Terminating employment for cause

An overview of legal parameters and best practice to avoid costly mistakes
By Hélène Bussières and Charif El-Khouri
|Canadian HR Reporter|Last Updated: 03/14/2019
Termination
Termination of employment for cause continues to be one of the most important sources of financial exposure for employers. Credit: sakkmesterke (Shutterstock)

Terminating employment for serious reason (or cause) is, without a doubt, one of the most important decisions HR and managers must make. If not done right, it can be a costly mistake.

The concept of cause

The Civil Code of Quebec (C.C.Q.) states that “one of the parties may, for a serious reason, unilaterally resiliate the contract of employment without prior notice.” The C.C.Q. does not define the concept of “serious reason,” but case law has generally defined it as an employee’s breach of his obligations that is serious (severe) in nature or repeated, as seen in the 2016 decision Garneau v. Gestion Universitas inc.

“Serious reason” or cause can take many forms; it can consist of one act or a multiplicity of acts. The more severe the act, the lesser the requirement that it be repeated. Of course, establishing cause is subject to the overarching principles of proportionality and progression of sanctions. However, the principle of progression of sanctions does not always apply to senior managers, according to the 2018 decision Forget v. Technologies Clemex inc.

Cause can be administrative or disciplinary in nature, the essential difference being that disciplinary cause applies to an employee who willfully breaches company rules, whereas administrative cause applies to an employee who is unwillingly unable to meet the requirements of her position.

For example, an employer may have administrative cause to terminate an employee’s employment in a case of chronic absenteeism, if the absenteeism in question is not culpable. However, if it is culpable (unjustified by medical or other legally sufficient reasons), cause would be disciplinary in nature.

The distinction between administrative or disciplinary cause for termination of employment is not just a matter of intellectual interest — it has a direct impact on the threshold of proof the employer must meet to establish its case before a tribunal.

For example, in cases of termination of employment for cause related to non-culpable underperformance (administrative), the employer must meet a specific burden of proof. The Court of Appeal of Quebec has said performance-based termination for cause requires the employer to establish that:

•the employee is aware of the objectives and standards he must meet

•the employer advised the employee of the performance issues and his deficiencies in meeting these objectives and standards

•the employer provided the employee with the required support to meet these objectives and standards

•the employer provided the employee with a reasonable period of time to meet these objectives and standards

•the employer clearly advised the employee he would face termination for cause should he be unable to meet these objectives and standards.

The concept of cause is one in constant evolution. As recently as 2017, the Superior Court of Quebec (in Forget v. Technologies Clemex inc.) upheld on judicial review an arbitral decision that essentially added a sixth criterion to the five above, namely that the employer must attempt to re-assign the employee to a different position or department in an attempt to find an alternate solution less drastic than termination.

However, this case is not settled law and remains subject to ongoing legal debate.

The exposure

An unjustified decision to terminate an employee for cause can be quite costly:

•In all Canadian jurisdictions, a wrongfully terminated employee may seek payment in lieu of notice of termination of employment, meaning her total compensation for a period of reasonable notice of termination of employment.

•Reasonable notice of termination of employment is non-formulaic and calculated based on all relevant factors (such as an employee’s position, compensation and years of service). Reasonable notice is typically capped at 24 months.

•In Quebec, unlike many other provinces, an employee cannot renounce in advance his right to receive reasonable notice. This means a contractual severance provision in Quebec that yields entitlements below reasonable notice would be unenforceable.

•Moreover, a Quebec employee who is not a senior manager, who has two or more years of service, and who believes she was terminated without cause (while the employer alleges the contrary), may file a claim for reinstatement with the labour standards watchdog — the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST). The CNESST would then represent the employee (free of charge) before the Labour Administrative Tribunal (TAT). If it is convinced the employee was terminated without cause, the TAT may order reinstatement of employment plus backpay (all compensation lost from the time of termination until the time of reinstatement).

•Wrongfully terminated employees may obtain other types of damages, such as moral or punitive damages or legal costs.

The termination

Once the decision to terminate employment is made, the employee will need to be advised of this decision. This execution phase can be fraught with its own perils, so here are best practices:

•The termination letter must describe the reason for termination.

•It is crucial the termination letter be drafted carefully, especially as Quebec law does not recognize the concept of after-acquired cause. This means once a reason is provided in the letter, the employer may not, after the fact, invoke independent causes for termination that it failed to invoke at the time of termination.

•Termination meetings should be conducted in a confidential setting, in the presence of a company representative who will attend as an observer, in addition to the representative who will advise the employee of the news.

•After the termination meeting, the employer may offer the employee the possibility: of remaining in the room afterwards, in isolation to adjust to the news; of leaving the workplace and going home to ponder the settlement offer, if any, or; if the termination is effective immediately on the same day, remaining for the day or for a few hours to pack her belongings and say goodbye to colleagues.

•Employers should avoid systematically escorting employees back to their office after the termination meeting (and then out of the building) unless justified in light of the company’s business and the nature of the faults committed by an employee.

•If the employer alleges cause for the dismissal but still wishes to extend a settlement offer to the employee, the offer should be provided in a distinct document, separate from the termination letter. This ensures the employer is not forced to disclose the settlement offer should it file the termination letter in court, nor have to seek court authorization to redact portions of the termination letter.

Conclusion

Termination of employment for cause continues to be one of the most important sources of financial exposure for employers. While there is rarely a magic formula for success, an employer can greatly mitigate risks by ensuring diligence in building the termination file, and then applying best practices in executing the termination once a decision is made. HR, with the support of counsel, has a key role to play in this regard, through its participation in both the decision-making and execution processes.

Both in the employment and labour group at Stikeman Elliott in Montreal, Hélène Bussières is a partner and Charif El-Khouri is an associate. Hélène can be reached at hbussieres@stikeman.com and Charif can be reached at celkhouri@stikeman.com.

Add Comment

  • *
  • *
  • *
  • *