Just ‘cause an employer fails to prove just cause doesn’t repudiate contract

Recent Ontario decision involving CIBC employees provides insights

Just ‘cause an employer fails to prove just cause doesn’t repudiate contract
Nadia Zaman

Exclusive to Canadian HR Reporter from Rudner Law.

Employers are often left wondering whether the termination clause in a contract will eventually be enforceable or not. This is because employment law is ever-evolving, and termination clauses are the hottest dish being served on the litigation table. Just like you never really know whether a hot dish is going to burn your tongue, you never truly know whether a termination clause will be unenforceable.

In a recent Ontario decision, Pirani v CIBC, the court addressed the following issue: if an employer failed to prove their allegation of just cause at trial, does that mean they repudiated the employee’s employment agreement? And in turn, would the employer be barred from relying on the contract’s termination without cause provision?

So what happened in this case?

Facts of CIBC case involving claim of wrongful dismissal

The plaintiff was a former employee of CIBC. In July 2013, she was dismissed for cause after serving for a little over eight and a half years. At the time of dismissal, she held the role of Senior Financial Services Representative (previously she held the role of Senior Financial Advisor) was 58 years old, earned an annual salary of $55,000, and was eligible for discretionary bonuses. By the time of trial, she was 68 years old.

Post-dismissal, the plaintiff sued CIBC for wrongful dismissal damages, seeking damages for reasonable notice equivalent to 48 months, special damages for overtime, Severance Pay in accordance with the Employment Standards Act, 2000, damages for mental distress and moral damages in the amount of $300,000.00 and aggravated, and exemplary and/or punitive damages in the amount of $200,000.00. The plaintiff also sought a declaration requiring the defendant to correct the Notice of Termination filed on the National Research database of the Investment Industry Regulatory Organization of Canada (IIROC).

CIBC, in its defense, alleged that there was just cause for dismissal and asked that the action be dismissed. The basis for CIBC’s allegation of just cause was as follows:

  • the plaintiff allegedly engaged in repeated breaches of the bank’s Code of Conduct, policies, and procedures;
  • the plaintiff allegedly received two warnings in writing about violating the bank’s policies and, following a final warning, was dismissed for cause; and
  • the breaches were allegedly serious and led to an irreparable breakdown of the employment relationship.

Analysis on just cause for dismissal

The court found that CIBC had just cause for dismissal:

“[171] Ms. Pirani’s misconduct was serious, involved a blatant disregard for policies and procedures, exposed CIBC to monetary and reputational loss, and led to an irreparable breakdown of the employment relationship.

“[237] Trust, integrity, and honest[y] are inherently required for Ms. Pirani to carry out her employment duties. I find that she was warned verbally and twice in writing, and was well aware of the consequences (the Code and her employment agreement specifically set out the consequence) of failing to carry out her job duties in accordance with the bank’s procedures. Having failed to do so, and continuing on to commit further breaches, I find that dismissal was a proportional response.”

The court further found that the plaintiff did not establish, on a balance of probabilities, that CIBC repudiated the contract. The judge stated:

“[176] Ms. Pirani argued at trial that the employment agreement was repudiated when she was dismissed for cause and, in the result, the CIBC cannot rely on the termination provision. Ms. Pirani does not plead repudiation in her statement of claim. Ms. Pirani bears the onus of establishing that the employment agreement was repudiated:

Humphrey v. Mene, 2021 ONSC 2539, at para. 116. An employer’s failure to establish just cause does not disentitle an employer from enforcing an otherwise valid without cause termination provision: Humphrey, at para. 135.” [Emphasis added]

Key takeaways for HR

This decision is good news for employers, in that 1) the case confirms that employees continue to bear the onus of establishing the repudiation of contract, and 2) even if an employer alleges just cause and fails to establish it at trial, the employer is not necessarily disentitled from enforcing an otherwise valid termination without cause provision.

This does not mean that employers can simply allege just cause for dismissal without a reasonable basis; there is case law stating that in such cases, the employer could be seen as repudiating the contract and prevented from relying on the termination clause.

In addition to other liability, such as bad faith damages, the company could end up paying far more in severance than they otherwise would have to if they allege just cause in circumstances where there is no legitimate basis to do so.

Accordingly, employers would be wise to seek legal advice prior to proceeding with dismissals and ensuring there is a legitimate basis to allege cause.

Nadia Zaman is a senior associate at Rudner Law in Toronto. She can be reached at (416) 864-8500 or [email protected].

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