Ontario Employment Law: Just Cause For Dismissal Doesn't Necessarily Amount to Wilful Misconduct

A finding of just cause for dismissal at common law does not automatically disqualify an employee from entitlement to statutory severance and termination benefiits under Ontario's Employment Standards Act, according to an important March 14, 2011 ruling of the Ontario Superior Court Ontario in Oosterbosch v. FAG Aerospace Inc.

In Oosterbach, a long term-employee was terminated by his employer based on its policy of progressive discipline, with termination being the last step of that process. Specifically, it was alleged that the machine operator- employee had engaged in a persistent pattern of careless misconduct over a period of approximately 1.5 years preceding his termination, despite having received a number of warnings and suspensions and numerous coaching and counselling sessions.

Among other infractions, the employer alleged the employee had falsified records and ran a number of pieces (to be used in the aerospace industry) that did not conform to prescribed specifications.

Justice Haines found that the employer had demonstrated "just cause" at common law for the termination of the Plaintiff's employment:

. . . In my view the persistence of the plaintiff's misconduct notwithstanding ongoing coaching sessions and warnings constitute a repudiation of the employment relationship. This conclusion is reinforced by the initiation of a further discipline investigation on March 28, 2008 for unsatisfactory work performance before the discipline process was concluded for the infraction on March 20 that resulted in the issuance of the fourth written warning.

Thus, the court found that the employee careless conduct disentitled him to reasonable notice of his termination at common law.

From this conclusion, one might expect that a finding of "wilful misconduct" under the Ontario Employment Standards Act, disentitling the employee to severance pay and termination pay, would inexorably follow.

But the court found otherwise, holding that his misconduct, while not to be condoned, did not rise to the required level of recklessness to meet the ESA's "“wilful misconduct, disobedience or wilful neglect of duty” test:

A person is reckless when he engages in conduct without regard for the outcome or consequences. Notwithstanding the number of infractions recorded I do not see that the conduct of the plaintiff rises to that level. He was undoubtedly careless and the persistence of that carelessness justified his dismissal. I would not, however, characterize his offending behaviour as "wilful misconduct, disobedience or wilful neglect of duty" that would disentitle him to receipt of termination and severance payments under the provisions of the Employment Standards Act, 2000.

This case is a significant employment law decision for a number of reasons:

• It establishes that a finding of "just cause" at common law will not always equate to "wilful misconduct" under Ontario Employment Standards Act.
• It reminds us that as the threshold for establishing "just cause" is a high one, numerous written warnings and counselling sessions will likely be required before any such finding is made, particularly with regard to a long-term employee.
• It establishes that an employer's progressive discipline system is not dispositive of a "just cause" finding. Whether or not an employer had "just cause" is a legal question which requires a contextual analysis.

The ruling appears to mandate a two-pronged analysis in assessing termination "for cause." Firstly, consideration must be given to whether the impugned behaviour meets the traditionally high "just cause" threshold.

If it does, while there will be no common law entitlement to pay in lieu of notice, a second enquiry must then occur as to whether the even more stringent "wilful misconduct" standard under the ESA has been met.

If this ruling survives appeal, it it provides a ray of hope for employees who are terminated for cause.

As Stikeman Elliot's Randall Boessenkool noted in an article today, "This case is a precedent which should concern employers."

(HT: Michael Fitzgibbon's recent article on this ruling.)

- Garry J. Wise and Robert Tanha, Toronto

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

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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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Ontario Employment Law: “Just Cause” for Dismissal

When can employment be lawfully terminated "for cause?"

In order for the courts to find that an employer has dismissed an employee for “just cause," the employee must be found to have breached a fundamental term of the contract of employment.

In other words, the employee must fail to perform a fundamental obligation of his or her job: Mckinley v. B.C. Telephone, 2001 SCC 38, (2001) 200 DLR (4^th)

What constitutes “just cause” in any particular circumstance?

In the classic English case of Pearce v. Foster (1886) 17 Q.B.D. 536, a case whose discussion of “just cause” is regularly cited by Canadian courts with approval, the court stated:

What circumstances will put a servant into the position of not being able to perform, in a due manner, his duties, or of not being able to perform his duty in a faithful manner, it is impossible to enumerate. Innumerable circumstances have actually occurred which fall within that proposition, and innumerable other circumstances which never have yet occurred, will occur, which also will fall within the proposition.

In the much more recent Canadian case, Mckinley, the following description of “just cause” is given by the Supreme Court of Canada:

The conduct under consideration must be seen in context. The issue is whether the employee’s misconduct was such that gave rise to a breakdown in the employment relationship.

If a court finds that there was just cause for the dismissal, the employee loses entitlement to notice, pay in lieu of notice, and may fail to qualify for unemployment insurance.

An important point to remember is that “just cause” can only be relied upon by an employer to justify termination when cause arises.

If an innocent employer does not warn the employee or dismiss for cause at that time of discovery of the misconduct, or otherwise fails to respond when fully aware of the circumstances surrounding the misconduct, it may be found to have condoned, or essentially forgiven, the misconduct.

Thus, absent timely response by the employer, the employee’s alleged or actual misconduct can not alone be relied upon by the employer as a reason to dismiss the employee at some remote, future time.

We see this rule at work in the following passage from Kellet v. Mazda, 2008 CanLii 74291 (ON S.C.), a case involving termination of an employee by an employer for, among other things, multiple acts of sexual harassment:

The sexual harassment evidence herein is properly taken into account in deciding whether there was just cause for dismissal. The defendant did not condone or waive these serious acts of employee misconduct. It disciplined the plaintiff and warned him by letter about the seriousness of the conduct in issue. That letter also contained a warning about other unprofessional conduct. Pursuant to Nossal v. the Better Business Bureau of Metropolitan Toronto (1985) 51 O.R. (2d) 279 (C.A.), further misconduct allows past misconduct, even of a different nature, to be considered when deciding whether there is just cause. In other words, all acts of misconduct, unless condoned or otherwise forgiven, properly may be accumulated for the purpose of deciding whether there was just cause, in the circumstances.

With respect to the definition of “just cause," courts have stated that the misconduct for which an employee is dismissed must be of a serious nature; mere dissatisfaction by the employer is not enough.

Of course, assessing the seriousness of the misconduct will be context-specific; in other words, it will depend largely on the nature of employment. Only in rare instances will a single mistake justify the dismissal of an employee, for example where that mistake threatens life or the continuance of a business. In most circumstances, a pattern of conduct and a series of warnings will be required before just cause justifying a termination will be found by a court.

In Pearce v. Foster, the court identified specific circumstances that can justify a finding of “just cause” by the employer:

1. serious misconduct;
2. habitual neglect of duty;
3. incompetence, off duty conduct that is incompatible and prejudicial to the employer’s business;

Other circumstances that can justify dismissal of an employee include insubordination, post-dismissal conduct, and sexual harassment.

Legal tests, which are highly sensitive to context, have been articulated by our courts to address these various circumstances.

In future posts, we will consider each of the noted circumstances.

We will also look at the key role written warnings by an employer may play in determining whether grounds exist for termination of employment for just cause. Finally, we will look at alternate forms of discipline, such as temporary suspension of employment, which may be an appropriate remedy to misconduct.

- Robert Tanha, Toronto

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

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