'It's easy to… make assumptions, but that's not going to fly in the court': lawyer
“If an employer is going to allege just cause, it has to have the evidence to prove it, and actually do some sort of investigation to uncover that evidence - you need to make sure that your reasons for cause can withstand scrutiny by the court, or else what's the point?”
So says employment lawyer Trevor Thomas of Ascent Employment Law in Vancouver, after a British Columbia court awarded a worker more than $800,000 in wrongful dismissal damages, including aggravated damages for the employer that included unproven after-acquired cause allegations.
The worker, 45, joined Macquarie Energy Canada, an equipment leasing company that’s part of an Australian-based global financial services organization, in 2005 as a salesperson. He eventually became a national account manager for equipment leases in Western Canada, based in Vancouver.
The worker’s employment agreement set out a base salary, benefits, and commissions under the commission plan. The commission plan provided for “front-end” commission payments based on new equipment leases and “back-end” payments at the end of leases coming from lease extensions and selling equipment. Back-end payments weren’t guaranteed, as they were only payable if Macquarie recovered the residual value of the equipment.
The employment agreement also included a termination clause providing four weeks’ notice for his first year of employment and three weeks for each additional year, up to a maximum of 52 weeks, for a without-cause dismissal. In lieu of notice, it could be paid out biweekly. The clause expressly restricted pay in lieu of notice to base pay and commissions earned up to the date of dismissal.
Performance management
In April 2021, the worker breached Mcquarie’s use-of-technology policy when he forwarded an internal document with confidential client data to his spouse’s computer. He received a formal conduct notice warning. The company also told him he needed to improve his relationships with internal staff and responsiveness to customer requirements.
In the fall of 2022, the company learned that the worker had launched a lawsuit against an individual who had stayed at his rental suite and posted a negative review on AirB&B. The worker was banned from AirB&B following a threatening text to the individual, who posted online tweets about the text but didn’t identify the worker.
Macquarie learned of the lawsuit after an article about it appeared on a local business website. The company was concerned it could damage its reputation, as the individual in the lawsuit had started working for a Macquarie client, although the client’s account was dormant.
Macquarie interviewed the worker about the lawsuit and the worker repeated false information about the text that he had included in his civil claim. He also repeated the information in a phone call and email with upper management.
The worker eventually settled the lawsuit because – he later testified – he knew he couldn’t be dishonest about it in court.
Termination
In November, the manager learned that the worker hadn’t been responsive to requests from the Royal Bank of Canada (RBC), which was a significant source of referrals for Macquarie. He discussed terminating the worker with other upper management, who supported it.
On Nov. 29, the manager informed the worker that he was being terminated for his interactions with internal staff, RBC’s complaint about him, the use-of-technology warning, and the potential reputational damage from his lawsuit. Macquarie provided the worker with 52 weeks’ base salary in lieu of notice, plus payment for his accrued hours of vacation based on his base salary.
The worker sued for wrongful dismissal, claiming damages for 20 to 24 months’ pay in lieu of reasonable notice and accrued vacation pay, plus aggravated and punitive damages from Macquarie’s conduct in his dismissal.
Macquarie alleged that it had after-acquired cause for dismissal, based on Outlook notes from the worker’s computer. These notes stated that the worker had regularly consumed cannabis gummies during business hours, was dishonest during the investigation about his AirB&B lawsuit, and had disclosed confidential information to a colleague with a competitor.
Macquarie later said it had discovered that the worker had provided a client with quotes for equipment with prices below what had been approved, and added this to its after-acquired cause argument, claiming it had lost hundreds of thousands of dollars. It later dropped this allegation a month before the hearing.
Failed to prove just cause
The court found that Macquarie failed to prove just cause, and instead breached its duty of good faith and fair dealing in the way it handled the worker’s dismissal and subsequent legal proceedings. This led to prolonged emotional distress for the worker, who said he experienced suicidal thoughts due to the accusations by the company – supported by medical evidence from a nurse practitioner and mental health counselling.
While the worker was dishonest in his lawsuit, the dishonesty wasn’t related to a workplace matter and there was no evidence that any publicity mentioned Macquarie or connected the company to the worker, said the court, adding that the client for whom the subject of the lawsuit worked was dormant. The worker’s dishonesty in the investigation was worthy of discipline, but didn’t go to the core of the employment relationship, the court said.
As for the ingestion of cannabis gummies, the worker provided evidence from his nurse practitioner and receipts that they contained “CBD” to help with sleeping problems and other health issues, not the psychoactive element “THC,” so he was never impaired while working. In addition, Macquarie management acknowledged that they had never observed signs of impairment, and some of the Outlook notes referring to the gummies appeared to be part of a fictional script the worker had written.
Macquarie made assumptions based on the Outlook notes, which was a weak piece of evidence, according to Thomas.
“Another option would be to just go ahead with the without-cause termination, or they could have reached out to this employee after they let them go to interview him about the information in the notes,” he says. “Of course, the worker might say no, but it’s an option to start the process to determine if there's after-acquired cause - you're almost engaging in an investigation after the employee’s termination, which at least would give a bit more of a solid footing to determine if there is actually cause or not.”
Unsupported by evidence
The claim that the worker undercut approved pricing for a key client – an allegation dropped before the hearing - was found to be unsupported by evidence, as was that he disclosed confidential information to a competitor – which was based on the same notes as the cannabis gummies - said the court.
“Before the employer jumped to the conclusion that the worker was doing bad things, it needed to figure out if it was true,” says Thomas. “It's easy to look at something with a quick glance and make assumptions, but that's not going to fly in the court - you really need to dig down, find out what actually happened, and obtain some strong evidence if you are going to make a cause argument.”
As a result, the termination was without cause, but the court found that the termination clause in the worker’s employment agreement – and the commission pay plan - was unenforceable, as it limited the worker’s entitlement to base salary and front-end commissions. This was a breach of the BC Employment Standards Act (ESA), which requires payment of “regular wages” in lieu of notice, including total earnings such as benefits and commissions.
Often, employers draft clauses like this and they don't realize that they can’t limit pay in lieu of notice to base pay, adds Thomas.
“You have to include all forms of wages, unless it's some sort of bonus that’s discretionary or not related to work productivity,” he says.
Reasonable notice
The court determined that the worker was entitled to a 19-month notice period, with the worker’s income based on a five-year average, adjusting for a particularly high-earning year and the pandemic’s impact on business activity.
The court also found that the worker was entitled to $35,000 in aggravated damages for Macquarie’s unsupported after-acquired cause allegations, which likely damaged the worker’s job-search efforts and contributed to his mental health issues, the court said.
The court declined to award punitive damages, finding Macquarie’s conduct fell short of the high threshold for such a remedy.
Macquarie was ordered to pay the worker 19 months’ salary, commissions, and vacation pay, plus $35,000 in aggravated damages. After subtracting what Macquarie had already paid the worker and income the worker derived from his vacation rental property during the notice period, the total award was $830,995 before prejudgment interest.
“The key to drafting enforceable contracts and termination clauses is to make sure that you understand the ESA fundamentally,” says Thomas. “And having a weak cause argument has two risks - you're probably going to lose and get costs awarded against you, and there's going to be a public decision out there that says your company failed to establish cause.”
