'Employers have obligations they have to meet before they can claim just cause'
An employer could not claim poor performance and insubordination as just cause to fire a worker because the employer didn’t properly address the behaviour before resorting to dismissal, the Alberta Court of King’s Bench has ruled.
“Just cause has a high bar, and having an employee with extremely poor performance engaging in repeated insubordination does not create just cause if it's largely ignored by the employer for several months,” says Dylan Snowdon, an employment lawyer at Carbert Waite in Calgary. “For employee behavior to be just cause requires the employer to also meet its obligation to engage in performance management.”
The worker joined Sproule Management GP, an energy consulting and advisory firm based in Calgary, as its controller in 2003. In 2010, he became the chief financial officer (CFO).
On Feb. 10, 2016, Sproule terminated the worker’s employment for just cause, alleging poor performance and insubordinate behaviour.
The worker sued for wrongful dismissal, seeking damages for 24 months’ pay and benefits – he was unable to find work for two years, although he applied for 25 jobs. He then applied for summary judgment on the basis that there were no genuine issues requiring a trial and claimed an additional three months’ salary for Sproule’s bad-faith conduct in the manner of dismissal.
Employer alleged just cause
Sproule contended that it had just cause for dismissal and, alternatively, a 12-month notice period would be more appropriate, given the worker’s 12 years of service.
Sproule’s just-cause argument alleged the following:
- In September 2014, a Sproule employee complained that another employee who directly reported to the worker harassed and bullied her. An investigation confirmed the complaint and found that the worker didn’t address the bullying. The worker refused to accept the investigation’s findings and the recommendation to fire the perpetrator. At a meeting with other management, he called others “stupid” and said that they didn’t understand how women interacted.
- In a November 2014 meeting with Sproule’s board and its audit committee, the worker was dismissive of both. Over the next few months, the chair of the board felt that the worker showed an inability to perform CFO duties, but Sproule didn’t give the worker any warnings.
- In November 2015, a corporate reorganization changed the worker’s title to controller, reporting to a senior vice-president. The worker was told that the board was concerned that he wasn’t performing the role of CFO, but the worker refused to accept his new supervisor. He was told that he had to follow the new structure and he should “rethink his attitude going forward.” However, around the same time, the worker was given a discretionary executive bonus that was based on Sproule’s financial position.
- In late 2015, the worker began a $50,000 project without authorization. He presented the project recommendations at a December board meeting and the board didn’t approve it. They didn’t warn him about his conduct in relation to the project.
- The worker also started becoming more combative, disrespectful, and critical in board meetings. Again, Sproule did not warn him about this behaviour.
Despite these alleged incidents, Sproule didn’t raise any concerns with the worker or give him a warning at any time. A performance review in 2015 described his performance as above average and suggested that he needed to be more engaged in meetings and be more of a CFO than a “lead accountant.”
Sproule was setting itself up for trouble by not addressing any concerns with the worker if it truly had any, says Snowdon.
“In the beginning, they should be engaged in appropriate performance management so that if they got to the end of employment and he still hadn't been meeting the requirements set out in their warnings, then they could have just cause,” he says. “Or, alternatively, if the employee is performing badly, they could have the conversation, ‘We're not quite ready to terminate because we haven't done what we're supposed to do, so let's start doing it now.’”
According to Sproule, the worker was insubordinate in a Jan. 19, 2016, board meeting. The president told him that the chair might be succeeding him as president and it was important for him to change his attitude and to start acting more professionally.
Three weeks later, on Feb. 10, Sproule terminated the worker for cause.
Assessment of just-cause argument
The court noted that in order to determine if there was a need for a trial to assess Sproule’s just-cause argument, it would assume a “best-case scenario” for Sproule and that its allegations were correct.
However, the court found that Sproule didn’t raise any concerns or give the worker any warnings. There were no documents indicating coaching or warnings that his job was in jeopardy if he didn’t change – in fact, Sproule recalibrated his role to match his performance when it felt it was substandard for a CFO, the court said.
In addition, the court noted that the worker was given a significant discretionary bonus in the fall of 2015, which was “further condonation and approval of [the worker’s] performance.”
The court also found that the worker’s alleged behaviour at the January 2016 board meeting alone would be serious enough to warrant disciplinary action, but again Sproule didn’t fully address it. He was advised to start acting differently and change his behaviour, but there was no mention of any potential consequences. In fact, it was implied that his employment wasn’t currently at risk and might only be so if the board chair became president and the worker continued the same way, the court said.
Finally, the court noted that even if the worker was warned at the meeting, there was no evidence that he was given a chance to improve in the three weeks between then and his termination.
“This was an[alleged] poor performer engaging in insubordination, but Sproule still didn't fulfill its obligations to the employee that would have allowed it to pursue just cause,” says Snowdon. “A proportionate response to the poor performance and insubordination would have been a full performance management process setting out a clear warning, clarifying performance expectations, warning that the worker’s position was at risk if he didn't meet the standard, and providing him with an opportunity to change the behavior that was being corrected.”
Employer unable to prove just cause
Given the positive messages about the worker’s performance and the lack of warnings about any poor behaviour, even if Sproule’s allegations and evidence of misconduct were true, the company could not support its just-cause defence and there was no genuine issue requiring a trial, said the court in granting the worker’s summary judgment application.
The court also found that, with no genuine issues requiring a trial, it could make factual findings about the factors for calculating the notice period in the summary judgment.
The court considered that the worker was 56 years old at termination, had 12 years with Sproule, was part of Sproule’s executive team, and was unable to find employment during his claimed two-year notice period. It determined that the worker was entitled to 18 months’ notice.
“Essentially the court just said there are many factors and other similar circumstances yielded notice periods in the 16-to-19-month range,” says Snowdon. “There's not a specific calculation - it's the court’s discretion to make a determination based on all of the individual factors applying in any individual case and there’s no guarantee of what notice period a court is going to come back with.”
The court also found that Sproule did not provide any evidence that the worker could have found comparatively similar employment or question the 25 job applications, said the court.
Although the worker claimed additional damages for bad-faith dismissal in the summary judgment application, he didn’t provide any evidence of mental distress above what is normally expected from a dismissal. The court dismissed this part of the worker’s claim.
Sproule was ordered to pay the worker 18 months’ salary and benefits, totalling $379,312.68 plus interest.
“It's a pretty strong message to employers that the bar for just cause is very high and employers themselves have obligations they have to meet before they can claim just cause,” says Snowdon.
