Tuesday, March 15, 2011

Ontario Employment Law: Just Cause and Employee Dishonesty

As noted in previous posts, where a court finds "just cause" for the termination of employment, the dismissed employee loses entitlement pay in lieu of notice, statutory severance payments, and further, and may fail to qualify for unemployment insurance.

Given these very serious consequences, Ontario's courts have developed fairly stringent and rigorous legal tests to determine whether "just cause" will be found. These tests consider whether the misconduct is sufficiently serious so as to give rise to a breakdown in the employment relationship.

How do the Courts assess "just cause" where an employee is accused of dishonesty or theft?

In a January 2010 ruling by the Ontario Superior Court, Leitner v. Wyeth Canada, the Court articulated the appropriate test as follows:
The Court must first determine whether the evidence established the employee's deceitful conduct on a balance of probabilities, and if so, whether the nature and degree of the dishonesty warranted dismissal.
In Leitner, the Court ruled that employer failed to meet the required standard. The long-term employee's lapse of judgment that resulted in him knowingly falsifying three expense claims on three occasions involving less than $500.00, was not enough.

With respect to stage 1 of the test, the Court stated the following:
While marketing people involved in substantial travel are not exempt from spending restrictions or from general rules of honest published expense reporting, practical people could see how such an employee, having lost receipts or failed to keep a proper record of expenditure may be tempted to rationalize an unorthodox recoupment strategy that an accountant might characterize as dishonest. The Plaintiff testified, and I believe him, that he was not trying to get extra compensation from his employer, but rather was trying to be reimbursed for moneys spent for which he did not have receipts at the time of reporting. His behaviour is not to be condoned, but when all circumstances are considered, dismissal without pay in lieu of notice is not warranted by the case law.
As this passage indicates, the Court accepted that there was no intent on the part of the employee to defraud the company.

With respect to stage 2 of the test, the Court stated the following:
When an employer determines that an employee is too dishonest to continue in its employment, the grounds for such a decision ought not to be three expense claims involving less than $500.00 that are consistent with careless or a temporary lapse of good judgment during a brief moment of a long and distinguished career, as was the case here.
This kind of dishonesty, while not to be condoned, did not rise to the level of justifying a dismissal in the absence of proper warnings and notice - which the employee had not received.

As a result of the Court's finding that no just cause existed for the termination, the employer was ordered to pay the employee 10 months' pay in lieu of notice.

As this case demonstrates, a finding of "just cause" on the basis of dishonesty will never be made lightly by a Court, especially where the employee is a long-term employee with a distinguished record of service.

If you believe you have been terminated without cause, please contact a lawyer who can advise as to your rights and entitlements.

- Robert Tanha, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

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