Misconduct discovered after employee was dismissed without cause and given pay in lieu of notice
Question: If an employee is dismissed without cause and her salary is continued during the notice period, can the employer stop payment if misconduct is later discovered that would have justified dismissal without notice?
Answer: Where an employee was dismissed without cause, it is possible for an employer to rely on after-discovered misconduct amounting to just cause to cease severance payments. However, the bar that the employer must meet in order to do so is high.
In Van den Boogaard v. Vancouver Pile Driving Ltd., the British Columbia Court of Appeal found that the employer was not prevented from asserting just cause when it became aware of misconduct after a without cause dismissal. The employer had terminated the employee without cause and paid him four weeks’ salary in lieu of notice. At the time of termination, the employee returned the company cellphone, which contained text messages indicating that he had been dealing illegal drugs to co-workers during work hours.
In finding that the employee’s activities constituted just cause for dismissal, the court held that an employer may invoke just cause even though it became aware of the misconduct after the employee had been dismissed, so long as the employer could prove that: it was not aware of the misconduct at the time of the employee’s termination; and it did not tolerate or condone the misconduct prior to the termination.
In Dennis v. Ontario Lottery and Gaming Corp., the employee had been terminated without cause. She was offered a severance package with the option of receiving the payment as a lump sum or a continuance of salary. After she accepted the severance package (having elected salary continuance), and the parties entered into a settlement agreement, the employer discovered that funds were missing from a program that the employee had administered. She argued that she took the funds with the full intention of paying it back. The employee was charged criminally with theft but the Crown dropped the charges.
The employer then conducted an internal investigation and concluded that the employee did commit theft. The employer asserted that it had just cause to terminate the employee, and she would not be paid the severance package.
The Ontario Superior Court of Justice found that the employer’s investigation was flawed, and the employee’s conduct relating to the missing funds did not involve an essential condition of her employment contract. As a result, the court held that termination for cause was disproportionate, and as such she was entitled to be paid the severance package.
The above cases show that although employers can rely on misconduct discovered after termination to cease paying severance, it must meet the high bar of proving that the new evidence would amount to just cause. The test for what constitutes just cause is a very difficult one to meet. There must be clear and cogent evidence that the employee engaged in conduct that resulted in a breakdown of the employment relationship. Courts are often suspicious of assertions of cause made after the fact, as there is an increased perception that just cause may be alleged in bad faith as a means to avoid paying severance to which an employee is entitled.
For more information see:
• Janice Rubin & Christine Thomlinson, Human Resources Guide to Workplace Investigations (Ontario: Canada Law Books, 2006).
• Van den Boogaard v. Vancouver Pile Driving Ltd., 2014 CarswellBC 1167 (B.C. C.A.).
• Dennis v. Ontario Lottery and Gaming Corp., 2014 CarswellOnt 9687 (Ont. S.C.J.).
