Mitigation of Loss: Key principles

When a claimant goes to an employment tribunal they are usually looking for compensation from their employer and often include a request to that effect in their claim form. In preparation the claimant will ordinarily be required to prepare a document for the tribunal – called a ‘Schedule of Loss’ – that provides details in respect of their losses.

If the claim is successful the tribunal will then go on to consider what remedy is appropriate to award to the claimant. To determine what that should be, the tribunal will consider a number of factors, including whether the claimant has taken reasonable steps to mitigate their losses – for example by looking for a new job if they are out of work or registering with appropriate job agencies.  

The recent Employment Appeal Tribunal (EAT) decision in Edward v Tavistock and Portman NHS Foundation Trust [2023] EAT 33 has reiterated some of the key principles relating to mitigation of losses and what level of compensation, if any, should be awarded. Whilst there is a duty on the claimant to mitigate their losses, it is for the employer to prove that the claimant has failed to act reasonably. This means that employers who find themselves defending against a tribunal claim should collect evidence of job opportunities that they can use to demonstrate that the claimant has failed to reasonably mitigate their losses. Doing so could discharge the burden on the employer.

In the case referred to above, Edward v Tavistock and Portman NHS Foundation Trust, the EAT made a number of useful comments to help tribunals consider the issue of mitigation. These can be summarised as follows:

1.     The burden of proof is on the respondent at all times. If the respondent does not put evidence to the tribunal about mitigation, then the tribunal is not obliged to make a finding on the issue.

2.     The tribunal should consider the questions identified by previous case law, which were:

(a)   What reasonable steps should the claimant have taken

(b)   How much alternative income would have been earned?

3.     While the questions raised in point 2 will be relevant to most cases, they are not exhaustive and may not always be applicable.

4.     The questions 2(a) and 2(b) are inter-related and need to be considered together. The reasonableness of steps may, for example, be affected by a particular job market at the relevant time.

5.     The tribunal should make a finding based on a broad evaluation of all the available evidence. The tribunal should not strive for a false appearance of precision; it is entitled to use its judgment to fix a suitable point in time.

6.     If the tribunal finds that a claimant would have likely obtained employment by a stated date, it is not necessary to identify the particular job that they would have obtained.

Even where an employer is unable to successfully defend a claim, there is an opportunity to persuade a tribunal to make a reduced award of compensation provided the employer does sufficient preparatory work as evidence to support any mitigation points it wants to raise on the question of remedy. It is always important to consider whether an ex-employee who brings a claim for compensation has made reasonable efforts to mitigate their losses. If they haven’t, the employer should challenge this, especially where the employee’s efforts to mitigate appear particularly sparse. The failure to mitigate is one way to limit significant financial exposure on the part of the employer.

Mitigation points or arguments are not just useful in the tribunal arena. They can be used in a variety of other situations, such as negotiating severance packages or during settlement discussions prior to a hearing.