Just cause – back from the dead?

Recent pro-employer decisions show greater consideration of employers’ interests in wrongful dismissal complaints
By Stuart Rudner
|Canadian HR Reporter|Last Updated: 09/18/2008

While it may be premature to break out the bubbly, it is fair to say that, in recent years, the pendulum in employment law seems to have swung back toward the employers’ side — or at least away from the employees’ side. Several decidedly pro-employer, high-level judicial decisions have recently showcased this trend.

Even before the Supreme Court of Canada’s decisions in

Honda Canada Inc. v. Keays


Hydro-Québec v. Syndicat des employées de techniques professionnelles et de bureau d’Hydro-Québec, section locale 2000 (SCFP-FTQ)

, there was an employer-friendly shift in judicial approach. Allegations of just cause have been more readily accepted than before. While some in the business world had concluded just cause was a lost cause, it has emerged in a number of recent Canadian cases.

In addition to cases involving allegations of just cause, judicial consideration of issues — such as the duty to mitigate in the event of dismissal, damages for bad faith, punitive damages and the duty to accommodate disability — have all been addressed in a pro-employer manner.

The duty to accommodate — Hydro-Québec v. SCFP-FTQ

The Supreme Court of Canada took steps to narrow the scope of the duty to accommodate from what had become, in some cases, an overwhelming burden with unknown parameters. In particular, the court noted the requirement is accommodation to the point of undue hardship, not, as the Quebec Court of Appeal stated, to the point of impossibility.

The duty to accommodate does not require an employer to “completely alter the essence of the contract of employment, that is, the employee’s duty to perform work in exchange for remuneration,” said the court, as with a chronically absent employee who can’t resume her work in the “foreseeable future.”

“The test for undue hardship is not total unfitness for work in the foreseeable future,” said the court. “If the characteristics of an illness are such that the proper operation of the business is hampered excessively or if an employee with such an illness remains unable to work for the reasonably foreseeable future, even though the employer has tried to accommodate him or her, the employer will have satisfied the test.”

The threshold for bad faith damages — Mulvihill v. Ottawa (City)

Before the Supreme Court’s decision in


, the Ontario Court of Appeal clarified the circumstances in which bad-faith damages should be awarded. The court held it is not bad faith if an employer legitimately believes it has cause to dismiss an employee. In such circumstances, even if cause is not proven, bad-faith, or


, damages will not necessarily be awarded.



requires is an examination of the manner of dismissal, taking into consideration the full context of the employment relationship,” said the court.

The damages formerly known as Wallace — Honda Canada Inc. v. Keays

In the most anticipated decision of the year, the Supreme Court of Canada completely revamped the manner in which bad-faith damages are calculated. The court replaced the notice extension with a compensatory approach that appears to require the employee to prove not only that the employer acted in bad faith, but that she suffered actual damages as a result.

In addition, the court overruled the lower courts’ finding that both bad faith and punitive damages were appropriate. In so doing, the court determined “punitive damages are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own.”

The duty to mitigate — Evans v. Teamsters Local Union No. 31



, the Supreme Court considered the duty to accommodate in the context of both wrongful dismissal and constructive dismissal situations. While some have suggested this was an example of a case where “bad facts make bad law,” the fact is the court explicitly ruled the duty to mitigate often requires the employee accept continued or renewed employment with the dismissing employer, if available.

“In some circumstances it will be necessary for a dismissed employee to mitigate his or her damages by returning to work for the same employer,” said the court. “Assuming there are no barriers to re-employment, requiring an employee to mitigate by taking temporary work with the dismissing employer is consistent with the notion that damages are meant to compensate for lack of notice and not to penalize the employer for the dismissal itself.”

However, this duty is not without limits — the court acknowledged the particular circumstances must be considered and “the critical element is that an employee ‘not (be) obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation.’” The courts must consider whether a reasonable person would have accepted the offer of employment.

Employers: Pick your battles

Employers should reconsider some preconceived notions. Many HR professionals and business executives have become so jaded they won’t take on any adversarial or litigious matter. The fear of


damages, punitive damages and other costs has them scared to take a stand, even when they have good reason. Instead, employers routinely offer packages even when they believe there is just cause to dismiss and continue to accommodate employees who are thought to be taking advantage of the company.

Litigation can be costly, risky and time-consuming but employers should think twice before giving in. Instead of packaging someone out, a company should consider whether just cause for dismissal does exist and not hesitate to question vague doctors’ notes that say an employee will be “unable to work for eight weeks due to illness.” Not every fight should be fought, but they shouldn’t be avoided either. If employers pick their battles they might be pleasantly surprised by the results.

Stuart Rudner is a partner who practices commercial litigation and employment law with Miller Thomson’s Toronto office. He can be reached at (416) 595-8672 or srudner@millerthomson.com.

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