This situation comes up often, as some employees will use their dismissal as a cue to start their own venture instead of looking for new work. Naturally this can lead to mixed results, and so the law treats income from self-employment similarly to income earned from traditional employment in these cases. If the income is substantial enough to replace one’s previous salary, that is substantial mitigation income. If, however, the income earned is significantly lower, it likely will not count against the employee’s entitlement to severance pay.
The other things to look out for though are any non-competition and non-solicitation agreements that may have been included in that employee’s contract. These clauses can be hard to uphold, as courts take a strong view that former employees should be allowed to keep earning a living. However, it may be perfectly reasonable to require a former employee not to open a competing business in the exact same neighborhood for 6 months after their employment ends. It is also reasonable to protect confidential business information, or to have a clause in the employment contract not to solicit your customers or employees. If the employee is directly poaching employees, or you have evidence that they may have stolen trade secrets, let’s discuss your options and how they may factor into settlement negotiations.