Employers should take care to use just-cause terminations sparingly, be prepared to prove it
Three recent decisions in Alberta indicate that employers will have an uphill battle to terminate employees for just cause, as courts appear to be increasingly reluctant to rule in their favour, say lawyers Sheena Owens and Maja Blanchette at Stikeman Elliott LLP in Calgary.
“It doesn’t mean that employers are always going to lose,” says Owens. “However, the recent decisions illustrate that ‘just cause’ is a difficult argument to make and given the special category of relationship between employer and employee, courts tend to favour the employee if there is any discretion to be exercised.”
The three Alberta Court of Queen’s Bench decisions found that the employers did not have just cause to terminate the employees’ employment.
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Blanchette notes it was “surprising to see these cases from Alberta come within in a one-year period.” She adds it is rare to see civil cases go to trial, “especially in employment law cases, because the damages might not be high enough to justify the costs of litigation.”
Blanchette and Owens, who represent employers in such matters, stress that each case is unique, and there is no predicting how courts will rule. However, they say that while it may be tempting for employers adopt an “I know it when I see it” approach to just cause terminations, care must be taken when considering terminating an employee for just cause.
In Underhill v. Shell Canada Limited, Shell dismissed Underhill for just cause following an investigation into her behaviour. The case included allegations that she was involved in at least six instances of serious misconduct, such as failing to identify a conflict of interest, breach of confidence and “complete disregard” for Shell’s termination and investigation procedures.
The court concluded it was not satisfied that Underhill demonstrated the “serious lack of understanding of conflicts” that Shell alleged. On the allegations that Underhill could not be trusted to keep confidences, the court ruled these breaches were not serious in all of the circumstances outlined. It found that although Underhill made some mistakes, she was not being disloyal or acting in bad faith.
It also noted that Underhill was a loyal and dedicated employee for more than 17 years, had no prior disciplinary history, and Shell did no suffer significant consequences from Underhill’s actions.
In Baker v. Weyerhaeuser Company Ltd., the employer alleged that the employee, with 14 years of service, was terminated for just cause due to safety violations and other misconduct. Baker alleged that Weyerhaeuser had manufactured a reason to fire him.
Baker had no disciplinary history or poor performance reviews until after he got a new supervisor. The new supervisor issued a written warning letter to Baker, citing his poor performance and noting the shift Baker supervised was not achieving the same level of output as Weyerhaeuser’s other shift. The supervisor further alleged that Baker failed to deal with a small fire properly.
The court concluded that Baker’s supervisor had looked for reasons to terminate Baker and relied on his personal bias against Baker and did not consider Baker’s whole record of employment.
The court noted that there were grounds for discipline due to the fire, in particular, failing to report the fire and improperly filling out a safety document. However, the court held the main reason for Baker’s termination was his supervisor’s personal feelings towards Baker and that Weyerhaeuser should have more thoroughly investigated the supervisor’s allegations.
A third case, Mack v. Universal Dental Laboratories Ltd., dealt with the allegation that Mack, who was also a shareholder and director, had failed to work with diligence, worked only a minimal and nominal amount of time at the office. The employer accused the employee of being disruptive in the office, using vulgar and abusive language, providing poor client service, using his work computer to access pornography, and failing to attend continuing education.
The court found that Universal proved the alleged misconduct. However, the court also found that Universal had condoned the misconduct. Universal failed to issue any written warnings to Mack and did not follow its performance management process as outlined in its employee policy manual.
The court also concluded that although Mack engaged in misconduct, it didn’t warrant termination. Universal should have attempted to use less severe sanctions to address Mack’s misconduct before his dismissal, such as formal written warnings, using the employee manual’s disciplinary process, and addressing Mack’s deficiencies at regular management meetings.
Absent an enforceable termination provision in an employment agreement, Blanchette says employers have an implied contractual obligation to provide indefinite-term employees with reasonable notice of termination unless there is just cause for termination of their employment.
This obligation can be significant, in some cases as much as 24 months. If notice cannot be provided, the employer must pay compensation equal to what the employee would have earned had the employee worked through the notice period.
Therefore, establishing just cause can result in significant savings. However, it should generally be reserved for serious misconduct, Owens says, such as neglect of duty, gross incompetence, willful disobedience or conduct that is prejudicial to the employer’s business.
Prior findings of just cause termination include theft, dishonesty, serious breaches of workplace policies, violence or harassment in the workplace, unexcused absences from the workplace, insubordination, criminal conduct, serious conflicts of interest, and prolonged and documented performance issues.
Blanchette said the key takeaways from these recent court decisions include:
- The difficulty in establishing just-cause termination, as it is “very dependent o the context” and there are many factors to be considered, such as history, seniority.
- There is “no such thing” as “near cause” cause is a legal concept in which a court seeks a middle ground between the full notice period entitlement of a without cause dismissal and termination for cause without notice. “An employer does not need to pay damages related to the termination if you fail to prove just cause.”
- Are there suitable alternatives to terminating for just cause? Could a warning letter, suspension, negative performance reviews, change in duties, performance improvement plan, revocation of privileges, counselling, coaching, or retraining instead.
On the last point, Owens says unionized workplaces often use this sort of discipline and corrective action. However, non-union employers rarely use it. By the time it gets to the point of wanting to terminate for just cause, most non-union employers “feel this person is not going to improve, so they’d rather just deal with a termination now than work with the person.”
The lawyers say employers who are contemplating terminating an employee for just cause should maintain documentation of all incidents of misconduct or other potential grounds for termination, performance issues, warnings, and prior discipline.
As well, they should ensure that they do not condone poor behaviour or performance. Policies should be up to date and exercised consistently in an unbiased manner. Employees should also have a clear understanding of what the guidelines mean. And employers should consider the employee’s length of service, position, duties, and other contextual factors should when deciding to terminate for just cause.
As well, Owens and Blanchette say employers who mistreat an employee at the time of termination could also trigger additional punitive and aggravated damages on top of severance costs. Such mistreatment could involve attacking the employee’s reputation, conducting a public firing, misrepresenting the reasons for termination, alleging just cause as a negotiating tactic, and spreading rumours or false information regarding the employee, especially to potential employers;
Says Owens: “These recent decisions remind us that employers owe extra duties to bring unacceptable behaviour an employee’s attention, the employer-employee relationship has some special characteristics.”