SEVERANCE ENTITLEMENTS AND MITIGATION

Whenever I meet with a prospective wrongful dismissal client and review the Severance Package that they have received, I initially estimate what their basic severance entitlement would be.

But I also ask them what their future prospects of employment look like. This is because the basic severance entitlement may be reduced by the client's obligation to mitigate their losses. The result may be below what the severance package offered is.

For example, if the client's basic severance entitlement from their employment might be nine months of compensation, but they expect to be rehired at an equivalent job within one month, then their anticipated net recovery is one month's compensation. So, if the offered severance package is for seven months, it would be prudent to accept it, notwithstanding the fact that it is less than what they are entitled to at first blush.

It is important to consider what the client's future prospects might be, although often they are uncertain.

If there is no settlement, the client’s entitlement will be reduced by not only what  they did earn but also by what they reasonably could have earned through available work opportunities.

That is why it is important for the client to keep full and accurate records of all of the prospective businesses they have sent their resumes to, and all efforts they have made to find such other employment.

However, some recent case law has held that the failure of an employee to make vigorous search efforts alone, is not sufficient to reduce their severance, if there was no proof of actual alternate reasonable employment available.

So, keep in mind, that severance is designed to help a dismissed employee transition into new employment. It is not designed to amount to a windfall. However, if the employee has a written contract that entitles them to a certain fixed term of severance in lieu of notice, without specifically setting out an obligation to mitigate in the contract, then they are entitled to such amount without deduction.

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