September 19, 2014 By: Karine Dion
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There exists an inequality of bargaining power between employees and employers, especially at the time of dismissal. Even though the law has evolved in a way that tries to protect employees as much as possible, employers still hold the ultimate card: they can terminate an employee’s employment whenever they want, for whatever reason, so long as they do so in accordance with the applicable human rights laws and they pay them enough money (with some exceptions, of course). However, an employee will be disentitled from such payments if their employment is terminated for just cause.

Although an employer may have just cause to terminate your employment, in other instances, they may either only believe they have sufficient cause or even allege cause in order to avoid making any payments to you. Nevertheless, proving just cause for dismissal has become a bigger hurdle for employers to overcome as our legal system tries to help those who would otherwise not be compensated for what could have been years, or even decades, of loyal service to the same employer.

Applicable Threshold and Test

If your employer has just cause to terminate your employment, you will not be entitled to reasonable notice of your termination. However, the obligation rests on your employer to prove, on a balance of probabilities, that he or she did in fact have sufficient reason to end your employment.

As stated by the Ontario Superior Court in Thompson v. Boise Cascade Canada Ltd.:

What is clear is that for conduct to justify dismissal, it must be such that by its nature it shows that the employee is repudiating the contract or one of its essential conditions. It is also clear that the employees’ conduct, and the character it reveals, must be such as to undermine, or seriously impair, the essential trust and confidence the employer is entitled to place in the employee in the circumstance of their particular relationship. In essence, the conduct must be such as the employer can point to it as a good reason for having lost confidence in the employees ability faithfully to discharge his/her duties.

The above quote demonstrates how terminating someone for “just cause” does not mean terminating them for trifling misconduct – it must be conduct that goes to the root of the employment relationship, such that the underlying relationship and confidence is ruptured and cannot be restored. This is not an easy threshold to meet.

In the case of McKinley v. BC Tel, the Supreme Court of Canada sets out the appropriate test to determine whether just cause exists in a given situation. The Court here was faced with whether any dishonesty by an employee, in and of itself, is sufficient to warrant an employee’s termination or whether the context of such dishonesty should be considered in assessing whether just cause for dismissal exists. The appellant employee had worked for BC Tel for almost 17 years. He had gone on sick leave due to his health and requested a position carrying less responsibility. Instead, BC Tel decided to terminate him, alleging just cause on the basis that he had been dishonest about his medical condition and the treatments available for it.

Where there has been an allegation of just cause for dismissal, the Supreme Court confirmed that a contextual approach of the alleged misconduct is required:

In light of the foregoing analysis, I am of the view that whether an employer is justified in dismissing an employee on the grounds of dishonesty is a question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether the employee’s dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamentally or directly inconsistent with the employee’s obligations to his or her employer.

In accordance with this test, a trial judge must instruct the jury to determine: (1) whether the evidence established the employee’s deceitful conduct on a balance of probabilities; and (2) if so, whether the nature and degree of the dishonesty warranted dismissal. In my view, the second branch of this test does not blend questions of fact and law. Rather, assessing the seriousness of the misconduct requires the facts established at trial to be carefully considered and balanced. As such, it is a factual inquiry for the jury to undertake. [emphasis added]

Even where the evidence establishes that the alleged misconduct by an employee did in fact occur, this will not give an employer the automatic right to terminate their employment. Instead, once the misconduct is known to have occurred, there must then be an appreciation for the principle of proportionality, as “[a]n effective balance must be struck between the severity of an employee’s misconduct and the sanction imposed”. The question relates to the quality of the misconduct, or its seriousness; not its quantity. This means that an employee’s misconduct should not be assessed in isolation, but must be examined in the context of the entire employment relationship. Given that a contextual analysis is required, the Court concluded that dishonesty is not, in and of itself, just cause for dismissal.

Although the above McKinley analysis was based around an employee’s dishonesty, it has been used to determine whether other alleged misconduct by an employee rises to the level of “just cause” in order to justify their termination without reasonable notice. Each case will therefore need to be examined based on its particular facts and circumstances, and an employer must ask themselves whether the misconduct, if true, is reconcilable with sustaining the employment relationship.

In the case of Dowling v. Ontario (Workplace Safety and Insurance Board), and reiterated in Corso v. NEBS Business Products Limited, the Ontario Court of Appeal expanded the test from McKinley to provide a more thorough, though non-exhaustive, list of questions a court, and therefore an employer, should consider when determining whether just cause for dismissal exists:

  1. the nature and extent of the employee’s misconduct;
     
  2. the context and surrounding circumstances:
  1. the circumstances of the employee, including:
  1. seniority;
  2. role and responsibility within the business;
  3. employment history and performance;
  4. age and other appropriate personal circumstances;
  5. other relevant circumstances;
  1. the circumstances of the employer, including:
  1. the nature of the employer’s business activity;
  2. relevant employer policies and practices;
  3. the employee’s position within the organization;
  4. the degree of trust reposed in the employee;
  5. other relevant circumstances;
  1. a determination of whether the misconduct can be reconciled with the continuation of the employment relationship or whether it is so serious that it gives rise to a breakdown in that relationship. 

Given the above analysis, a court will examine the “surrounding circumstances” of alleged misconduct to see if there are any mitigating factors weighing against dismissal, such as whether the employee’s conduct was provoked through abusive or other unreasonable conduct on the part of the employer or another employee; whether the employee was undergoing a period of unusual stress; a lengthy otherwise uncheckered service and performance record; or the absence of any premeditation on the part of the employee.

Progressive Discipline

Unless an employee’s misconduct is so serious that it precludes continuing the employment relationship, employers are generally required to provide their employees with some form of progressive discipline, for example by way of a clear warning coupled with a reasonable opportunity to mend their ways. An employee’s dismissal, without prior warning, is often found to be wrongful. Nevertheless, where the misconduct leads to a breakdown in the employment relationship, examples of which are found below, a single incident of misconduct or insubordination may constitute just cause for dismissal without the requirement for progressive discipline.

When Misconduct Leads Directly to Termination

In the case of Corso v. NEBS Business Products Limited, the defendant employer argued that the plaintiff employee had developed a product that competed with its business. Therefore, the employee breached his duties, breached the company’s relevant conflict of interest and Protection of Confidential Information policies, and broke the trust and confidence that was fundamental to the employment relationship. The court agreed with the employer:

Of themselves and probably collectively, the lunches [improperly billed to the company], the use of company resources [to develop his product] and the pornography would not justify termination for cause. They would justify a warning or other discipline, but not dismissal without notice. The more serious deceit was Mr. Corso’s concealment of the eVault project in the face of direct questioning. It justified the employer’s conclusion that he could not be trusted.

As trust was essential to the effective performance of the employee’s duties, which is probably true for many employees, the court agreed that the employer should not be expected to continue the employee’s employment when the employer could no longer trust him.

Another example of when one instance of misconduct will lead to a breakdown in the employment relationship is in the case of sexual harassment. In Bannister v. General Motors of Canada Ltd., the Ontario Court of Appeal was faced with a respondent accused of sexual harassment in the workplace. After conducting an investigation that corroborated the complaints made against the respondent, his employment was terminated. The respondent had been interviewed four times prior to being terminated. The Court stated that an employer who responds quickly and effectively to a complaint may avoid liability or not be liable to the same extent as an employer who fails to take such steps. The respondent, who was a supervisor and responsible for implementing the employer’s anti-harassment policy, continually denied the complaints.

Management was entitled to have a supervisor who would do his best to assure that the environment was clear of racist or sexist slurs or objectionable conduct. In respect of gender issues, the respondent failed management. Given the finding that he joined in these activities without later apology or acknowledgment, it is hard to imagine an alternative to termination which would not perpetuate the harassment which management was obligated to eliminate. In my view, the termination was fully justified.

In Gonsalves v. Catholic Church of Canada Extension Society of Canada, the Ontario Court of Appeal again dealt with a supervisory employee who had been terminated for reasons of sexual harassment. The employer did not have a formal policy in place for dealing with sexual harassment. The Court affirmed that an employer has a duty to all of its employees both to end the abuse and to alleviate its impact upon the employment environment. Overall, the Court held that in cases of serious misconduct, which is manifestly inexcusable, a warming may be completely inappropriate to an employer who is satisfied that the misconduct has occurred.

Once the employer is satisfied that the complaints are well-founded, the denial has a significance in limiting suitable choices open to the employer. There is no opening for an apology to clear the air if employment is to be continued. 

The above suggests that where an employee denies allegations of sexual harassment, a warning would prove useless as would an apology. In these instances, an employer would have no choice but to terminate an employee’s employment in order to protect the other employees from continued harassment.

Even where an employer has a policy for dismissal for cause, which states that an employee must be given written notice that he or she may be subject to dismissal, or that an investigation will be carried out in the face of alleged misconduct, the employer may still be able to terminate an employee for cause without following their own policy. This was the case in Dowling v. Ontario (Workplace Safety and Insurance Board). Here the Ontario Court of Appeal held that because the employee’s actions were not mere errors in judgment, but intentional, numerous, dishonest acts that occurred over a period of time, and that were neither insignificant nor trivial, and given his role in the company, the employee was in breach of the employer’s policies and therefore he was properly dismissed for cause. Important to note is that in this case, the employee knew an investigation was ongoing and could have explained his actions at any point in time. Instead, he chose to lie.

Take-Away

As stated above, generally one instance of misconduct will not be sufficient to justify termination, as an employer should give warnings to an employee that their behaviour was unacceptable, a form of progressive discipline should be implemented, and mitigating circumstances considered. Nevertheless, as there are exceptions to every rule, there will be instances where one instance of misconduct will lead to a complete breakdown of the employment relationship. When this occurs, an employer will have the right to immediately terminate an employee’s employment, without the need to provide them with reasonable notice of termination, or pay in lieu thereof.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Employment Law