The improved economy is good news for just about everyone, except claimants for wrongful discharge.
While the increased job opportunities as the economy continues to evolve makes it somewhat easier for employees who have been terminated, or are about to be terminated, to find other work, it also limits their ability to pursue legal claims relating to improper disciplinary action taken against them. This is because of the doctrine known as mitigation of damages, a legal tenet that reduces claims by employees for loss of income if other jobs are available, and more significantly, if they obtain new work at similar or greater pay.
The mitigation doctrine requires employees who lose their jobs to make reasonable effort to find other, equivalent positions. An improved economy makes that easier to do. It also has the effect of minimizing their claims for litigation purposes and, therefore, reducing the leverage they may have for settlement related purposes when they are being removed from their current jobs.
The mitigation doctrine works like this:
- If an employee is terminated, the employee must take reasonable steps to find comparable work;
- The employee’s failure to do so, may limit, or even eliminate, any claim for damages due to wrongful discharge;
- If the employee finds other work, any income made by the employee at the new job is deducted from any claims for wrongful termination. For instance, if an employee was making, say, $75,000 at a job, and is terminated, the employee’s claim for wrongful termination. The employee is out of work for four months, and then obtains new work at the same pay, or even higher pay, the employee’s damages would be limited to the income lost during the three month period, or about $25,000, equivalent to one-third of a year of pay.
- If the employee actually earned more income at the new job, the increased salary could trump any damage claim. For instance, if the same employee is making $75,000, loses the job and then obtains other work for $80,000, the employee would not have any claim for lost income, except for the time period that the employee was out of work, which may be quite minimal in today’s increasingly robust job market.
The same “mitigation” doctrine applies to employees seeking unemployment compensation benefits. Under the Minnesota unemployment compensation laws, an employee is required to take “reasonable” effort to find “suitable work.” This does not mean that an employee must take an inferior job, but requires that they seek comparable jobs based upon their skills and prior compensation. If they fail to do so, however, they can be cut off from unemployment compensation benefits.
The mitigation doctrine is aimed at preventing unnecessary loss or waste. By encouraging an employee to seek other work, and requiring them to take other jobs, if available, the doctrine is geared to preventing malingering. But it also has the effect of limiting the damage claims that employees can make and, thus, has a negative impact on their ability to reach settlements with their employers for wrongful termination claims.
The upshot is that the mitigation doctrine has the effect of minimizing litigation. This is borne out by statistics, which invariably show that, as the economy improves, fewer wrongful discharges are brought, and fewer employees succeed in them. Apart from litigation, the doctrine of mitigation in an improving economic marketplace has the effect of reducing the type of severance arrangements, or settlements, that employees can expect to receive when they lose their jobs.
So, employees out of work, or about to lose their jobs, can be grateful for an improved economy offering greater job opportunities for them. On the other hand, they can bemoan the impact that the mitigation of damages doctrine has on their ability to obtain severances, or settlements, when they are wrongfully discharged.