Mitigation of Loss for Unfair Dismissal

A question which often arises in dismissal cases is whether the employee needs to look for alternative work in a notice period granted to them and, if they do not do so, whether they are liable to be accused of not "mitigating their loss" for damages purposes. In a recent case, the EAT decided that an employee's contract effectively gave the employer two different potential courses of action:

• to dismiss the employee by giving notice; or
• to dismiss the employee with a payment in lieu of notice.

The EAT reached the interesting conclusion that either way, the payment received would be either money due as a debt in any event under the contract, or it would be damages for breach of the contract. In any event, the employer should not be entitled to argue that the employee has failed to mitigate his loss, because the employer had promised to pay the entire sum.

This case could be compared to Abrahams -v- Performing Rights Society in 1995, which held that a payment in lieu of notice was not given by way of damages for breach of a contract but because it was a debt arising under the contract.

Cerebus Software Limited -v- Rowley