Does a terminated employee have a duty to mitigate their damages?

The law is clear that the purpose of an award of damages in a breach of contract action is to place the injured party in the same financial position as he would have occupied if the contract has been fully performed. Hodges v. A. P. Fries & Co., 34 Fla. 63, 69, 15 So. 682, 684 (1894); Popwell v. Abel, 226 So.2d 418, 422 (Fla.4th DCA 1969); First National Insurance Agency, Inc. v. Leesburg Transfer & Storage, Inc., 139 So.2d 476, 482 (Fla.2d DCA 1962). It is, therefore, the established law of this state that in an action for breach of an employment contract (brought by an employee for an alleged wrongful discharge prior to completion of the contract) the prima facie measure of damages is the contract price of salary or wages for the unexpired term of the contract together with any unpaid balance due under the contract for services rendered before the wrongful discharge. Hazen v. Cobb, 96 Fla. 151, 117 So. 853

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(1928); 2 Fla.Jur.2d "Agency and Employment" § 134, p. 315 (1977). The plaintiff employee has the burden of proof at trial in such action to establish his damages as thus measured by the greater weight of the evidence. McCormick on Damages § 159 (1935).

These prima facie damages, however, are subject to reduction upon proof of an amount which the employee actually earned, or could have earned through the use of due diligence in other employment of like nature, for the remainder of his term of employment under the contract. Southern Keswick, Inc. v. Whetherholt, 293 So.2d 109 (Fla.2d DCA 1974). In this connection, it is often said that the plaintiff employee has a duty to mitigate his damages by reasonably seeking other employment of like nature subsequent to the breach of contract; the penalty for failing to comply with that duty is a reduction in his recoverable damages in the amount he could have earned had he complied with such duty. Punkar v. King Plastic Corp., 290 So.2d 505, 508 (Fla.2d DCA 1974). By the overwhelming weight of authority in this country, the defendant employer has the burden of proof at trial to establish the above reduction in mitigation of damages as thus measured by the greater weight of the evidence. 11 Williston on Contracts § 1360 (3d ed. Jaeger 1968) and cases collected; 5 Corbin on Contracts § 1039, p. 251 (1964) and cases collected; McCormick on Damages 627-628 (1935) and cases collected; 3 Sutherland on Damages § 693, p. 2560 (1916) and cases collected; Annot., 17 A.L.R.2d 968, 978-982 (1951) and cases collected; Annot., 134 A.L.R. 242, 243-254 (1941) and cases collected; Ballard v. El Dorado Tire Co., 512 F.2d 901 (5th Cir. 1975) (applying Florida law). ¹

In our view, this result rests on sound ground because the failure to mitigate damages, or, indeed, the successful effort to do so, does not defeat the plaintiffs' right to recovery, but only reduces the amount of his recoverable damages. As such, it does not make sense to place the burden of proof on such issue on the plaintiff employee for if he had such a burden, the failure of proof thereon would necessarily require a dismissal of the plaintiff's claim at trial a result which our law does not permit. It is, therefore, clear that the mitigation of damages issue is more properly considered a defensive matter in the nature of a set-off on damages which must be specifically pled by the defendant employer as an affirmative defense under Fla.R.Civ.P. 1.110(d) and proved at trial by the greater weight of the evidence. Annot., 44 A.L.R.3d 629, 639 (1972).

In the instant case, the plaintiffs clearly established a prima facie case of damages for breach of a contract herein by proving what the contract price of salary was for each plaintiff on the unexpired term of the contract subsequent to the wrongful discharge. It was thereafter incumbent upon the defendant Foundation to prove, if it could, as a set-off on damages what the plaintiffs actually earned, or could have earned through the use of due diligence from other employment of like nature, for the remainder of the term of employment under the contract. Absent such proof, the plaintiffs were entitled to judgment on the prima facie measure of damages as thus established.

Our review of the record reveals that the defendant Foundation never pled mitigation of damages as an affirmative defense nor proved such defense at trial by the greater weight of the evidence. There is evidence, which the defendant Foundation established on cross-examination, that the plaintiffs subsequent to their discharge formed another corporation which apparently did work similar to that of the defendant

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Foundation. All agree, however, that beyond that there is a complete failure of proof on the mitigation issue. There is no evidence as to whether the plaintiffs were employed by the new corporation, and, if so, for what length of time and at what salary. There is also no evidence that the plaintiffs failed to perform their duty to mitigate damages by seeking other employment of like nature.

The defendant Foundation contends, however, that it was entitled to an involuntary dismissal of the plaintiffs' action because of the above failure of proof on mitigation of damages. We cannot agree. Under the existing law, such a failure of proof could never defeat the plaintiffs' claim. On the contrary, it was the burden of the defendant Foundation to plead and prove mitigation of damages as a set-off which it failed to do. As the plaintiffs clearly established a prima facie case of damages for breach of the contract herein and the defendant Foundation presented insufficient evidence to reduce the damages award, it is our view that the trial court was eminently correct in entering the final judgment from which this appeal is taken.

As a separate ground for granting summary judgment, the trial court found that Aery would not be entitled to lost wages after May 25, 2005, the date he applied for disability benefits, since he failed to mitigate his damages by retiring and not seeking equivalent employment. If Maroone's alleged FWA violation caused Aery's disability and resulting inability to work, Aery's duty to mitigate damages by finding other employment would be discharged.

A court's purpose in awarding lost wages is to “make the plaintiff ‘whole,’ to restore the plaintiff to the economic position the plaintiff would have occupied but for the illegal [acts] of the employer.” Castle v. Sangamo Weston, Inc., 837 F.2d 1550, 1561 (11th Cir.1988). As an equitable award, such damages will typically consist of either back pay, front pay, or both. See Hudson v. Chertoff, 473 F.Supp.2d 1292, 1299 (S.D.Fla.2007) (quoting Szedlock v. Tenet, 139 F.Supp.2d 725, 733 (E.D.Va.2001)).

In awarding back pay, “the trial court must determine what the employee would have earned had she not been the victim ..., and must subtract from th[at] figure the amount of actual interim earnings.” E.E.O.C. v. Joe's Stone Crab, Inc., 15 F.Supp.2d 1364, 1378 (S.D.Fla.1998). Front pay, on the other hand, “is simply money awarded for lost compensation during

[118 So.3d 915]

the period between judgment and reinstatement or in lieu of reinstatement.” Pollard v. E.I. du Pont de Nemours & Co., 532 U.S. 843, 846, 121 S.Ct. 1946, 150 L.Ed.2d 62 (2001). While reinstatement, when feasible, is typically “the preferred remedy” for a wrongful firing, Cassino v. Reichhold Chems., Inc., 817 F.2d 1338, 1346 (9th Cir.1987), front pay may be applied where “ ‘reinstatement is not viable because of continuing hostility between the plaintiff and the employer or its workers, or because of psychological injuries suffered by the plaintiff as a result’ ” of the firing. Haines City HMA, Inc. v. Carter, 948 So.2d 904, 905 n. 2 (Fla. 2d DCA 2007) (quoting Pollard, 532 U.S. at 846, 121 S.Ct. 1946) (emphasis added).

In seeking back or front pay, the plaintiff “must mitigate her damages by seeking employment ‘substantially equivalent’ to the position [from which] she was” terminated. Reiner v. Family Ford, Inc., 146 F.Supp.2d 1279, 1287 (M.D.Fla.2001) (quoting Joe's Stone Crab, 15 F.Supp.2d at 1378) (internal quotations omitted); Szedlock, 139 F.Supp.2d at 733–34 (“While a Title VII plaintiff is generally entitled to back pay ‘as a matter of course,’ the right of a plaintiff to claim back pay is limited by a claimant's statutory duty to mitigate the employee's damages.” (footnote omitted)). However, the defendant/employer “bears the burden to allege and prove that the plaintiff failed in that regard,” Pennsylvania State Police v. Suders, 542 U.S. 129, 152, 124 S.Ct. 2342, 159 L.Ed.2d 204 (2004), and the failure to mitigate will be used only to “ limit the amount of ... pay available.” Castle, 837 F.2d at 1562 (emphasis added). Moreover, “[t]he employer must show that the claimant failed to exercise ‘reasonable diligence to locate other suitable employment and [or] maintain a suitable job once it is located.’ ” Richardson v. Tricom Pictures & Prods., Inc., 334 F.Supp.2d 1303, 1310 (S.D.Fla.2004) (quoting Baker v. John Morrell & Co., 263 F.Supp.2d 1161, 1179 (N.D.Iowa 2003)).

Under this doctrine, “[c]ourts have generally excluded periods of unavailability, such as periods of disability, from computation of [front or] back pay awards,” since holding otherwise would provide the plaintiff with a windfall. Sowers v. Kemira, Inc., 701 F.Supp. 809, 826 (S.D.Ga.1988). However, where “the disability would not have occurred but for the employer's” act, “[a] different rule is justified.” Id.; see, e.g., Arnold v. City of Seminole, 614 F.Supp. 853, 871, 873 (E.D.Okla.1985) (finding front and back pay to be warranted where the complained-of sexual harassment caused the plaintiff to endure psychological disability). Under those circumstances, the claimant may be entitled to lost wages “where the defendant's ... conduct caused the disability,” since holding otherwise would allow an employer to get off the hook for forcing the plaintiff out of the job market. Lathem v. Dep't of Children & Youth Servs., 172 F.3d 786, 794 (11th Cir.1999); see, e.g., Gotthardt v. Nat'l R.R. Passenger Corp., 191 F.3d 1148, 1156 (9th Cir.1999) (finding that a trial court did not abuse its discretion in ordering front pay instead of reinstatement where “[t]he evidence support[ed] the district court's finding that [the plaintiff's] medical and psychological condition, by making her ‘unable to work for Amtrak’ and ‘prevent[ing] her from obtaining employment in another field of work,’ would make reinstatement impossible”).

In this case, despite struggling through a period of depression, Aery obtained similar employment in Leesburg, Florida. After he was fired for what he believed to be another unjustified reason, Aery contends that he lost the ability to work and sought the only form of income he could acquire—disability benefits.

[118 So.3d 916]

Aery cannot be required to mitigate his damages by working if his disability and inability to work were caused by Maroone's alleged FWA violation. Because there are disputed issues of fact, summary judgment was inappropriate on the issue of mitigation of damages in this case.

Accordingly, Creech was not entitled to recover the balance of his salary or bonus for the 1984-85 year because the amount he earned after his wrongful discharge exceeded the balance due him from Zayre for salary and bonus.

Nevertheless, the general rule in cases of this type is that the measure of damages recoverable for breach of a contract of employment for a definite term is the amount of compensation agreed upon for the remainder of the period involved, less the amount which the servant earned, or with reasonable diligence might have earned, from other employment during that period. However, if following the discharge, the former employee has earned more than the price agreed to be paid, his recovery is limited to nominal damages only. 53 Am.Jur.2d Master and Servant § 62 (1970). E.g. Board of Education of Alamogordo Public School District No. 1, 102 N.M. 762, 701 P.2d 361 (1985). This rule is also followed in Florida where a contract has been breached but for one reason or another recoverable damages were not proven. See AMC/Jeep of Vero Beach, Inc. v. Funston, 403 So.2d 602 (Fla. 4th DCA 1981); Muroff v. Dill, 386 So.2d 1281 (Fla. 4th DCA 1980).

In view of the foregoing, the provisions of the judgment awarding Creech $13,378 are reversed and the cause is remanded to the trial court with directions to enter a judgment for Creech for nominal damages only.

While a successful Title VII claimant, such as Richardson, is generally entitled to an award of back pay, the claimant must make a reasonable and good-faith effort to mitigate her damages. Id. (citing Weaver v. Casa Gallardo, Inc., 922 F.2d 1515, 1527(11th Cir.1991)); Giles v. General Elec. Co., 245 F.3d 474, 492 (5th Cir.2001) ("Because it is an equitable remedy, back pay is subject to a duty to mitigate damages.") (citation omitted); Szedlock v. Tenet, 139 F.Supp.2d 725, 733-34 (E.D.Va.2001) ("While a Title VII plaintiff is generally entitled to back pay `as a matter of course,' the right of a plaintiff to claim back pay is limited by claimant's statutory duty to mitigate the employee's damages."). "[A] claimant must mitigate her damages by seeking employment `substantially equivalent' to the position she was denied." Joe's Stone Crab, 15 F.Supp.2d at 1378 (citing Weaver, 922 F.2d at 1527). It is the employer's burden to prove its mitigation defense to a Title VII back pay award. Id. (citing Smith v. Great Am. Restaurants, Inc., 969 F.2d 430, 438 (7th Cir.1992)); Carey v. Mt. Desert Island Hosp., 156 F.3d 31, 41 (1st Cir.1998).

"`Substantially equivalent employment' is employment that affords virtually identical promotional opportunities, compensation, job responsibilities, working conditions, and status to those available to employees holding the position from which the Title VII claimant has been discriminatorily terminated.'" Joe's Stone Crab, 15 F.Supp.2d at 1378 (citing Weaver, 922 F.2d at 1527). The employer must show that the claimant failed to exercise "reasonable diligence to locate other suitable employment and [or] maintain a suitable job once it is located." Baker v. John Morrell & Co., 263 F.Supp.2d 1161, 1179 (N.D.Iowa 2003); see also Excel Corp. v. Bosley, 165 F.3d 635 (8th Cir.1999).

"If an employee suffers a `[willful] loss of earnings, however, the employer's backpay liability is tolled." Thurman v. Yellow Freight Sys., Inc., 90 F.3d 1160 (6th Cir.1996) (citing N.L.R.B. v. Ryder Sys., Inc., 983 F.2d 705, 712 (6th Cir.1993)). The Sixth Circuit in Thurman discussed the Ryder case and cited another Fourth Circuit decision as follows:

In Ryder, an employer claimed backpay should be tolled because the plaintiffs were fired for insubordination and therefore suffered a [willful] loss of earnings. The court held, "[A] discharge from interim employment will toll backpay liability only if the employee's

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misconduct was `gross' or `egregious.'" Id. at 713. Similarly, an employee's discharge for cause due to his [willful] violation of company rules will toll backpay. Brady v. Thurston Motor Lines, Inc., 753 F.2d 1269 (4th Cir.1985).

90 F.3d at 1169. The court then distinguished the facts in Ryder and Brady from the facts before it explaining that, although the plaintiff in Thurman was fired for cause from his subsequent employer, the discharge was based on a vehicle accident, and there was no evidence that the plaintiff acted intentionally. The court therefore did not toll back pay based on the defendant's failure to establish that plaintiff "acted [willfully] or committed a gross or egregious wrong." Id. Thus, Thurman stands for the proposition that a plaintiff who is involuntarily terminated from substantially equivalent employment is not entitled to a back pay award if the behavior that caused the termination was intentional.

The Brady decision addressed the effect that a discharge for misconduct from interim employment should have on a back pay award in this way:

[W]e are of the opinion the Title VII claimant must also use reasonable diligence to maintain any suitable employment which is secured. To permit otherwise would force the Title VII defendant to pay for the misconduct of a claimant in subsequent employment. We do not think that such a result is properly related to the make whole objective of back pay.

In determining what reasonable diligence requires, it seems clear that it should not permit all on the job behavior except [willful] or wanton conduct. The standard of reasonable diligence is more discerning. It requires instead that in maintaining subsequent employment, a Title VII claimant act reasonably and responsibly in accordance with employer rules. As noted earlier, the duty of a Title VII plaintiff to mitigate damages includes the obligation to accept a "job substantially equivalent to the one he was denied." Ford Motor Co. v. EEOC, 458 U.S. [219]at 232, 102 S.Ct. [3057]at 3066[, 73 L.Ed.2d 721 (1982)]; see Edwards v. School Bd. of City of Norton, Va., 658 F.2d [951]at 956[(4th Cir.1981)]. Such a duty of necessity includes the obligation to make reasonable and good faith efforts to maintain that job once accepted. When either of these obligations are not met, a claimant should be said to have voluntarily removed himself from the job market or the work place and forfeited his right to back pay. See Ford Motor Co. v. EEOC, 458 U.S. at 232, 102 S.Ct. at 3066.

* * * * * *

We are thus of opinion that the rationale which supports the tolling of the back pay period following a voluntary quit should also apply to those terminations which result from a violation of an employer's rules. It would be incongruous to hold that while Title VII claimants cannot voluntarily terminate suitable, interim employment without suffering a back pay reduction, they may choose without penalty to risk the loss of similar employment by engaging in misconduct. To permit claimants the freedom of substantially unrestrained conduct during interim employment unfettered by the loss of back pay, would serve only to punish the employer for the misconduct of the claimant, and be inconsistent with the requirement of exercising reasonable diligence.

753 F.2d at 1277, 1278-79.