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Mitigation: An employer’s way of challenging employee’s claims

If an employee is unfairly dismissed by an employer and intends to bring an action against the employer for unfair dismissal, then both the employer and employee must be mindful of the employee’s duty to mitigate their losses. This is stated under s.123(4) of the Employment Rights Act 1996 where the employee will be expected to explain to the Tribunal what actions they have taken by way of mitigation. This includes looking for another job and applying for available state benefits.

The Tribunal is obliged to consider the question of mitigation in all cases. What steps it is reasonable for the employee to take will then be a question of fact for its determination. The courts have made clear, however, that the standard to be imposed on an employee, who has suffered unfair dismissal, should not be overly stringent. The burden of proof is on the employer, and it is not enough for the employer to show that there were other reasonable steps that the employee could have taken but did not take. It must show that the employee acted unreasonably in not taking them. This distinction reflects the fact that there is usually more than one reasonable course of action open to the employee (Wilding v British Telecommunications Plc [2002]). This point has been explained further in the recent Employment Appeal Tribunal (EAT) ruling of Cooper Contracting Ltd v Lindsey [2015], where the employer argued that there were more lucrative options available to the employee who opted to work as self-employed rather than as an employee following his dismissal. The EAT dismissed the employer’s appeal that awarding the employee three months of losses was unreasonable; the EAT confirming that by the employee accepting lower paid, yet more desirable employment was not an example of him acting unreasonably. The EAT confirmed that the Tribunal will take into account the views and wishes of the employee as one of the circumstances to ascertain whether they have acted unreasonably although it is the Tribunal’s assessment of reasonableness and not the employee’s that counts.

Failure to mitigate is likely to arise in several different circumstances. The most common argument raised by employers is that the employee had not made sufficient effort to look for new work or had confined their search to too narrow a range of jobs. Employees should therefore keep documentary evidence (e.g. job adverts, application letters) to show the steps they have taken to find new work. This obligation is ongoing so therefore the longer the dispute remains, the greater the opportunity for the employer to collate appropriate evidence to counter the employee’s claims as to quantum.

The duty to mitigate only arises after the dismissal. Therefore, where an employee rejects an offer of new terms before the dismissal has taken effect, this cannot be a failure to mitigate, as no duty to mitigate yet exists.

For further information about an employment issue, please contact our Employment Department.


Charles Grossman: c.grossman@fgdlaw.co.uk