The Duty to Mitigate Your Losses
It is a key principle that any Claimant will be expected to mitigate any losses suffered.
This means, Claimants are expected to take reasonable steps to mitigate their loss, for example by looking for a new job (if they are out of work).
A Tribunal will not make an award to cover losses that could reasonably have been avoided.
The most common example is that an unfairly dismissed employee is expected to search for work and will not recover loss of earnings beyond the date the Tribunal concludes the Claimant ought to have found work at a similar rate of pay. A better way of phrasing this is as “alternative income,” because a dismissed employee could (for example) replace their previous income by becoming self-employed.
The Respondent must prove the Claimant has failed to mitigate (this argument, if ran successfully, can reduce the compensation awarded). It is not unusual for Respondents to provide evidence of suitable jobs the Claimant could have applied for (as one example).
However, it is usually insufficient for the Respondnt to show that the Claimant failed to take a certain step. The Respondent has to prove that the Claimant acted “unreasoanbly”.
Whether reasonable steps to mitigate have been taken is a question of fact for the Tribunal. The Tribunal will consider:
- What steps the Claimant should have taken to mitigate.
- Whether it was unreasonable for the Claimant to have failed to have taken any steps identified.
- If yes, the date from which an alternative income would have been obtained.
The Tribunal may, in some case, apply a percentage reduction to compensation, but usually only when the facts are so uncertain. The Tribunal will need to justify this approach.
When does the duty to mitigate arise?
After dismissal, so a failure to accept new work before that date will not be a failure to mitigate.
What if there is a subsequent dismissal from a new job?
The Respondent is likely to argue that any losses after the new job is not its responsibility and the subsequent dismissal “breaks the chain of causation.”
The dismissal at the new job does not automatically break the chain of caution and a Tribunal may award losses incurred after that occurs. It will inevitably depend on the circumstances and why the subsequent position ended.
Are benefits taken into account?
Yes, if you start to receive benefits (such as job seekers allowance) this will be taken into account and the earnings will be deducted from the loss of earnings. However, simply living off benefits and not taking reasonable steps to find an alternative income is likely to be deemed a failure to mitigate.
If you fail to apply for benefits that you would be entitled to, the Respondent may argue this in itself is a failure to mitigate. There is not a definitive answer to this question.
Our current view is that Claimants should apply for the benefits they are entitled to, because it will not only provide some income, it will negate any argument that you have failed to mitigate your losses and is some situations help you in this regard (as set out below, you may be asked to collate evidence that you are applying for work).
Early Receipt of pension, is that relevant?
Credit need not be given for early receipt of pension following dismissal, which is seen as deferred wages. However, if you are dismissed after the age where you can draw from your pension and doing so would not reduce the value of the pension, this may be seen as a failure to mitigate. The Tribunal would likely give credit for the sums that could have been drawn down.
TIPS – What steps can be taken to show I have mitigated my losses?
Consider mitigation at an early stage and collate evidence (as times goes on) to rebut this argument, for example by keeping diary entries (or even better a time line) of attempts to get another job and keeping copies of all job advertisements reviewed and applications made (it will be more difficult to argue a Claimant has failed to mitigate their losses if they have a paper trail of lots of job applications made from the date of dismissal onward).
Mitigation Evidence – Examples
Documentary evidence of mitigation may include:
- Job advertisements.
- Job applications made.
- Responses received.
- Print-outs of internet job search results and any websites / agencies joined.
- Details of interviews and any training undertaken to assist with obtaining new employment.
- Details of new employment, such as the offer letter, employment contract and payslips.
- Details of benefits and relevant paperwork– it would be prudent to look into any benefits you may be entitled to – for example job seekers allowance (where you may need to evidence that you are actively seeking work, and therefore creating evidence for the Tribunal claim, to be eligible).
- Details of networking events attended or contacts approached.
- Details of any self-employed work undertaken, including copy invoices showing work done and amount paid.
- Records of any remuneration received (from any work).
- It is often helpful to keep a record (for example in a calendar or creating a time line) where you record all efforts to mitigate your loss. This is useful where there is not a paper trail (such as looking for jobs online, calling contacts, looking in the newspaper etc).
This blog is for information purposes only. Nothing should be relied upon as a substitute for legal advice and nothing written should be construed as legal advice or perceived as creating a lawyer-client relationship.
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