Court confirms law of condonation

But past offences can be used to augment continuing misconduct

The Ontario Court of Appeal recently had an opportunity to confirm the law of condonation in Chambers v. Omni Insurance Brokers et al. 2002 CarswellOnt 1750 (May 28, 2002) (Ont. C.A.).

When an employer “condones” an employee’s misconduct, an employer may be precluded from using that misconduct subsequently to justify cause for dismissal. This principle was succinctly stated as early as 1889 by the Ontario Court of Appeal:

“When an employer becomes aware of misconduct on the part of his servant, sufficient to justify dismissal, he may adopt either of two courses. He may dismiss, or he may overlook the fault. But he cannot retain the servant in his employment, and afterwards at any distance of time turn him away. ... If he retains the servant in his employment for any considerable time after discovering his fault, that is condonation, and he cannot afterwards dismiss for that fault without anything new. ... Further, condonation is subject to an implied condition of future conduct, and whenever any new misconduct occurs, the old offences may be invoked and may be put in the scale against the offender as cause for dismissal.”

The recent Chambers case is largely fact driven. James Chamber sold his insurance practice to Omni Insurance effective Sept. 30, 1996. As part of that transaction, he was hired as an employee pursuant to a written two-year employment contract.

Omni had concerns regarding Chambers’ performance from almost the very beginning. In one instance, Chambers had failed to ensure alternate insurance coverage for a client when one insurance company cancelled the contract. Omni wrote a strongly-worded warning letter, indicating future lapses might lead to termination with cause. In another instance, Chambers deliberately failed to attend a training session because he did not feel it was relevant to the products he sold. Again, a warning memo was issued emphasizing the risk of immediate termination.

After the expiry of the two-year employment contract and despite the problems which had arisen, Chambers’ employment was continued by Omni, although on less lucrative terms and conditions than before.

In November 1998 Omni learned of a serious problem in which an application for insurance was not submitted on behalf of a client. The client was left without coverage. Omni had also learned of two instances of incompetency that led to lapses in coverage immediately prior to Omni closing the sale transaction. In December 1998 Omni decided to terminate Chambers’ employment on the basis of repeated and serious instances of incompetency. After the termination, Omni learned of two further instances of problems that led to gaps in coverage. Chambers sued for damages for wrongful dismissal.

The trial judge, however, gave very little weight to the performance issues prior to September 1998, despite the strongly-worded memos:

“There were some complaints made about the quality of Mr. Chambers’ work in 1997 and early 1998, but I place very little significance on those complaints, or on those problems, considering that Mr. Chambers was offered a continuation of his position by the letter of September 1998. In this respect, I have regard to the legal principle of condonation. I would say that the incidents, or problems, before the fall of 1998 are not to be overlooked entirely, but that in the context of everything that happened, they have very little carry-over impact to what did take place in the fall of 1998.”

The Divisional Court found the trial judge had erred in law by giving insufficient weight to the concerns that had arisen prior to September 1998 and overturned the trial decision.

On appeal to the Ontario Court of Appeal, the original trial decision was restored. There is no doubt the trial judge and the appeal court sympathized with the ex-employee. Chambers testified that while he was an employee, he had been under stress, perhaps to the point of clinical depression, as a result of the death of his father, his divorce, the loss of income from his biggest client and his resulting personal bankruptcy. He had sold his insurance business to Omni largely to pay off debt.

Despite the number of instances of misconduct and the warning memos, the appeal court found that Chambers had been unjustly dismissed. The appeal court emphasized that deference should be granted to the trial judge’s findings on condonation, partly because the trial judge had the advantage of hearing all of the evidence first hand.

In the course of decision, the appeal court specifically approved of the concept that condonation is “subject to an implied condition of future good conduct and whenever any new misconduct occurs the ‘old offences’ may be invoked and may be put in the scale against the employee as cause for dismissal.” All three levels of court agreed on the principle that an employer was entitled to rely on previous misconduct when new misconduct occurred in order to justify summary dismissal. The various courts differed on the application of that principle to the facts.

The lengthy history of this case demonstrates that employers will have difficulties in relying on even well-documented cases of misconduct that arguably have been condoned due to the passage of time or renewal of the employment relationship. However, the law is clear that the condonation of prior misconduct does not mean that an employer cannot later invoke the misconduct to justify a dismissal for cause. Where the employee does not meet the implied condition of future good conduct the formerly condoned misconduct can be used by the employer to justify a dismissal for cause.

Neena Gupta is a partner at Goodman and Carr LLP and a member of the firm’s Human Resource Management Group. Neena can be reached at [email protected] or (416) 595-2480.

Latest stories