If you are in a dispute over money, there is a legal concept you need to know: the duty to mitigate. Think of the ‘duty to mitigate’ as the legal version of ‘cut your losses.’ If you’re claiming damages, you’re expected to take reasonable steps to limit them where you can (subject to some exceptions). You cannot recover losses you could have reasonably avoided.
For example, if you are trying to make a claim on your home insurance due to flooding, your insurer may look at what steps you took to at least reduce any further damage. Did you shut the water off when you first noticed a problem? Have you taken any further steps to stop things from getting worse? If the damage could have been contained to one room, but you failed to take steps to stop it from ruining the entire house, your damages may be significantly reduced from that failure to mitigate.
Mitigation most commonly arises in the world of employment law. Any payments made for wrongful dismissal are meant to keep an employee whole, but they’re certainly not meant to last forever. The duty to mitigate means that everyone has a part to play. Here’s a bit more about where it does, and does not, apply:
The Other Half of Wrongful Dismissal
When employment ends without cause, Ontario’s Employment Standards Act, 2000 (ESA) sets the floor: working notice or pay in lieu (and, in some cases, ESA severance pay). Beyond those minimums, the common law may entitle an employee to a longer period of “reasonable notice,” unless a valid contract limits it. That common-law notice is meant to bridge the time it reasonably takes the employee to find comparable work.
Any severance package or notice assessment must be viewed alongside the employee’s duty to mitigate. After termination, employees are expected to take reasonable steps to find comparable work so that their losses don’t grow. However, mitigation doesn’t mean taking any job. The obligation is to make diligent, good-faith efforts to secure comparable work, i.e. similar role, compensation, status, responsibilities, and a reasonable commute. Employees don’t have to accept a demotion or a markedly inferior or distant role in order to satisfy their obligation to mitigate. However, turning down a truly comparable offer can lead a court to reduce, or even eliminate, common-law notice.
Practically, employees should start searching promptly, apply regularly, keep a detailed job-search log, tailor applications, network, and be ready to show interview activity. From the employer’s side, mitigation can operate as a defence that narrows the employee’s right to seek common-law notice. The onus will be on the employer to show both that the employee didn’t take reasonable steps and that comparable work was realistically available and likely attainable.
The Clawback Clause
A severance package can look generous at first glance, but many are structured with a “mitigation” clawback clause. In salary-continuance arrangements, employers often require former employees to (a) keep them updated on the job search and (b) notify the former employer if they accept new employment. If re-employment happens, payments usually stop and a clawback formula kicks in. Commonly, the employer pays 50% of the remaining balance of the offered notice period as a lump sum. As an example, if an employee is offered 10 months’ pay by salary continuance, and they secure a comparable job after4 months, under a typical 50% clause, there are 6 months left on the continuance, so the employer will pay 3 months as a lump sum and the continuance ends.
Employee’s must be mindful that wrongful-dismissal damages aren’t meant to create a windfall or “double recovery”—they’re meant to bridge the employee’s transition to new employment, not fund two paycheques. Accordingly, clawback clauses are lawful and align with the employee’s duty to mitigate.
When Is Mitigation Not Required?
The duty to mitigate expects the employee to engage in reasonable efforts to find comparable work. What happens if an employee is seriously ill, and needs time off before undergoing a job search? What if the employee is pregnant when they are let go, and will need some months off before beginning their job search effectively? What if they choose to go back to school instead of undergoing a thorough search?
In these cases, the circumstances are key. Is the employee who is ill incapable of finding further work at this time, and do they have medical evidence to prove this? If so, that may satisfy their duty to mitigate, but if the illness would not impact their job search, then it may not. Similarly, an employee who is pregnant but still months from delivery may still need to undergo a search, but courts may be sympathetic to an employee who is days or weeks away from giving birth.
Enrolling in full-time studies that takes the employee out of the labour market will often count against them and reduce common-law notice, because they are choosing not to replace their income. There are exceptions: short, targeted upskilling or licensing programs can be reasonable if the employee keeps an active job search going, the market for their role is weak, and the training is likely to speed re-employment at similar pay.
Final Thoughts
Used properly, the duty to mitigate can meaningfully reduce common-law notice exposure for employers. Yes, you may owe notice or pay in lieu, but former employees are expected to make reasonable efforts to find comparable work, and you can rely on those efforts (or the lack of them) to narrow what’s payable. Employer should consider strengthen their position by offering bona fide comparable roles, providing outplacement support, pointing to real market opportunities, and documenting everything.
For employees, mitigation is partly about effort and partly about proof. Start your search promptly and keep a detailed log: dates, postings, applications, interviews, networking, recruiter outreach, and outcomes. Save copies of job ads and rejection emails, and be ready to explain any gaps.
Before you issue a termination offer or sign one, get advice. Our employment lawyers routinely assist employers and employees across the Cambridge, Kitchener, and Waterloo Region to review termination packages, assess reasonable-notice exposure, and tailor a mitigation strategy, whether you’re an employer aiming to reduce risk or an employee protecting your entitlements. Contact us today to set up a consultation.