When assessing a damages award in a wrongful dismissal case or compensatory award in an unfair dismissal case, the courts and tribunals apply the normal common law rules requiring a person who is seeking damages to "mitigate his loss".

In unfair dismissal compensatory award cases this is specifically provided by statute which provides that Tribunals must "apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law . . ." (ERA 1996 s.123(4)).

An employee has NO obligation to mitigate loss if the employment contract itself provides for the amount to which the employee will be entitled in the circumstances which have arisen (eg a payment in lieu of notice, and see Abrahams v Performing Rights Society Ltd CA 1995 ICR 1028 CA). However it must always be borne in mind that the amount must not be so unreasonable as to count as a "penalty" as in that case it would be simply invalid under general common law principles.

For notes on the differences between the (common law) concept of "wrongful dismissal" and the (statutory) concept of "unfair dismissal" see Unfair dismissal/Wrongful dismissal (contrasted with unfair dismissal) .