforts, including any expenses that they incur in taking these steps. These expenses may include costs such as maintaining a professional designation, attending conferences/workshops, parking fees, printing expenses, and networking coffees/lunches.
Court Awards Relocation Costs Incurred in Mitigation
While these costs may, in some cases, seem nominal, a recent decision of the Ontario Superior Court of Justice sends an important reminder to all workers to diligently track and seek compensation for all expenses incurred in mitigating a loss of employment.
In Robinson v. H.J. Heinz Company of Canada, the plaintiff brought a claim for constructive dismissal after experiencing a significant demotion at work. While the plaintiff was successful in proving a constructive dismissal and being awarded 15-months of reasonable notice, this case is notable for the fact that the plaintiff was also awarded $45,010.32 for expenses that she incurred in seeking comparable employment.
The court found that the plaintiff mitigated her damages by moving from the GTA to accept a job in Southwestern Ontario at a reduced income. The court accepted that a dismissed employee is entitled to claim from his/her employer for reasonable out-of-pocket expenses incurred in seeking out and accepting alternate employment.
In particular, the plaintiff sought compensation from her former employer for the following mitigation expenses:
Expenses on the sale of her house in Mississauga;
Expenses on the purchase of a house in Southwestern Ontario; and
Moving and transitional expenses associated with commuting to southwestern Ontario before the purchase was complete, meals and living expenses, and moving costs.
The court accepted each of these claims as reasonable and awarded $34,010.32 for expenses associated with the sale of the plaintiff’s house, $3,500.00 for land transfer taxes, legal fees and related fees associated with the purchase and $7,500.00 for expenses associated with her commute and moving. A significant factor in the court’s decision to award these damages appeared to be the fact that the plaintiff had relocated to the GTA at the employer’s request, having been a long-time resident of Southwestern Ontario with deep roots in that area. As such, it was unsurprising to the court that the plaintiff elected to seek re-employment again in Southwestern Ontario.
Lessons for Ontario Employees and Employers
This case serves as a useful reminder to employees in Ontario to record and seek compensation for any expenses that they incur in seeking a new job, including costs associated with having to relocate for work.
As for employers, it is important to be aware that your business may be liable for significant costs, in the event that a former employee is required to move in order to fulfill their duty to mitigate. This may be especially significant if your business operates in a smaller market or town or if the employee that has been dismissed occupied a highly specialized and unique role which will likely necessitate relocation to find new work.
Additional Resources
To learn more about severance entitlements, see our recent Q&A article on this topic.
Try our Ottawa Severance Pay Calculator to get a sense of what your severance entitlement may be.
To learn more about the duty to mitigate, see our recent Q&A article on this topic.
Vey Willetts LLP is an Ottawa-based employment and labour law boutique that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in the National Capital Region and across Ontario. To speak with an employment lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca