Recent Ontario case sets new, high-water mark for such claims
Dismissing an employee for just cause carries profound legal and practical consequences. Legally, a successful "for cause" dismissal strips an employee of their right to reasonable notice at common law and, in most Canadian jurisdictions, statutory termination pay.
Practically, the professional damage is often more severe; terminated employees may struggle to secure new roles because they cannot provide a positive reference or explain their departure.
Recognizing these impacts, a court will subject a for cause dismissal to intense scrutiny.
Review, evaluation of just cause dismissal
A court will not reflexively accept an employer’s justification for termination. Instead, it conducts a rigorous review of the employer’s position, weighing the alleged misconduct against the employee’s entire work history.
The court evaluates whether the employer can substantiate the underlying facts and whether the proportionality of the punishment (just cause is often called the "capital punishment of employment law") is truly warranted by the conduct.
Typically, when a court finds that a dismissal for cause was unsubstantiated, the remedy is limited to an award of reasonable notice. However, if the employer’s decision to allege cause was not only unfounded but also made in bad faith, the court may award additional damages for the breach of the duty of good faith.
Ontario case: Damage to career trajectory
Occasionally, the ramifications of a for cause dismissal extend far beyond lost wages during a notice period, permanently damaging an individual’s career trajectory in their industry. Employees in the financial sector are particularly vulnerable to this circumstance due to employer reporting requirements on dismissal.
When traditional damages are insufficient to address this career-long loss, the courts may intervene more decisively. In Silva v. Royal Bank of Canada, the Ontario Superior Court of Justice issued a landmark award, granting substantial damages for the employee's lost earning capacity due to the employer’s decision to dismiss for cause.
The plaintiff in Silva was a 47-year-old financial planner employed at a bank, with 12 years of service. In 2018, her employer dismissed her for cause, alleging she had forwarded confidential client information to her personal account by emailing two client files to herself.
As the employee was licensed to sell mutual funds by the Mutual Fund Dealers Association (MFDA), the employer was obligated to report any contravention of law or regulatory requirements, such as theft, fraud, or breaches of client confidentiality on her part. This obligation included filing a mandatory Notice of Termination (NOT) with the Ontario Securities Commission (OSC) upon dismissal.
As the court noted, the NOT serves as a critical regulatory tool, alerting future employers to the circumstances of an individual's departure so they can conduct appropriate due diligence.
The employer’s NOT alleged that the employee had forwarded confidential client material to a personal account and had processed unauthorized transactions before obtaining proper signatures.
Flawed investigation by employer
However, the employer’s own submission to the MFDA told a different story. It admitted there was no evidence of actual misconduct regarding client information, no client complaints had been received, no other regulatory filings had been triggered, and, crucially, no financial loss had occurred.
Following its investigation, the MFDA characterized the breaches as "minor in nature" and took no action other than issuing a cautionary letter.
The court reviewed the MFDA’s findings and the entirety of the employee's conduct. It concluded that the employer’s internal investigation was fundamentally flawed and that there was no valid cause for dismissal. The court awarded the employee a 16-month notice period.
Going further, the court addressed the tangible financial damage the NOT had caused. It found that the employee had no realistic prospect of finding employment in the financial sector while the damaging allegations in the NOT remained on her regulatory record.
Forced out of her industry, she accepted a role at an insurance company where she earned $69,000 annually. This was a dramatic reduction from her previous $235,000 salary.
Substantial damages
Given that she had expressed a clear desire to return to the financial sector for the balance of her career, the court awarded her $1,919,272 to compensate for her lost future income and benefits based on what she would have earned in this period had the employer not terminated her employment.
The court recognized that it would take the employee time to rebuild a book of business and that she would earn less during this period, which this figure was intended to replace.
Additionally, the court awarded $150,000 in aggravated damages and $50,000 in punitive damages, penalizing the employer for its egregious conduct leading up to and following the dismissal.
Takeaways for employers, HR
While damages for lost opportunity are not entirely new, Silva sets a new high-water mark for such claims. Whether this decision will trigger a surge in similar claims remains uncertain.
The distinguishing factor in Silva was the employee’s ability to point to a specific, identifiable action, the filing of the NOT, that directly and tangibly hindered her career and prevented re-employment in her field, combined with the nature of the industry: finance and banking. In most dismissals, such a clear, documented causal link between an employer's act and a career collapse is absent.
However, in the financial sector the hiring process includes a more substantive background check process than most industries: an employer opting to dismiss for cause is almost certainly going to prevent an employee from finding another role in their field.
Silva is a compelling reminder of the high stakes involved in termination decisions. It reinforces the necessity for employers to conduct comprehensive, impartial, and evidence-based investigations before alleging cause. A robust, procedurally fair process is the employer's best defense.
If litigation ensues, a well-documented and defensible investigation provides the best possible shield against the significant financial liabilities illustrated by the Silva decision.
