Principles of mitigation of loss

The EAT confirmed that it is not for the Claimant to prove that he or she has mitigated their loss; the burden of proof is on the employer as being in the wrong by unfairly dismissing the employee, and it is for the employer to prove that the Claimant acted unreasonably in not mitigating loss.

The principles summed up by the EAT which the Tribunal should consider are as follows:-

• Burden of proof is on the wrongdoer – the employer.
• The burden of proof is not neutral and if the employer has no evidence to put before the Tribunal that the Claimant has not mitigated loss, the Tribunal is not obliged to find any.
• It is necessary to prove that the Claimant acted unreasonably in failing to mitigate loss.
• There is a difference between acting reasonably and not acting unreasonably.
• What is reasonable or unreasonable is a matter of fact.
• The views and wishes of the Claimant should be taken into account as one of the circumstances to consider although it is the Tribunal’s view of reasonableness and not that of the Claimant that counts.
• The Tribunal must not apply too demanding a standard to the Claimant.

In summary, it is for the wrongdoer, namely the employer who has unfairly dismissed, to demonstrate that the Claimant acted unreasonably in failing to mitigate loss and the fact that it may be perfectly reasonable for a Claimant to have taken on a better paid job does not necessarily satisfy this test. It will be useful evidence for the Tribunal to conclude whether the Claimant has acted unreasonably but of itself, it is not sufficient.

In facts of this case, the Claimant worked as a carpenter until he was sacked, whereupon the employer claimed that he had been self employed. The Tribunal found that he was in fact an employee and upheld his claim. The issue arose when the claim for compensation was assessed. The Claimant had chosen not to look for alternative employment but instead worked as a self employed tradesman. The Tribunal found that this was reasonable in the circumstances and that his compensation should not be limited for loss only until the hearing date on the basis of failure to mitigate. It did observe that there were opportunities for him to take employed work at higher pay if he wanted and so considered that this justified limiting his future loss to 3 months. The employer’s appeal on the basis that the availability of better paid employment should have caused the Tribunal to reduce the award of loss on the basis of failure to mitigate, was dismissed for the above reasons.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.