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Can you package someone out instead of investigating misconduct?

Recent decision suggests employers may not be entitled to terminate without cause in order to 'side-step' the duty to investigate

By Stuart Rudner

A recent decision of the Superior Court of Ontario may signal a fundamental change in employment law.

It has always been the case that an employer is entitled to dismiss an employee at any time, for almost any reason (other than protected grounds under human rights legislation), so long as it provided appropriate notice or pay in lieu thereof. The other exception, of course, would be unionized employees covered by a collective agreement.

When an employee is alleged to have engaged in misconduct, employers are expected to investigate before taking disciplinary action. In recent years, the importance of the investigation has taken on greater importance. Courts will insist that any investigation be fair and reasonably thorough, depending on the circumstances. In some recent wrongful dismissal cases, employers have been ordered to pay additional damages due to their failure to investigate fairly.

Sometimes, employers will decide that, rather than conduct a full investigation and then assess whether there is just cause for dismissal or some lesser form of discipline, it will be easier to simply dismiss the employee on a without cause basis by giving her a severance package. Given that employers have the fundamental right to terminate the employment contract, this can be a more prudent course of action.

However, the right to do so has recently been called into question.

In Brownson v. Honda Canada Mfg., the plaintiff was alleged to have been one of 23 employees engaged in misconduct. The company decided to dismiss him with a package rather than engage in a lengthy investigation and discipline process. The plaintiff sued for wrongful dismissal, and there was a motion for summary judgment. In the context of that motion, the Court held as follows:

[12] By offering compensation in lieu of notice the Defendant submits it is merely terminating an employee in accordance with the law which permits an employer to terminate employment on adequate notice and in compliance with statue.

[13] If this termination had come out of the blue I might be persuaded. However, in the present case, the juxtaposition of the termination with a contemporaneous investigation of misconduct colours the ordinary procedures, such as escorting the terminated individual out of the workplace, with an innuendo that could give rise to the mental suffering alleged by the Plaintiff particular to the circumstances of the termination rather than the fact of being terminated.

[14] In the circumstances of the present case it is a triable issue whether the employer adopted the procedure intentionally to side step the criteria for fair treatment of an employee against whom cause is alleged.

As a result, the matter was not decided and, unless it is settled, it will proceed to trial. Paragraphs 13 and 14 of the decision raise the question of whether there will be a change in the law precluding an employer from dismissing an employee without cause when there are "live" allegations of misconduct.

Of course, it is entirely possible the court which hears the trial of this matter will find that there was nothing wrong with Honda`s decision to package the plaintiff out. We will have to wait and see whether this case gets to trial and, if so, how it is decided.

Stuart Rudner is an HR lawyer and a founding partner of Rudner MacDonald LLP, a Toronto-based firm specializing in Canadian employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at srudner@rudnermacdonald.com. You can also follow him on Twitter @CanadianHRLaw and join his Canadian HR Law Group on LinkedIn.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
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