Wrongful Dismissal and Mitigation: Can a Fired Worker Start His Own Business?

The recent case of Leeming v. IBM Canada Ltd. includes a useful review of the law relating to mitigation of damages in the context of wrongful dismissal. It provides some particularly useful insights into the issue that arises when the fired employee, unable to find comparable employment, starts his or her own business.

In this case, the plaintiff was wrongfully dismissed from IBM from her position as a Senior Managing Consultant. In that position, she had been responsible for various project management duties including project scheduling, tracking budgets and interfacing with clients to ensure deliverables were met.

After eight years of employment at IBM, IBM decided to eliminate her position and terminated her employment. At that time, she was 60 years old.

In the following four months, she applied for 20 positions in various industries and job types. She searched job search websites and spoke to recruiters. She tried to find jobs through outplacement counselling, by networking with friends and business contacts and through any leads that those people provided to her. She created a LinkedIn profile through which she was approached about potential job opportunities.

She had two job interviews but she received no offers.

When her efforts to find a new position failed, she decided to start her own business specializing in digital marketing solutions for small and medium-sized companies. Marketing was not an area in which she had either experience or training. She obtained a franchise with a franchisor in that industry but by the time her lawsuit reached trial over one year later, her business had not yet become profitable.

IBM took the position at trial that she had failed to mitigate and was therefore disentitled to damages for wrongful dismissal.

The court was satisfied that the plaintiff did not fail to mitigate. The judge found that she had made reasonable efforts to find a new job and ultimately that her decision to become her own employer by training herself for a new career as a franchisee, was reasonable. The judge pointed out that it was easy enough for IBM to say that she should have stayed in the labour market longer but in the judge’s opinion, she tested the market long enough to make a reasonable decision to retrain for a new career.

The judge referred to a previous Court of Appeal decision in which case the court had said that the fact that the early years of a worker’s self-employment did not live up to his monetary expectations does not mean that this was an unreasonable attempt to mitigate. A fired worker is entitled to consider his own long term interests when seeking another way to make a living. His attempts at mitigation cannot be considered unreasonable just because he fails to focus exclusively on his short term obligation to mitigate damages for the sake of his former employer.

The idea of starting one’s own business always raises difficult questions in the context of a former employer’s mitigation arguments. In this case, the plaintiff spent what the court considered to be a reasonable amount of time and made reasonable efforts without success. Presumably, her age had something to do with her inability to find another job. Nevertheless, the question of when it is safe for a fired worker to give up the job search and retrain for a new career will always be a tricky one, since the odds that the new career will pay dividends during the notice period are usually quite low.

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