Mitigation of loss means taking reasonable steps to reduce the financial damage a wrong has caused you. In an Australian unfair dismissal claim, it means you need to show the Fair Work Commission that you looked for work after you were dismissed. If you can't show it, any compensation the Commission orders can be reduced. The rule is in section 392(2)(d) of the Fair Work Act 2009, and it catches many applicants who didn't know it existed.
This guide covers the rule in unfair dismissal claims, with a short note on how it differs in ordinary contract disputes. It explains what counts as reasonable effort, what gets deducted, what to do about a re-employment offer, and how to keep a record that holds up.
TL;DR
- The Commission must consider what steps you took to reduce your loss when it decides compensation. You need evidence, not just a claim that you tried.
- "Mitigation" means deliberate, positive steps, such as applying for suitable jobs. You don't have to spend money or sacrifice your property to do it.
- Wages and workers' compensation you earn after dismissal can be deducted. Income support payments such as JobSeeker are not.
- Compensation is capped, and it covers lost income only. It does not cover hurt feelings or distress.
- Start a job-search log the week you are dismissed, and keep it up until the hearing or settlement.
Table of Contents
- What mitigation of loss means
- What the Fair Work Commission expects of you
- The trap of taking time off
- What gets deducted from compensation
- Compensation is only for lost income
- Re-employment offers: a high-risk decision
- Building a mitigation record that works
- Where deadlines fit in
- Our perspective
- How we can help you prepare
- If the employer doesn't pay
- Mitigation outside unfair dismissal
- FAQ
- Sources
What mitigation of loss means
The idea is older than unfair dismissal law. In contract law, a person who is wronged and sues for damages is expected to take reasonable steps to limit their loss. Losses they could have avoided are not recoverable. Law firm commentary on Australian contract law describes it this way: a failure to mitigate may reduce the damages payable.
The unfair dismissal system applies the same logic in its own statutory language. If the Commission finds a dismissal was harsh, unjust or unreasonable, it may order compensation. When it works out the amount, it has to weigh a list of factors. One of them is the effort you made to reduce the effect of losing the job.
This is why two people with identical dismissals and identical pay can receive very different outcomes. One has a tidy record of applications. The other spent three months "getting back on their feet" and has nothing to show.
What the Fair Work Commission expects of you
The Commission's benchbook page on mitigation is short and worth reading in full. Its main points:
- You must provide evidence that you took reasonable steps to minimise the impact of the dismissal.
- What is reasonable depends on the circumstances of your case.
- You aren't required to take unreasonable steps, such as spending money or giving up property rights.
- Mitigation means deliberate, positive steps to lessen the effect of the dismissal, for example seeking new employment.
In practice, that means active and sensible job searching in your own field and skill set. Scrolling job boards without applying doesn't count. Neither does waiting for an old colleague to call.
What counts as a reasonable step
The test is context-dependent, but these are the kinds of steps that usually carry weight:
- Applying for roles that match your experience, qualifications and location.
- Registering with recruiters in your industry and following up with them.
- Contacting former colleagues and industry contacts about openings.
- Attending interviews and recording the outcome.
- Accepting suitable short-term or casual work while you look for something permanent (this will reduce your loss, and the income will be taken into account).
- Updating your resume and LinkedIn profile and recording when you did it.
The number of applications matters less than whether they were genuine and suitable. Ten well-targeted applications a week with replies saved will read better than fifty scattershot ones with no trace.
What you don't have to do
The Commission recognises limits. You don't have to pay for a new qualification you can't afford, or sell a house or equipment to cover the gap. If your industry is small and local roles are rare, the Commission can take that into account. You still need to show what you did and why more wasn't possible.
The trap of taking time off
People who have just been dismissed often need time. They may be stressed, ill or caring for family. That is human, and it can also be costly in a claim.
If you do nothing for several weeks, the Commission has no evidence of mitigation for that period. It may reduce compensation for the period you can't account for. If you really can't look for work, because of illness for example, get medical evidence that covers those dates and keep it with your records. A certificate that says you were unfit to work is far more useful than an explanation offered months later.
What gets deducted from compensation
Mitigation is only one part of the calculation. The Commission's compensation formula page explains that it must consider all the criteria in section 392, and that it is a complex process. For your own records, these are the main points.
| Type of money | Deducted from compensation? |
|---|---|
| Wages from a new job between dismissal and the order | Yes, the Commission takes it into account |
| Workers' compensation payments | Yes |
| Casual or part-time earnings | Yes |
| JobSeeker and similar income support | No |
The JobSeeker point surprises people. Some applicants leave their income support out of the calculation because they think it will hurt them, while others mistakenly report it as earnings and undervalue their own claim. Report earnings accurately, and treat income support as a separate category.
Compensation is only for lost income
The Commission is clear that compensation covers lost income, called remuneration. It is not awarded for shock, distress or humiliation, and the Commission's compensation page says the same. Even a very upsetting dismissal produces a figure based on what you would likely have earned, adjusted by factors such as mitigation.
There is also a ceiling. The compensation cap is the lesser of the remuneration you received or were entitled to receive in the 26 weeks before dismissal (whichever is higher), or half the high income threshold. For a dismissal on or after 1 July 2026, the high income threshold is $190,100, so the cap is $95,050. For dismissals between 1 July 2025 and 30 June 2026 it is $91,550. We explain how those figures interact in our guide to the $95,050 payout cap and unfair dismissal remedies.
Re-employment offers: a high-risk decision
The hardest mitigation question comes when your former employer offers you a job back, or a different job, during the dispute.
The Commission's general position is that a wrongfully dismissed person can't claim a loss that accepting a reasonable offer of new employment would have avoided. Refusing another position with the same employer at the same pay may amount to a failure to mitigate.
There are exceptions. The Commission's case examples include one where an employee's refusal wasn't a failure to mitigate because the employer had earlier tried to cut the employee's salary, which was treated as a further major breach. Loss of status or a breakdown in trust can also be legitimate reasons. Saying you are unhappy or that the pay is lower, with nothing more, is unlikely to be enough.
So don't reject an offer by return email. Write down your reasons, check them against the circumstances, and get advice from a lawyer, union or community legal centre before you answer. Keep the offer and your reply in your file.
Building a mitigation record that works
A good record is simple and consistent. Here is a routine that takes little time.
- Start on day one. Create a spreadsheet or document with the date, employer or recruiter, role, how you applied, and the result.
- Save the proof. Keep confirmation emails, screenshots of job ads and application receipts. Ads disappear, so capture the listing when you apply.
- Record the gaps honestly. If you were sick or caring for someone, note it and attach the medical evidence.
- Log new income. Every pay slip from new or casual work should go in the file, since it will be taken into account.
- Keep the offers. Note any job offers you received and what you decided and why.
- Update it weekly. A log written in one sitting two days before a hearing looks like one.
The Commission also looks at the whole picture. That includes how long you might have stayed in the job, and whether you would have been dismissed anyway. Your log supports the argument on loss. It doesn't replace the rest of your case.
Where deadlines fit in
Mitigation is easy to forget because it comes into play late. But you need to start the job search immediately, and your application must be lodged within 21 days of the dismissal taking effect. If you are unsure about your eligibility or timing, our unfair dismissal eligibility guide sets out the 21-day rule. If you resigned under pressure, see our guide to constructive dismissal. Look for work from the first week, even while you are preparing the claim.
Our perspective
We built our service around Australian Fair Work claims, and the pattern we keep seeing is that people prepare the "was it unfair?" side carefully and leave the "what did it cost me?" side until the end. Mitigation is where that gap hurts. By the time someone realises they needed a record, weeks of applications are unrecorded and the ads are gone.
So our advice is to treat the job-search log as part of the claim from the first day. It costs almost nothing, and it is the evidence the Commission asks for. It also helps in conciliation, where a well-organised file makes your position clearer to everyone in the room.
We also encourage people to be realistic. The Commission's focus is financial loss, capped, and adjusted for what you earned or could have earned. A clear picture of that figure early on helps you decide whether to settle, and what to ask for.
— Nicolas
How we can help you prepare
If you're preparing an unfair dismissal claim, our preparation support takes you through eligibility checks, evidence organisation, document upload and the Fair Work forms, all grounded in Australian legislation and Commission procedure. You can file the result yourself or take it to a lawyer, union or community legal centre. To see how it works, start at Terminationhelp. We prepare your materials. We don't give legal advice or predict outcomes.
If the employer doesn't pay
An order for compensation isn't always the end. If an employer fails to pay within the time set in the order, the Fair Work Ombudsman explains that you can seek enforcement through civil proceedings in the Federal Circuit and Family Court or a state or territory court. Small claims proceedings can be used to recover amounts up to $100,000. Keep a copy of the order and any payment correspondence.
Mitigation outside unfair dismissal
If you are chasing damages for breach of an employment contract rather than a Commission remedy, the common law duty applies. An employee who is wrongfully terminated can recover the remuneration they would have earned but for the termination, but not losses they could reasonably have avoided. The same practical advice applies: look for work and record it. For the finer legal points, such as who bears the onus of proof, speak to an employment lawyer. The academic literature, for example this Melbourne University Law Review article, shows how mitigation interacts with causation and other limits on damages.
FAQ
Do I have to take any job I'm offered?
No. The Commission looks at what is reasonable in your circumstances. A suitable job in your field is one thing, but you generally aren't expected to take work that is far below your skills or unsafe. Keep a note of why you declined an offer. If the offer comes from your former employer, get advice before refusing.
Will JobSeeker reduce my compensation?
No. The Commission's guidance says income support payments are not deducted. Wages and workers' compensation payments received after the dismissal can be.
What if I was too unwell to look for work?
Tell the Commission and back it up with medical evidence for those dates. A certificate from your doctor covering the period is much stronger than a later explanation. Without evidence, the gap may be treated as time you didn't mitigate.
Can I get compensation for stress or humiliation?
No. The Commission doesn't award compensation for shock, distress or humiliation in unfair dismissal matters. Compensation is for lost remuneration, adjusted for factors such as mitigation, and it is subject to the cap.
When should I start my job search log?
The day you are dismissed. The 21-day lodgement deadline means you will be preparing your claim at the same time, but the log is quick to keep and is hard to rebuild later.
Sources
- Mitigation | Fair Work Commission
- The formula to calculate compensation | Fair Work Commission
- Remuneration | Fair Work Commission
- Compensation for unfair dismissal | Fair Work Commission
- Compensation | Fair Work Commission
- Compensation cap | Fair Work Commission
- Non-compliance with unfair dismissal orders | Fair Work Ombudsman
- Australian contract law explained | Gilbert + Tobin
- Employment damages and mitigation | Precedent (AULA)
- Contract Damages and the Promisee's Role in Its Own Loss | Melbourne University Law Review
Recommended
- Australia: $95,050 payout cap and unfair dismissal remedies
- Check Unfair Dismissal Eligibility in Australia: 21 days to lodge
- 3 checks to claim unfair dismissal on probation in Australia
- File an unfair dismissal claim in Australia within 21 days
Article produced using AI. This is not legal advice.