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Proving just cause doesn’t mean employer isn’t on the hook financially

Termination, severance pay may be owing if employee’s misconduct wasn’t ‘wilful’

By Stuart Rudner

Is it possible that an employer will have just cause to dismiss an employee, yet will still be on the hook for termination and severance pay?

The answer, which will undoubtedly surprise some readers, is yes.

Just cause for dismissal is a very different concept than wilful misconduct, which is the test for most statutory regimes.

Where just cause for dismissal exists at common law, an employer can terminate the relationship without any notice or pay in lieu thereof. Just cause can be found in a variety of scenarios, including wilful misconduct but also less blameworthy conduct such as poor performance. However, according to employment standards legislation, termination pay (and severance, in some jurisdictions) is required unless the employee’s conduct was wilful. For example, in Ontario, termination pay is required in the absence of “wilful misconduct, disobedience or wilful neglect of duty.”

While much of the behaviour that constitutes just cause for dismissal involves wilful misconduct, there are examples that don’t. For example, it is possible that an employee will be dismissed as a result of poor performance or due to innocent absenteeism. Those can result in summary dismissal at common law, but the employee would not be guilty of wilful misconduct. As a result, the employee would be entitled to statutory termination pay and, if the other criteria are met, severance pay.

This is a scenario that is rarely encountered, but it occurred in Oosterbosch v. FAG Aerospace Inc., a 2011 Ontario decision. In that case, the worker was dismissed after the employer unsuccessfully attempted to address his performance and conduct issues through its progressive discipline policy.  He was 53 and had worked for the company for 17 years. The discipline policy in question provided for dismissal in the event an employee receives four written warnings in a 12-month period.

The worker, a machine operator, received four written warnings between Aug. 22, 2007, and March 20, 2008, for:

• failing to notice a defect on the production line

• returning about 15 minutes late from a 30-minute break

• arriving late for his shift

• failing to notice a defect on the production line and falsification of a production report.

There were additional incidents of lateness, absences and unsatisfactory work performance apart from the four incidents that resulted in termination — and the worker received numerous coaching or counselling sessions.

The company took the position that the worker was dismissed for just cause and he was not entitled to either common law notice or termination and severance pay pursuant to the employment standards legislation. The court agreed that the employer was entitled to summarily dismiss the employee. However, it went on to conclude that the worker’s conduct was not “wilful,” holding that:

“A person is reckless when he engages in conduct without regard for the outcome or consequences. Notwithstanding the number of infractions recorded I do not see that the conduct of the (employee) rises to that level. He was undoubtedly careless and the persistence of that carelessness justified his dismissal. I would not, however, characterize his offending behaviour as ‘wilful misconduct, disobedience or wilful neglect of duty’ that would disentitle him to receipt of termination and severance payments under the provisions of (Ontario’s) Employment Standards Act, 2000.”

Employers should keep this in mind whenever they embark upon a just cause dismissal. While it is a natural reaction to proceed on the basis that the dismissed employee is not entitled to any notice or severance, the Oosterbosch case makes it clear that is not necessarily true.

It is rare for a just cause dismissal to be simple or "open and shut" — employers will need to be able to show they acted reasonably and in good faith when making a decision to dismiss. A proper investigation is almost always required, though the extent of the investigation necessary will vary with the circumstances. A failure to carry out the dismissal properly can expose an employer to substantial extraordinary damages.

Stuart Rudner is an HR lawyer and a founding partner of Rudner MacDonald LLP, a Toronto-based firm specializing in Canadian employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at srudner@rudnermacdonald.com. You can also follow him on Twitter @CanadianHRLaw and join his Canadian HR Law Group on LinkedIn.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Stuart Rudner

Stuart Rudner is a founding partner of Rudner MacDonald LLP in Toronto. Follow him on Twitter @CanadianHRLaw. He can be reached at srudner@rudnermacdonald.com.
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