The Employee’s “Duty to Mitigate” – What Does That Mean?

“Let everyone sweep in front of his own door,
and the whole world will be clean.”

– Johann Von Goethe (1749-1832)

ACTUAL CASE HISTORY: Janice, 47, was the Corporate Communications Director for a large English bank. She was in charge of planning, coordination and oversight of both internal corporate communications and public relations for the bank’s offices and operations in 12 countries. She had a written employment contract that guaranteed her two year’s of employment. Or so she thought.

In a severe economic downturn, Janice’s employer was merged with a larger, German bank with a stronger balance sheet and capital base. Her department, consisting of 17 employees, was combined with the German bank’s corporate communication’s department. Unfortunately, the merged banks didn’t need two Communications Directors. Janice was let go. Janice wasn’t concerned, as she had significant savings, and a solid, written, enforceable contract.

In fact, Janice saw her layoff as an opportunity. She decided that this would be a good opportunity to take a much-needed vacation, visit old friends, and then pursue some business courses she’d been wanting to take for a long time. She asked her personal attorney to work things out with her employer.

Two months later, she received an email from her attorney: “Please call me. We need to talk.” When they spoke, Janice learned from her personal attorney that Janice’s former employer was aware of her travel and her education plans, and on that basis was balking at paying Janice her salary for the remainder of her contract. Janice’s attorney was puzzled: she said to Janice, “A contract is a contract. They have to pay you.” Janice came to us for a second opinion.

Our “second opinion” was very different than the first. Apparently Janice’s personal attorney was unaware of a basic tenet of employment law: the employee’s “duty to mitigate” damages. We agreed with Janice and her personal attorney that her former employer was legally obligated to pay to Janice whatever losses or “damages” she suffered by their breach of her employment contract. However, the law provides that Janice was legally obligated to take reasonable, good-faith efforts to mitigate (which means “to limit”) her “damages.” In other words, even if an employer breaches its contract to employ, the employee cannot simply sit back and enjoy a vacation. Rather, the employee must take reasonable steps to seek re-employment in a similar position. If the employee does not do that, the employer may be free of any further obligations to the employee.

Fortunately for Janice, we were able to resolve the problem through negotiation with her former employer’s legal counsel. She was lucky; most employees who “sit back” in these situations are not.

LESSON TO LEARN: In any situation where you believe your employer has caused you losses or damages due to job loss, you have a “duty to mitigate” any damages you may have suffered. You cannot simply both (a) seek to collect those damages, and (b) sit idly, while enjoying a long-term, paid vacation. The one exception to this general rule is if you and your employer have agreed otherwise. That is, an employer may release you of your duty to mitigate, but such a release must be handled carefully.

WHAT YOU CAN DO: To address and avoid difficulties arising from your duty to mitigate damages in employment, here are six things you should know to guide yourself:

1. In employment contracts, ask for a “no duty to mitigate” provision”: In negotiation of an employment contract, it is wise to insist upon the inclusion of a provision that provides, “Under no circumstances shall the employee be under a duty to mitigate damages resulting from the employer’s default or breach of this agreement, or any part of it.” A simple, clear clause such as that one can only be to your advantage.

2. If you do lose your job, always keep a “job search journal”: Your duty to mitigate damages from job loss is satisfied by reasonable, good-faith efforts to locate and secure a new position. For this reason, it is important that you keep a written record of your reasonable, good-faith efforts in what we call a “Job Search Journal.” It’s a simple list of each time you (a) reviewed “help wanted” ads and internet job posting sites, (b) contacted or met with recruiters, (c) engaged in networking activities, (d) spent time revising your resume, (e) attended interviews, and (f) otherwise made efforts to locate and secure new employment. This is the number one thing you need to do to evidence your fulfillment of your duty to mitigate your damages from job loss.

Keeping a “job search journal” is a good idea for three other reasons, as well: (a) first, unemployment insurance in your state may require that you periodically prove you are trying to find a new job, (b) second, your keeping track of your efforts may provide you a source of continual feedback as to what you’ve tried, what you haven’t tried, what is working and what is not working, in getting “back in the race,” and (c), third, if you should ever end up in litigation (or an arbitration over your job loss, having a “job search journal” will help you prove your damages, and collect them from your employer.

3. The “duty to mitigate” rule is one of “reasonability”: In law, most rules follow one rule: reasonability. So, too, does your duty to mitigate. To fulfill your duty to mitigate you need not seek re-employment 18 hours a day. Nor do you need to take a job that is not suitable for you, or significantly below the compensation level or stature of your last one. Nor do you need to relocate your residence for a new job. What is reasonable in any instance is a matter of judgment.

4. In severance agreements, the “duty to mitigate” rule generally does NOT apply (unless agreed otherwise): As a general rule, when you receive a severance agreement, and you sign it, if the agreement does not expressly state that you have a duty to mitigate, the view is that you do not have such a duty. In any event, you can’t be criticized, and can only be wise, if you ask for insertion of a “no duty to mitigate” provision, just to be sure.

5. Some agreements even require you report your job-search efforts: A small number of agreements, especially severance agreements – a small minority – go so far as to require former employees who are receiving payments (such as severance) to regularly report to HR their job search efforts, as a pre-condition to receiving continued payments. The rationale is this: “If you aren’t out there, trying to find a new job, then we shouldn’t be paying you to sit and relax.” Such provisions may seem harsh, but they are enforceable, and so must be respected.

6. Some agreements require only “mitigated mitigation”: Some agreements, especially severance agreements, are quite liberal, in that they strongly encourage former employees to take any job they can find, thereby limiting the need for severance payments. These “mitigated mitigation” provisions provide words to this effect: “If you find a new job, and it pays less than your former job, then the former employer will pay you the difference for a specified period of time. This is a form of balancing interests, and seems reasonable to us.

Our Quality Vs. Power™ (QVP™) Method of Workplace Negotiating emphasizes smart negotiating – and navigating – for yourself at work. Negotiation of work and career issues requires that you be prepared for almost anything, and knowledgeable about the many “rules” that exist in law, society and business that may affect you.

Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what our Quality Vs. Power™ Method is all about.

A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

© 2008 Alan L. Sklover. All rights reserved. Commercial use prohibited.