Employers should not undermine their position by choosing not to allege cause when it exists
Regular readers know that there are two types of dismissal in Canada: with cause and without. The vast majority of dismissals are without, in which case the employee is entitled to notice and/or compensation (often referred to as severance). In those cases where just cause for dismissal exists, the employee is not entitled to anything (other than perhaps some statutory amounts).
Unfortunately, many employers compromise their own interests by trying to be too strategic or, in some cases, trying to be nice, and not alleging cause when they dismiss the individual even if they believe it exists. If the matter does not resolve and a claim for wrongful dismissal is brought against them, they attempt to defend on the basis that they had just cause. In most cases, this will fail.
This issue arose recently in the New Brunswick Court of Appeal in Abrams v. RTO Asset Management. As often happens, the employer believed that it had just cause to summarily dismiss the employee as a result of an inappropriate relationship with a subordinate and his dishonesty when confronted. But the employer chose not to do so, opting instead to dismiss him on a without cause basis.
The termination letter stated:
“Further to our discussion today, this letter confirms the decision made by Goeasy Ltd. (the “Company”) to terminate your employment, effective immediately. As discussed, the Company takes the position that there is just cause for the termination of your employment. This position is based upon your conduct related to the issues discussed during our meeting on May 24, 2017, which conduct constitutes a breach of trust and has resulted in the Company losing confidence in your ability to perform the responsibilities of your role.
Nonetheless, without prejudice to our ability to take the position that your employment has been terminated for just cause, the Company has decided to terminate your employment, effective immediately, on a without cause basis.”
Abrams brought a claim for wrongful dismissal and on an initial motion, the motion judge found that RTO had just cause to dismiss him due to his misconduct and dishonesty. Abrams appealed to the New Brunswick Court of Appeal, which made the following findings:
- At the termination meeting, Abrams was advised that the dismissal was without cause.
- The termination letter was “free of ambiguity” that this was a without cause dismissal.
- Abrams received pay in lieu of notice of dismissal from RTO in the amount of four weeks, which was the amount required by employment standards legislation for a dismissal without cause.
- RTO issued a Record of Employment which indicated that the dismissal was without cause.
The Court of Appeal found that the reservation of the right to assert just cause in the termination letter was simply a tactic to pressure Abrams into accepting the proposed severance package.
This case is an excellent reminder that employers should not undermine their position by choosing not to allege cause when it exists. It is hard enough to establish just cause, as I discuss in my text, You’re Fired! Just Cause for Dismissal in Canada; employers should not make it even harder.
The question sometimes arises as to whether the employer can allege that just cause for dismissal existed when it did not dismiss on a with cause basis. Some courts have been sympathetic to employers who choose not to allege just cause at the time of dismissal in order to help the employee.
The Ontario Court of Appeal, in Giancola v. Jo-Del Investments Ltd., addressed this issue and found that employers should not automatically be precluded from alleging just cause in court simply because they failed to do so at the time of dismissal despite knowledge of the misconduct in question. The court recognized that there would be little social utility in penalizing employers for, effectively, choosing to act in the best interests of an employee that they have chosen to dismiss.
That said, many courts will not allow employers to reverse their position when a matter becomes litigious. It is absolutely risky to do things such as tell an employee that they are being dismissed without cause and confirm that in the termination letter, pay “severance” based on statute, common law or contract, or issue a Record of Employment that indicates the dismissal was without cause, if you want to maintain the ability to assert just cause.
When we work with employers, we usually recommend that if just cause exists, the dismissal letter should clearly state that the dismissal is for cause. The letter can go on to confirm that as a result, the employee has no entitlement to notice or compensation (aside from those narrow statutory exceptions).
However, the employer can then make a gratuitous offer to the employee in an effort to resolve all outstanding issues. Obviously, that offer should include a Full and Final Release in favour of the company so there will be no risk of future claims if it is accepted.
This is a far more strategic approach than proceeding on the basis that the dismissal is without cause and then hoping to be able to allege cause later if a settlement cannot be reached.