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Dismissal: The difference between a good reason and a ‘just’ one

Having a good reason to fire an employee doesn’t mean an employer can avoid providing reasonable notice

By Jeffrey R. Smith

There are many issues in employment law that can cause a quandary for employers. Just cause for dismissal is probably one of the ones that causes the most headaches for employers.

There have been countless situations where employers have been caught off-guard in a wrongful dismissal proceeding, thinking for sure they had sufficient reason to dismiss an employee but finding out that’s not the case.

It’s a fundamental principle in employment law that there’s a power imbalance in the employment relationship and dismissal is the capital punishment of it. As a result, the bar for just cause for dismissal is set high.

An employer can have any number of reasons to terminate someone’s employment. The employee may not be meeting performance targets, have an attitude problem, act insubordinate, or financial troubles may necessitate the cutting of staff. These are all legitimate reasons for dismissing an employee. However, there’s a big difference between having a reason for dismissal and just cause for dismissal.

An employer can dismiss an employee for any reason at any time — as long as it’s not discriminatory — if the employer provides sufficient reasonable notice of dismissal or pay in lieu of notice based on the typical factors — length of service, age, availability of similar employment, and the importance of the employee’s position — in order to bridge the gap for the employee to seek new employment.

It’s only if there’ s just cause for dismissal that notice does not have to be provided — which is usually a result of employee misconduct that renders the employment relationship too damaged to continue.

California to Ontario

The difference between a good reason for dismissal and just cause was discovered recently by the Canadian subsidiary of a U.S. company that had transferred an employee in California to Ontario to be a director of operations of a facility there. The facility had several pre-existing problems and the company hoped the new director would improve things.

However, the situation did not get much better and the Ontario facility’s performance continued to lag. Over the next year, the company told the employee things needed to improve and it wasn’t happy with the way things were going.

Unfortunately, the facility actually got worse in some metrics so the company hired a new director it felt would be able to get the improvements needed. The employee was dismissed 20 months after he had been transferred to Ontario.

A court found the company had “a valid business reason” to dismiss the employee, in that it wanted things to improve at the Ontario facility and it just wasn’t happening. However, many of the problems were pre-existing and not the employee’s fault, so the employee couldn’t necessarily be blamed for them.

And if the company wasn’t happy with the lack of progress in the facility’s performance under the employee and wanted to use that as just cause for dismissal, it didn’t give the employee enough time to turn things around, said the court.

The court determined the employee was entitled to eight months’ notice — including pay, benefits and car allowance.

In this case, the employer had legitimate concerns with part of its business and felt the Ontario facility was underperforming under the direction of the employee. But in order to argue just cause for dismissal based on the employee’s performance, it needed to implement a more thorough performance improvement and guidance regime and allow time for it to work.

Otherwise, with no misconduct on the employee’s record, there was no real proof of just cause, leaving the employee with entitlement to reasonable notice of dismissal.

A good reason for dismissal isn’t necessarily a “just” reason — and the difference between means a lot for the dismissed employee’s entitlement.

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Jeffrey R. Smith

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective.
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