Job Search After Termination

Written on behalf of Peter McSherry

Post Termination Job Search

Many persons facing sudden termination will be shocked to learn that there is a legal obligation upon them to look for replacement income, should legal action be taken against the company for the failure to provide proper notice of termination.

The General Rule

Following termination of employment, absent a contract to the contrary, the fired employee has a duty to mitigate (i.e. minimize) their claim for lost income for the notice period.

Generally speaking, this obligation means the employee must show that he or she has taken reasonable steps to seek other income, which generally may be comparable employment or starting a new business.

The Onus of Proof

The obligation to show a terminated employee’s failure to mitigate is upon the company. It not only must show a factually based failure to mitigate, but also that  if the former employee had taken reasonable steps to conduct a proper job search, he or she would have been successful in this endeavour. This is a difficult onus for the employer to meet.

Earnings Offset

The flip side of this principle has been generally conceded to be that any income earned by the employee following termination will reduce the claim for lost income for the notice period.

Ontario Court of Appeal Sets the Law

A new decision of the Ontario Court of Appeal has recently refined this proposition. It deals with two issues, income earned in the statutory period and part-time earnings in the common law period, and requires careful analysis.

The employee in question had been employed by various McDonalds restaurant franchises for a period in excess of 25 years, most recently as a restaurant manager. The statutory sum of notice and severance due to her under the Employment Standards Act (ESA) was roughly 34 weeks.[1]

No Deduction for the Statutory Period

It was determined by the trial judge and the Court of Appeal that income sums earned by the plaintiff during this statutory period would not offset the sums due. This has long been accepted as the law but the Court of Appeal confirmed to be so. Accordingly, a terminated employee who finds a new replacement job at the same salary, or even greater, one day after termination will be entitled to the full ESA sum without an offset.

EI Benefits

The employer also argued that Employment Insurance Benefits should reduce the claim under the statute and common law. The law on this issue has been clear for decades. No such reduction is mandated. There is, however, an obligation to repay EI benefits and indeed for the employer to deduct it from the sum due and remit this to the EI Commission. This issue was not addressed in the decision. The end result is that the damages paid by the employer are not reduced, but the employee must repay the EI sum received.[2]

Residual of the Notice Period

The other significant aspect of the decision relates to the claim for lost income for the balance of the notice period, which was set at 20 months in this case. More precisely, this is the time period from the end of the statutory period, presumed to be 34 weeks, to the end of the 20-month common law period.

The incomes the plaintiff earned post-termination included a sum from part time work from Sobey’s making salads and at a Home Depot as a cashier.

The plaintiff had been working for Sobey’s while employed by the company. These part-time earnings were not deducted as they were not a “substitute” for her prior earnings, but rather were part-time positions which she could have held while employed with the defendant.[3]

The Home Depot earnings sum, the court ruled, was “unclear” and for that reason no deduction was allowed, as it was the employer’s obligation to prove the need for an offset.

The majority decision of the Court of Appeal, it should be noted, specifically rejected the trial judge’s reasoning that there should have no offset as the new positions were inferior in substance to the prior job of restaurant manager.

One More Thought

However, in concurring reasons, that agrees with the end decision but for differing logic, the third justice of the Court of Appeal reasoned that there should be no mitigation offset where the terminated employee works in a “much inferior” position. This view is a radical departure from prior caselaw. It is not binding law, but often such concurring decisions become important in later cases.

How Does this Impact My Case?

If you have been terminated, there will be a mitigation obligation. It will not reduce your statutory claim but, in most instances, new income will very likely reduce the balance of your common law claim.

Part-time replacement income may not necessarily reduce your claim, particularly if it is income which you could have earned while still employed. That is to say, it is not “substitute” earnings. Clearly, the issue of mitigation requires solid and reliable advice.  Contact the offices of Guelph employment lawyer Peter McSherry. We can help you understand this complex web of mitigated income, and help you understand what you should be doing following a termination in order to protect yourself. Contact us online or by phone at 519-821-5465 to schedule a consultation.

[1] This issue was not settled by the trial judge nor by the Court of Appeal.

[2] This is not as precise as is stated. As the severance payment is insurable earnings, there may be a new EI claim established at the end of the notice period, if then unemployed. One claim will then offset the other. Also legal fees are deducted from the calculation of the sum to be repaid.

[3] The Court left open for argument the concept that the part-time earnings could in future cases be significant enough to be substitute earnings and hence deductible.