Many summary dismissals are undertaken in the heat of the moment, without a proper investigation or thorough consideration of the strengths and weaknesses of the case for summary dismissal and all of the options available to the employer. The unfortunate result is mistakes are often made that leave the employer exposed to potential liability.
The importance of investigation
While the due process of a criminal investigation is not required in the context of a dismissal for cause, an employer must show it investigated allegations of misconduct reasonably and properly before it proceeded with the dismissal. Sometimes an investigation will reveal there was a misunderstanding or a wrong conclusion in thinking an employee engaged in misconduct.
A client called me one morning, extremely upset by the apparent misconduct of a senior executive. The president of the company was livid over what he perceived to be a betrayal and was ready to march the executive out the door on the spot. But I strongly recommended an investigation to confirm the employer’s interpretation. Several hours later, the president called back to advise videotape evidence confirmed the executive’s explanation. What appeared to be dishonest behaviour was entirely innocuous. By conducting a brief investigation, the company not only saved a substantial amount of money in legal fees and potential damages to the executive, it also avoided firing a core member of the executive team over a misunderstanding.
There is little to lose by conducting an investigation before making the decision to dismiss an employee and following the legal test for showing just cause. An employer must not only prove the employee engaged in misconduct or failed to meet reasonable performance levels, but also show this misconduct or poor performance irreparably damaged the employment relationship.
Judges will consider the employee’s reaction when confronted with allegations of misconduct. If an employee responds by admitting wrongdoing, apologizing and offering reasonable assurances it will not happen again, a judge is more likely to consider the employment relationship salvageable and consider a lesser form of discipline. Conversely, if the employee displays a lack of honesty and trustworthiness, courts are more likely to find the employment relationship has been irreparably harmed.
A contextual approach
The courts have made it clear employers should use a “contextual approach,” which considers not only the misconduct in question but the entirety of the employment relationship. This includes the length of service, contributions the employee has made, prior disciplinary incidents and the nature of the position and degree of trust required.
There are no black-and-white rules. The contextual approach means every case must be considered under its own particular circumstances, so misconduct that constitutes just cause in one case is not necessarily just cause in another. An individual who has been with an organization for a lengthy period of time, with an unblemished record, is more likely to be given a second chance by the courts than a recent hire who has already been in trouble.
Approaches to dismissal
Once the investigation has determined just cause, many employers fear alleging just cause is too risky or have qualms about impacting the employee’s ability to collect employment insurance or find new employment. In some cases, there may be just cause but the employer hasn’t yet been able to find sufficient evidence of the misconduct.
Many organizations make mistakes in the manner of dismissal that hurt their legal position. In one case, although the organization felt it had just cause, the dismissal letter failed to reference just cause and provided pay in lieu of notice in accordance with the Employment Standards Act. Needless to say, such pay is not required if just cause exists.
If an employer thinks it has just cause to dismiss an employee, and wants to be able to take that position in the event of subsequent litigation, that should be made clear in the dismissal letter. The employer can offer what it would characterize as a gratuitous payment, as long as the dismissal letter clearly states any payment is being offered on a gratuitous basis without prejudice to that position.
Offering a gratuitous payment can reduce potential liability. After all, even if the individual successfully challenges the allegation of just cause and seeks damages, she may not be entitled to anything more than the amount already paid.
In situations where the employer is still seeking evidence for just cause, it is often advisable to offer the gratuitous payment over a period of time, typically by way of salary continuance. If insufficient evidence is found, the employer can provide the salary and benefit continuance that would be required in the event of a dismissal without cause, thereby avoiding any liability. Alternatively, if evidence is located, the employer could stop making payments and take the position it has just cause for dismissal.
Conditional severance offers
It is a common practice to make severance offers that are conditional upon the signing of a release. In most cases, this is a strategic course of action that will minimize the risk of a future claim being made. However, it may not be prudent to enter into such an agreement if employer is still hoping to find evidence of just cause. Once the employer has an agreement to pay a certain amount in exchange for a full and final release, it is unlikely it would be able to get out of the agreement by adopting the position it had just cause for dismissal.
Employers should not abandon just cause as a “lost cause.” There is no shortage of cases in which judges have found just cause for dismissal. The key is to be able to prove not only that the employee engaged in some form of misconduct, but also the misconduct irreparably harmed the employment relationship. Documentation at the time of dismissal can be critical and employers should think long and hard about the company’s position and the manner in which that is set out in the dismissal letter.
Stuart Rudner is a partner in Miller Thomson’s labour and employment group in Toronto. He can be reached at (416) 595-8672 or email@example.com.