An Overview of the Mitigation of Economic Damages

• Publication year: 2000
• Pages: 23
• Citation: Vol. 29 No. 10 Pg. 23

29 Colo.Law. 23 Colorado Lawyer 2000.

2000, October, Pg. 23. An Overview of the Mitigation of Economic Damages

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Vol. 29, No. 10, Pg. 23

The Colorado Lawyer
October 2000
Vol. 29, No. 10 [Page 23]

Hot Topics In Employment Law

An Overview of the Mitigation of Economic Damages
by Ed Aro, Peter Walsh

In employment cases arising under both federal and state law a discharged employee has a legal duty to make reasonable and diligent efforts to secure comparable employment in order to mitigate economic losses relating to the challenged discharge.1 As a matter of law, a claimant has failed to mitigate if (1) he or she did not exercise reasonable diligence in seeking substantially equivalent employment; and (2) equivalent employment actually was available had the claimant exercised reasonable diligence.2

Courts will reduce any award relating to lost earnings by an amount that the claimant could have earned by exercising reasonable diligence in mitigating economic damages,3 and a claimant forfeits his or her right to back pay if he or she refuses a job substantially equivalent to the one he or she was denied.4 Failure to mitigate is an affirmative defense that the defendant must plead and prove.5 This article provides an overview of what constitutes "reasonable efforts" to seek "substantially equivalent employment," and addresses a number of common factual and legal issues that arise in the employment mitigation context.6

"Reasonable Efforts" To Find Employment

A claimant is required only to make reasonable exertions to mitigate damages and is not held to the highest standards of diligence in doing so.7 The claimant need not be successful in mitigating his or her damages, but must make "an honest, good faith effort" to find comparable employment.8 Determining whether a claimant exerted sufficient effort in locating an alternate job is an issue of fact, and courts do not always agree on what constitutes "reasonable diligence." For example, whereas one court held that the plaintiff adequately mitigated his damages when he made only two job applications during his first year of unemployment and made minimal additional efforts while working as a temporary employee,9 another court concluded that the submission of four applications and informal inquiries into three or four other positions did not constitute reasonable diligence.10

Given the fact-sensitive nature of the inquiry, it is difficult to draw any bright lines regarding what does and does not constitute "reasonable diligence." Nevertheless, courts frequently look to certain common factors in assessing whether a claimant has exercised reasonable diligence. Most courts focus on the time the claimant devoted to the task of finding comparable employment; the resources he or she used, including want ads headhunters, and other employment services; the number of applications submitted; and the availability of comparable positions in the relevant job market.11

Generally, to ensure a finding of reasonable diligence, a claimant should, at a minimum, check want ads regularly register with employment agencies, discuss job opportunities with friends and acquaintances, and pursue all known comparable opportunities.12 Failure to pursue any of these avenues could very well result in a finding that the claimant failed to reasonably mitigate his or her damages. It is advisable for claimants to keep detailed records of their job searches, for the adequacy of their efforts will certainly be challenged at trial by their former employers.

"Substantially Equivalent" Positions

Ed Aro is a partner and Peter Walsh is an associate with the firm of Hogan & Hartson LLP.

To satisfy the duty to mitigate, a claimant must attempt to secure a job "substantially equivalent" to the job from which he or she was discharged.13 An unemployed or underemployed claimant need not go into another line of work, accept a demotion, or take a demeaning position.14 Likewise, an employee is not required to seek employment that is not consonant with his or her particular skills, background, and experience, or that involves conditions that are substantially more onerous than those of his or her previous position.15 At the same time, employees forfeit their right to back pay if they refuse jobs substantially equivalent to the ones they were denied.16 The Sixth Circuit Court of Appeals, interpreting the term narrowly, has defined a "substantially equivalent position" as one that affords "the claimant virtually identical promotional opportunities, compensation, job responsibilities, working conditions, and status."17

Facts that are critical to the equivalency equation include the particular skills used and the amount of compensation received. For example, in one particularly instructive case, the court held that even though the attorney-plaintiff continued to practice law, a part-time legal position in the public sector obtained for personal child care reasons was not substantially equivalent to her prior full-time job in the private sector.18 In light of her failure to look for full-time private sector jobs, the court held that the plaintiff did not mitigate her damages.19 Likewise, a highly paid professional may be required to seek similar positions in the private sector that offer equivalent compensation packages, even if such positions require him or her to relocate.20

However, it is important to note that a claimant need not succeed in obtaining a substantially equivalent position in order to mitigate damages. As long as a claimant makes a diligent effort to secure comparable employment, success in that endeavor is irrelevant and the...