The Duty to Mitigate Wrongful Dismissal in Ontario: An Employer's Guide

When you dismiss an employee in Ontario, your liability is not necessarily fixed. The damages you owe for inadequate notice can be reduced, sometimes substantially, by a legal principle most employers overlook until they are already in litigation: the duty to mitigate. Understanding how it works, and taking the right steps at the point of termination, can be the difference between a manageable settlement and a costly one.

In Ontario, a dismissed employee must take reasonable steps to find comparable employment after being let go. This legal obligation, called the duty to mitigate wrongful dismissal, means any income earned during the notice period reduces the damages owed by the former employer. The burden of proving an employee failed to mitigate falls on the employer.

This guide explains the mitigation doctrine from the employer's perspective: what the duty requires, who has to prove it, how the income an employee earns affects what you owe, when you can ask a dismissed employee to return, and the fixed-term contract scenario where the duty disappears entirely. It closes with practical steps to preserve a mitigation argument. If you are reviewing your wider exposure to dismissal claims, our Toronto employment lawyers advise businesses on the full lifecycle, from drafting contracts to defending claims.

The Duty to Mitigate in Employment Law: The Basic Rule

At common law, an employee who is dismissed without adequate notice is entitled to damages equal to what they would have earned during a reasonable notice period. That sum is not a guaranteed windfall. The employee has a corresponding obligation to take reasonable steps to find new comparable employment, and to reduce, or mitigate, the loss flowing from the dismissal.

The Supreme Court of Canada confirmed this principle in Evans v. Teamsters Local Union No. 31, 2008 SCC 20. A dismissed employee who simply sits at home and makes no genuine effort to find work risks having their damages cut, because the law will not compensate a loss the employee could reasonably have avoided.

The word that does the heavy lifting here is "comparable." The duty is not to take any job at all costs. It is to seek work that is similar to the position the employee lost. In Lake v. La Presse, 2022 ONCA 742, the Ontario Court of Appeal made clear that an employee is not required to accept a lower-paying or less senior role to satisfy the duty. There, a general manager remained unemployed for nearly two years, and the motion judge reduced her damages for not applying to inferior positions. The Court of Appeal reversed that reduction. Comparable means comparable, measured by status, hours, and remuneration, not whatever job happens to be available.

What courts examine is whether the employee's job search was reasonable and active. Evidence of applications sent, networking, use of recruiters, and a genuine willingness to return to similar work all matter. An employee does not have to succeed in finding a new job. They have to try, in a way a reasonable person in their position would.

Who Has to Prove Failure to Mitigate? The Employer's Burden

This is the point employers most often get wrong. The duty to mitigate belongs to the employee, but the burden of proving failure to mitigate damages in Ontario rests entirely on the employer. The employee does not have to prove they searched diligently. You have to prove they did not.

To succeed on a failure-to-mitigate argument, an employer generally has to establish two things:

1. that the employee failed to take reasonable steps to find comparable work; and
2. that, had the employee made reasonable efforts, comparable work was available and could have been obtained.

Both limbs matter, and the second is where many employer arguments collapse. It is not enough to assert that the former employee "could have found something." You need evidence that comparable positions actually existed in the relevant market during the notice period. Without that, a court will not assume the employee would have landed a job had they tried harder.

Courts are also notably skeptical of employers who dismiss someone, refuse to provide a reference letter or any transition support, and then turn around in litigation and argue the employee failed to find work. That posture invites the obvious response: you made the job search harder, then blamed the employee for its difficulty. The practical lesson is that a mitigation defence is built with evidence and good conduct from the day of termination, not invented later.

What Happens to Income the Employee Earns? (Mitigation Income)

Mitigation income is the most direct financial lever an employer has. Any employment income the dismissed employee earns during the common law notice period is generally deducted from the wrongful dismissal damages owed. The more the employee earns after leaving, the less you pay. If a dismissed employee with a ten-month notice entitlement finds a comparable role after four months, the income from that new role over the remaining six months reduces your liability accordingly.

This deduction is broad. Income from a new full-time position counts. So does income from a new part-time or lesser role, even though the employee was never obligated to accept that lesser role in the first place. In Williamson v. Brandt Tractor Inc., 2026 ONCA 272, the Ontario Court of Appeal confirmed that income earned during the notice period reduces damages regardless of whether the new position was strictly comparable. In other words, the employee is free to decline inferior work, but if they take it anyway, the earnings still offset what you owe.

There are important exceptions. Some money the employee receives is not deducted from damages:

• Employment Insurance benefits. EI payments are not deducted, and an employee who is repaid wages may have to reimburse the government separately.
• Concurrent employment income. If the employee already held a second job under an arrangement that permitted it before the dismissal, income from that pre-existing job is not deducted, because it was not earned in substitution for the lost role.
• Income during the statutory minimum notice period. Entitlements under the Employment Standards Act, 2000 are treated differently from common law damages, and income earned during that statutory window is not subject to the same mitigation offset.

These exceptions trace to Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402. The distinction between common law notice and statutory entitlements is technical, and it is one of the easier things to get wrong when calculating exposure, so the numbers are worth confirming with counsel before you rely on them.

The Same-Employer Rule: Can You Ask the Employee to Come Back?

One of the more powerful, and most misunderstood, mitigation tools is the same-employer re-employment offer. Evans v. Teamsters established that, in some circumstances, an employee may be required to mitigate their wrongful dismissal damages in Canada by accepting an offer to return to work from the very employer who dismissed them. If a reasonable person would accept the offer and the employee refuses without good reason, the refusal can amount to a failure to mitigate.

But the rule is hedged with conditions, and this is where employers must be careful. Under Evans, the re-employment offer will only count against the employee where:

• the salary offered is the same or comparable;
• the working conditions are not substantially different or demeaning; and
• there is no atmosphere of hostility, embarrassment, or humiliation.

If any of those conditions is missing, the employee may decline the offer without breaching the duty. The hostility exception is real and is argued often. It is not enough that the employee would feel awkward returning; the conduct surrounding the dismissal has to have made the working relationship objectively untenable. In Evans itself, the Supreme Court found the employee had failed to mitigate because there was no evidence of acrimony or humiliation, so the principle protecting employees from hostile re-employment was confirmed but not triggered on those facts.

For the offer to carry weight, it must give the employee a genuine, clear opportunity to mitigate, a point reinforced in Farwell v. Citair (General Coach Canada), 2014 ONCA 177. A vague suggestion that the employee "could have reapplied" is not the same as a concrete, written offer of a comparable role. Where an employer makes a genuine, written, comparable re-employment offer promptly during the notice period, with no hostile conditions attached, and the employee refuses it without cause, the employer has strong grounds to argue failure to mitigate. The flip side is that an aggressive or demeaning termination can foreclose this argument before it starts.

The Fixed-Term Contract Exception: Why the Duty to Mitigate Disappears

Everything above assumes an indefinite-term employment relationship. Fixed-term contracts follow a different and far less forgiving rule for employers.

Where an employee is engaged under a fixed-term contract that does not contain an enforceable early-termination clause, there is no duty to mitigate at all. If you dismiss the employee before the term ends, they are entitled to the wages and benefits for the entire unexpired balance of the contract, as of right, with no deduction for income they earn elsewhere afterward.

The Ontario Court of Appeal set this out in Howard v. Benson Group Inc., 2016 ONCA 256. John Howard was dismissed roughly 23 months into a five-year contract. The termination clause was unenforceable, which meant the default consequence of early termination applied: he was entitled to the wages for the remaining balance of the term, around 37 months. Crucially, because the contract itself specified the consequence of early termination, the Court treated the remaining wages much like a liquidated damages amount, and the usual obligation to mitigate did not apply. Howard could have found a higher-paying job the next day and still collected the full balance.

For an employer, the takeaway is stark. A fixed-term contract without a properly drafted, Employment Standards Act-compliant termination clause can expose you to the full remaining value of the term with no mitigation offset whatsoever. If you use fixed-term arrangements, the termination clause is not boilerplate to be skimmed; it is the single provision standing between you and that exposure. For a fuller treatment of when fixed-term contracts make sense and how to draft them safely, see our guide on fixed-term versus indefinite employment contracts in Ontario.

Practical Steps for Employers at Termination

Mitigation arguments are easier to build before a dismissal than to retrofit during litigation. The following steps help preserve and strengthen the defence.

1. Provide a reference letter on dismissal. Courts look dimly on employers who refuse references and then claim the employee failed to find work. A fair reference removes that line of criticism and genuinely helps the employee re-employ, which serves your interest too.
2. Document comparable job postings in the relevant market. If you may later argue that comparable work was available, gather evidence of it as it exists at the time, not months later when the postings have vanished.
3. Make any re-employment offer in writing. If you have a suitable alternative role, offer it in writing with a clear deadline, at comparable pay, and without hostile conditions. A documented, genuine offer is far stronger than an after-the-fact assertion that the employee could have returned.
4. Do not let the termination turn hostile. Aggressive or demeaning dismissals can destroy the same-employer re-employment argument and invite the hostility exception. Keep the process professional and measured.
5. Review your employment contracts now. Fixed-term contracts without enforceable termination clauses expose you to full-term liability with no mitigation offset. Audit them before, not after, a dispute.
6. Involve counsel before termination. The strongest mitigation positions are designed in advance. Looping in an employment lawyer before you act is far cheaper than untangling a flawed termination later.
7. Track the employee's post-departure income. Once a claim is underway, income earned during the notice window is deductible, and your counsel will need evidence of it to argue the offset.

Frequently Asked Questions

Do I have to take another job after being fired in Ontario? No. A dismissed employee must take reasonable steps to find comparable employment, meaning work similar in status, hours, and pay. They are not required to accept a lower-paying or less senior role to satisfy the duty to mitigate in employment law. As the Court of Appeal confirmed in Lake v. La Presse, comparable means comparable, not whatever job is available.

Who has to prove failure to mitigate, the employee or the employer? The employer bears the full burden. To succeed, the employer must prove both that the employee failed to take reasonable steps to find work and that comparable work was actually available during the notice period. The employee does not have to prove they searched diligently; you have to prove they did not.

What counts as comparable employment for mitigation purposes? Comparable employment is work similar to the lost position in status or seniority, hours, and remuneration including salary, benefits, and bonus. A significantly lower-paying or more junior role is not comparable, and an employee can decline it without breaching the duty to mitigate, even after a long period of unemployment.

Can an employer require a dismissed employee to return to the same job? Sometimes. Under Evans v. Teamsters, an employee may have to accept re-employment with the same employer if the pay is comparable, conditions are not demeaning, and there is no hostility or humiliation. If the workplace would be objectively untenable given the circumstances of the dismissal, the employee can refuse without failing to mitigate.

Does income from a new job reduce my wrongful dismissal payout? Yes. Employment income earned during the common law notice period is generally deducted from the damages owed, which lowers the employer's liability. This applies even where the employee took a lesser role they were never obligated to accept. Earnings during that window offset what the former employer owes.

What happens if I am on a fixed-term contract and I am dismissed early? If the fixed-term contract has no enforceable early-termination clause, there is no duty to mitigate. The employee is entitled to the wages and benefits for the entire unexpired balance of the term, with no deduction for income earned elsewhere, following Howard v. Benson Group Inc.

Does Employment Insurance affect wrongful dismissal damages? Employment Insurance benefits are not deducted from wrongful dismissal damages. They are treated separately from mitigation income, although an employee who later recovers wages may have to repay EI to the government. EI receipt does not reduce what the employer owes for inadequate notice.

What should an employer do at termination to preserve a mitigation defence? Provide a reference letter, document comparable job postings, make any re-employment offer in writing at comparable pay, keep the termination professional, audit fixed-term contracts for enforceable termination clauses, and involve counsel before acting. Build the defence with evidence from day one, not after a claim is filed.

Sources & Official Resources

Case Law Cited

1. Evans v. Teamsters Local Union No. 31, 2008 SCC 20
2. Lake v. La Presse, 2022 ONCA 742
3. Williamson v. Brandt Tractor Inc., 2026 ONCA 272
4. Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402
5. Howard v. Benson Group Inc., 2016 ONCA 256
6. Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA 177

Ontario Statutes Cited 7. Employment Standards Act, 2000, SO 2000, c 41

Helpful Resources 8. Law Society of Ontario: Find a Lawyer

Contact Hadri Law

If your business is facing a wrongful dismissal claim, or you want to ensure your employment contracts are structured to preserve mitigation arguments, Hadri Law's employment team can help. We advise Ontario employers on terminations, contract drafting, and dismissal litigation, and we work to reduce exposure before disputes arise.

Hadri Law Professional Corporation is a multilingual boutique firm serving clients in English, French, Spanish, and Catalan. Call us at (437) 974-2374 for a free initial consultation, or learn more about how our Toronto employment lawyers support businesses through every stage of the employment relationship. Our office is located at First Canadian Place, 100 King Street West, Suite 5700, Toronto, ON M5X 1C7.

This article is for general information only and does not constitute legal advice. Employment law outcomes depend on the specific facts of each case. Consult a qualified Ontario employment lawyer before acting on any matter discussed here.