Mitigating losses

Employees have an important duty to mitigate (i.e. reduce) their losses, which they must do mainly by looking for alternative work. It is vital to be well-organised and to think ahead about proving all losses.

Employees should keep a careful record such as a “job search diary” of all efforts to find work, and keep copies of all adverts, application forms, online applications, responses received, as well as a record of all interviews attended and all travel and other costs incurred. These will need to be shown to the tribunal.

Employers facing a finding of unfair dismissal nearly always produce evidence of lots of jobs the claimant could have applied for, to argue that their compensation should be cut for failing to mitigate their losses.

Where an employee is dismissed during maternity leave, it is particularly important for the claimant to be ready to resist arguments that their compensation should be cut on the basis that she would probably not have returned to work quickly in any event (Ministry of Defence v Cannock [1994] 918). Potential claimants can protect against this by making (and keeping a record of) regular job applications (including online applications) during maternity leave, and following them through appropriately.

An employee dismissed without notice need not give credit in their unfair dismissal compensation for any wages from a new job earned during the notice period (Norton Tool Company Limited v Tewson [1972] ICR 501). This rule of “good industrial practice” was upheld by the Court of Appeal in Burlo v Langley [2006] EWCA Civ 1778, even though it can result in “double-recovery” of compensation during the notice period. Confusingly, the rule is different in claims for wrongful and constructive dismissal, where the claimant must give credit for any sums earned in a new job during the notice period (Stuart Peters Ltd v Bell [2009] EWCA Civ 938).

Earnings from any new job are taken into account to reduce the compensatory award but not the basic award. The compensatory award will be reduced by earnings from, for example, new full or part-time work, self-employment, agency or casual work. The tribunal does not take into account earnings from a second job that a claimant already had before dismissal. Neither will it take account of income from any insurance product such as mortgage or income protection insurance, or income from any source unrelated to employment.

An employee who finds a new higher-paid job will have no ongoing claim for lost earnings.

There may sometimes be other ways of mitigating losses apart from finding a new job, for example, setting up a new business, or attending a training course. For example, in Orthet v Vince-Cain [2004] IRLR 857, the EAT ruled that a dismissed employee had mitigated her losses by attending a university course, since she was unlikely to get a comparable new job to the one she had lost without further qualifications.

The burden of proof that the employee has failed to mitigate loss rests with the employer (Fyfe v Scientific Furnishings [1989] IRLR 331).

An unreasonable refusal of an offer of re-employment can be a failure to mitigate. The tribunal will consider whether the employee acted unreasonably in refusing the offer, taking into account all the circumstances (Wilding v BT [2002] IRLR 524).

It is not a breach of the duty to mitigate to refuse an offer of self-employed terms from your employer (F&G Cleaners Limited v Saddington [2012] UKEAT/140/11/JQT).

No compensation can be awarded for periods during which a claimant has no right to work in the UK (Kings Castle Church v Okukusie [2012] UKEAT 0472/11/1306).

Employers are not allowed to avoid paying proper compensation by arguing that they do not have enough money and that the size of the award would endanger their business: