05/16/2025
A wrongfully terminated employee has a positive obligation to mitigate their losses. "Mitigation" means to replace the lost income by accepting a comparable job that is reasonable in the circumstances.
The applicable law on mitigation was summarized in Globex Foreign Exchange Corporation v Kelcher, 2011 ABCA 240 at para 55, as follows,
"A wrongfully terminated employee is entitled to damages, but a defendant employer can argue that damages ought to be reduced because of the employee’s unreasonable failure to mitigate the loss by taking other employment: Red Deer College v Michaels, [1976] 2 SCR 324, [1975] 5 WWR 575. The defendant’s burden of demonstrating a failure to mitigate is onerous, however, because although in breach, he is demanding positive action from the innocent party: Cheshire, Fifoot and Furmston at 683. Defendants cannot complain of a failure to mitigate caused or materially contributed to by their own actions: 2438667 Manitoba Ltd v Husky Oil Limited, 2007 MBCA 77, [2007] 9 WWR 642 at 654."
Typically, the obligation to mitigate arises after termination of employment. In a case from the Manitoba Court of Appeal in 2025 (Brown v General Electric Canada (2025 MBCA 37)), however, the Court dealt with a situation where an employee who worked for company A, was offered continued employment with a new company (company B) which was attempting to merge with company A. The offer of continued employment with company B was extended to the employee before the merger occurred.
The employee refused company B's offer of continued employment. Company A then terminated the employee's employment. The employee sought a severance package. Company A argued that the employee failed to mitigate and should receive no severance. The employee lost at trial and on appeal.
The Manitoba Court of Appeal effectively stated that the precise timing of the offer of continued employment to the employee, was not material to the question of mitigation.
BOTTOM LINE. If a company merging with or taking over your existing employer offers you continued employment, think twice before refusing the offer of continued employment. You don't want to be found to have failed to mitigate which will defeat your claim for severance.
