Wrongful Termination Claims & the Duty to Mitigate

Wrongful termination claims result in several different harms to an employee, including economic loss. Under Massachusetts law, and as the Appeals Court in J.C. Hillary’s v. MCAD opined, a victim of wrongful termination has a duty to mitigate his or her economic damages by making a good faith search for employment. As numerous opinions also make clear, the employer carries the evidentiary burden to demonstrate that the plaintiff failed to mitigate his or her economic loss.

The U.S. Supreme Court decision in Ford v. EEOC underscored that, in satisfying the duty to mitigate, an employee “need not go into another line of work, accept a demotion, or take a demeaning position.” At the same time, an employee “forfeits his right to backpay if he refuses a job substantially equivalent to the one he was denied.”

Analyzing whether an employee has properly mitigated can be very fact-specific. One factor for consideration is the employee’s age. In Moore v. University of Notre Dame, for example, the Northern District of Indiana affirmed a back pay award in an age discrimination case and noted that the plaintiff was 66 years old. In finding that the plaintiff fulfilled his responsibility to mitigate, the court observed that the “options available to him are not as great as those available to someone younger” and characterized the likelihood of finding comparable work as “slim.” Similarly, in Donnelly v. Yellow Freight System, the Seventh Circuit affirmed a back award in which the lower court acknowledged “a 55-year-old is not looking at a seller’s market.”

While searching for comparable work is one way to satisfy the duty to mitigate, an employee may also do so by: (1) pursuing a degree, (2) starting a business. Below are cases discussing under what circumstances these mitigation methods are appropriate.

In Dailey v. Societe Generale, the Second Circuit upheld a back pay award in a gender discrimination case where the plaintiff left the banking industry following a six month search and moved to another state to enroll in a full-time physicians’ assistant program. In doing so, the court noted that, before leaving the industry, the plaintiff used her former employer’s outplacement services until they were discontinued; utilized her contacted her contacts within the banking industry to discover job openings; engaged executive recruiters to assist in her search; and interviewed for open positions.

Similarly, in Brady v. Thurston Motor Lines, the Fourth Circuit in a wrongful termination case under Title VII found the employee properly mitigated his damages where he searched for employment for approximately one year before enrolling in college as a full-time student. In doing so, the court stated “[w]e think a year of fruitless searching for comparable work was enough.”

Examples of other decisions holding that enrolling in school satisfies an employee’s duty to mitigate include Green v. Administrators of Tulane Educational Fund, where the Fifth Circuit affirmed a back pay award in a sexual harassment and retaliation case. There, the plaintiff obtained a degree and higher paying position, which mitigated her front pay damages. The Eleventh Circuit in Smith v. American Service Co. of Atlanta also affirmed a back pay award in a race discrimination case where the plaintiff began attending cosmetology school full-time after a seven month job search.

In Boston Public Health Commission v. MCAD, the Massachusetts Appeals Court upheld a six year back pay award totaling more than $100,000 and rejected the employer’s argument that the plaintiff failed to mitigate her economic loss in choosing to become self-employed. The court found the plaintiff’s discriminatory firing especially relevant: “The record revealed that Lewis was hesitant to work for any employer after being fired in a sudden and discriminatory manner and that she began her own business in good faith.”

Courts outside of Massachusetts agree. In Hawkins v. 1115 Legal Service Care, the Second Circuit made clear that “[s]elf-employment, if it is undertaken in good faith and is a reasonable alternative to seeking other comparable employment, may be considered permissible mitigation.” Likewise, in Carden v. Westinghouse, the Third Circuit noted that it is the employer’s burden to prove that the employee failed to mitigate and that, barring such evidence, establishing a business is a reasonable alternative to finding other comparable employment.

The element of good faith is particularly relevant. In Hansard v. Pepsi, for example, the Fifth Circuit found the plaintiff’s efforts at self-employment were not sufficient because the “business was never more than a part-time enterprise,” he “was fully capable of continuing his job search during the week,” and the plaintiff “did not approach the flea market as a business, rather he primarily gathered odds and ends from his home and sold them.”

Overall, recovering damages and making the employee whole is the ultimate goal in any litigation. As such, effectively rebutting an employer’s contention that an employee failed to mitigate is equally as important as demonstrating pretext for unlawful discrimination.

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