Unfair dismissal – the duty to mitigate loss

1. What is the duty to mitigate loss?
2. When does the duty to mitigate loss arise?
3. What does “reasonable” mean in these circumstances?
4. How should the Tribunal deal with mitigation?
5. How can I prove that I’ve mitigated my loss?

What is the duty to mitigate loss?

In unfair dismissal cases the person who has been (unfairly) dismissed (“the Claimant”) has a duty to mitigate their losses after they are dismissed. This means that they are obliged to try and find other work as soon as reasonably possible so as to decrease their losses. Dismissed employees should therefore try and obtain new employment as soon as possible after their dismissal. This doesn’t mean that the Claimant will be penalised if they don’t find a job but it does mean that they will be penalised by the Employment Tribunal if they don’t make a reasonable effort to find a job.

When does the duty to mitigate loss arise?

The duty to mitigate loss arises when the employee is dismissed. An unreasonable failure to comply with an order for reinstatement or reengagement will therefore be deemed a failure to mitigate. Note, however, that a simple failure to comply with such an order will be a failure to mitigate – only an “unreasonable” failure. Further, the duty to mitigate losses doesn’t arise during the notice period but only after termination (you’re still employed during the notice period).

What does reasonable mean in these circumstances?

The employee must take reasonable steps to find new employment. What is reasonable depends on the facts. The circumstances of the particular employee must be taken into account, so the test changes into one a more subjective one – has the particular employee possessing the characteristics that they do taken reasonable steps to find alternative employment?

The duty to mitigate is generally held to have been breached if the employee refuses to, for example, accept a job with lower wages or refuses to accept a job because it pays less than their unemployment benefit. Further, the acceptance of a job which is very much lower paid than their previous job may be deemed to be a failure to mitigate. The Employment Tribunal will look at the conduct and the intentions of the employee to determine whether their conduct has been reasonable.

How should the Tribunal deal with mitigation?

The Tribunal should look at the employee’s circumstances at every stage since they were dismissed from their job and consider whether they have acted unreasonably at any particular stage. For example, if the employee has made reasonable efforts to find new employment for two months after his job but stops looking for a job after that then the Employment Tribunal must look at a failure to mitigate loss from the beginning of the period after the initial two months. The Employment Tribunal will determine what the employee would have been earning if he’d found a job after those two months and use this to calculate the decrease in compensation due to the failure to mitigate.

What the Employment Tribunal should not do is apply a “broad brush” approach and reduce the whole compensatory award by a percentage.

Redmans’ specialist unfair dismissal solicitors represent both employees and employers in the Employment Tribunal