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Posts tagged: just cause

Wrongful Dismissal Update: Recent Case Law Increases Legal Uncertainty

By , January 8, 2019 10:04 am

Recently, it has become increasingly difficult for employment lawyers to assess an employer’s potential legal liability in connection with an employee termination. The law is pretty straightforward but predicting how a judge will apply the law to a specific termination is riddled with legal uncertainty.

A recent case involving a 54-year-old senior executive who earned about $275 000 a year who was terminated for just cause after 11 years service is a good case in point.

The Issues

The judge in this case decided three main issues; namely: (i) did Keddco Mfg. have just cause to terminate Scott Ruston’s employment; (ii) if not, how much notice of termination should he have received; and (iii) was Mr. Ruston entitled to any punitive damages or aggravated damages because of the way Keddco treated him?

The Law

When deciding whether an employer has just cause to terminate an employee and avoid paying termination pay, a trial judge is required to apply the test set out by the Supreme Court of Canada (the “SCC”) in a well-known 2001 case, as interpreted by the Ontario Court of Appeal in another well-known 2004 case.

If an employer cannot prove just cause, then the employee is entitled to receive reasonable notice of termination (or pay in lieu of this notice) unless the employee signed an employment contract with an enforceable termination clause. The test a judge applies to determine the appropriate reasonable notice period is set out in a 1960 court case.

Since the SCC clarified the law in 2008, trial judges have had jurisdiction to award employees punitive and aggravated damages.

The Decision

  1. Just cause: It is generally very difficult for an employer to prove just cause – especially for a long service employee with no prior discipline like Mr. Ruston. Alleging just cause and then leading very little, if any, evidence at trial really annoys judges. I believe unsubstantiated allegations of just cause results in longer reasonable notice periods, aggravated damages in some cases, and a higher cost award against the employer.
  2. Reasonable notice: Although the Ontario Court of Appeal has specifically directed trial judges not to apply the “one month notice per year of service” rule of thumb when determining the reasonable notice period, this rule of thumb has been a good place to start for employees like Mr. Ruston until the last couple of years. In this case, after an 11-day trial the judge concluded Keddco should have provided an 11-year employee with 19 months’ notice of termination or about 1.7 months per year of service.
  3. Punitive damages & aggravated damages: When the SCC issued its 2008 decision on punitive damages and aggravated damages, most employment lawyers believed it closed the door on these types of damages except in extraordinary cases. Now, however, there is much uncertainty as to whether a particular set of facts will attract punitive and/or aggravated damages. In this case, the judge awarded the employee $100 000 in punitive damages for a number of reasons including the fact that Keddco intimidated Mr. Ruston in the termination meeting,  threatened to sue Mr. Ruston for fraud, and led no evidence at trial to substantiate the fraud allegations. Keddco was also ordered to pay $25 000 in moral damages because, among other things, the employer failed to be candid in the termination interview as far as the reasons for his termination were concerned, made unsubstantiated allegations of fraud, and knew the fraud allegations would be very stressful for Mr. Ruston.

To my knowledge, this case has not been appealed.

Lessons to be Learned:

  1. Every employee should be required to sign an employment contract with a legally enforceable termination clause. In this case, the notice period could have been limited to 8 weeks in a contract, decreasing legal uncertainty. Mr. Ruston’s bonus accounted for about 41% of his total annual compensation. The termination clause can also restrict (or eliminate) the amount of bonus an employee is entitled to receive during the notice period, decreasing uncertainty. This kind of clause could have saved Keddco hundreds of thousands of dollars.
  2. An employer should not allege just cause unless it plans to lead credible evidence to substantiate the allegations. If just cause had not been alleged in this case, then the wrongful dismissal damages could probably have been decided by way of a summary judgment; not an 11 day trial. My guess is that if the parties cannot agree on legal costs, Keddco will be ordered to pay Mr. Ruston at least $100 000 in legal costs – although the cost order could be much larger.

  3. An employer should act in good faith when terminating a person’s employment. This should eliminate legal uncertainty and risk that a judge will order the employer to pay any punitive and/or aggravated damages, which totalled $125 000 in this case.  

For almost 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416-317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

Employer Ordered to pay $ 425 000 of Wrongfully Terminated Employee’s Costs

By , February 27, 2017 1:00 pm

In many wrongful dismissal cases, the legal costs associated with taking a case to trial exceeds the value of the legal claim. That is why the vast majority of these cases settle before trial.

Rolling the dice and taking a case to trial can have serious financial consequences.

Doyle v. Zochem Incorporated

Consider a recent case involving the termination of a 44-year-old female supervisor with 9 years’ service. She earned a salary of about $ 85 000, worked in a male dominated workplace, and her termination came shortly after filing a sexual harassment complaint.

As I wrote in an earlier blog, the trial judge awarded her 10 months pay in lieu of reasonable notice, $ 60 000 in moral damages because of the way she was terminated, $ 25 000 for the way the employer handled her human rights complaint, and interest for a total of about $ 150 000.

Earlier this year, the Ontario Court of Appeal upheld the trial judge’s decision.

Cost Award is 283% Higher than Wrongful Dismissal Damages

This blog discusses the $ 425 000 cost order the court made against the employer in connection with the trial.

The trial of this wrongful dismissal action took 28 days. The employer made a claim of after acquired cause. This means the employer initially took the position that the employee was terminated without cause but then claimed it discovered evidence after the termination which would have justified a with cause termination so that the employee was not entitled to any termination pay. The evidence relating to after acquired cause took up much of the trial. The trial judge concluded the after acquired evidence was a flimsy defence supported by flimsy evidence.

Factors to Consider When Assessing Costs

As a general proposition, the judge stated costs should follow the event (i.e. the losing party should pay some of the winning party’s costs), be proportional to the issues in the action and the outcome, and be reasonable to the losing party to pay. Other factors to be considered is the conduct of the parties and whether one party plays “hardball.”

Difference Between Actual Costs, Substantial Indemnity Costs & Partial Indemnity Costs

In this case, the employee’s lawyer said her actual fees were $ 496 661 (or $ 422 162 on a substantial indemnity basis or $ 322 830 on a partial indemnity basis). The employer’s lawyer said their fees were $ 682 413.

Neither party made an offer to settle that complied with Rule 49 of the Rules of Civil Procedure; that is, before the trial the employee did not agree to settle for less than $ 150 000 and the employer did not offer to settle for more than $ 150 000.

Costs Order in this Case

The judge ordered the employer to pay the employee $ 322 830 of her legal costs (i.e her costs on a partial indemnity basis) plus H.S.T. plus disbursements plus $ 12 000 for settling costs for a total of $ 424 584.33

Lessons to be Learned

  1. Alleging after acquired cause is a risky strategy particularly if there is flimsy evidence supporting the allegation.
  2. If the parties assess the case significantly differently then seriously consider retaining a mediator. This is required for wrongful dismissal actions commenced in Toronto. In my experience, a good mediator is able to get parties on the same page and persuade the parties it is in their interests to enter into a without prejudice settlement instead of incurring the time, costs and legal uncertainly associated with a trial.
  3. If a plaintiff refuses to accept a reasonable settlement offer then the plaintiff may be ordered to pay the defendant’s costs after the date of the offer, despite the plaintiff winning their trial. On the other hand, if a defendant refuses a reasonable settlement offer then the defendant may be ordered to pay more of the plaintiff’s costs after the date of the offer.

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

When Can an Employer Terminate an Employee for Just Cause?

By , September 20, 2016 10:10 am

“Just Cause” is a legal term that describes when employers are justified in terminating an employee without providing the employee any notice of termination.

In a recent decision, the Court found that a teacher’s misconduct was serious enough to warrant a just cause termination.

The Case, Fernandes v. Peel Educational & Tutorial Services Limited.

A private school terminated a teacher for just cause after discovering that the teacher had submitted falsified and incorrect student marks. The teacher still submitted inaccurate marks although given two opportunities and lied to his employer to cover up for the mistakes.

The Test for Just Cause

An employer is justified in dismissing an employee for just cause when the employee’s misconduct is “sufficiently serious that it struck at the heart of the employment relationship.” There are three important factors:

  1. determine the nature and extent of the misconduct;

Recognizing that teachers occupy a special position of trust and have professional obligations to students and the school, the teacher’s actions constituted serious misconduct. The school trusted the teacher to properly evaluate student progress. The teacher intentionally acted against these interests.

  1. consider the surrounding circumstances;

The courts will look at both the employer and employee’s circumstances to determine whether just cause exists. Most importantly for the teacher, he did not describe anything going on in his life that would affect his job performance. If he did, this could have explained his actions.

For the employer, the fact that the school could have suffered serious harm mattered greatly. It was a private school whose accreditation relied on proper evaluation standards. The teacher endangered the school’s accreditation. The Court stressed that even though the school did not suffer harm, it is the severity of the potential harm that is considered in just cause.

  1. decide whether dismissal was warranted.

This last factor combines the above two to determine whether dismissal was warranted. Despite the duration of the acts was short, 2 months, and the teacher was a long serving employee, the misconduct was sufficiently serious that it struck at the heart of the employment relationship.

Lessons to be Learned:

  1. Before terminating an employee for cause, keep the three above factors in mind. The Court signalled that employers should be aware of any difficulties that the employee may have that could affect job performance.
  2. Terminating an employee for just cause is a serious decision and should not be made lightly. If employers do not have just cause, they could face a costly wrongful dismissal action.
  3. Some judges refer to an employee termination as economic capital punishment. It is generally very difficult – but not impossible – to prove just cause. Employers should therefore consult with a lawyer before terminating an employee for just cause.

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

Legal Shades of Grey: Are offensive statements made on personal time just cause for termination?

By , June 2, 2015 9:20 am

Hydro One Employee Terminated for Making Sexist Statement to a TV Reporter

Shawn Simoes who worked as an engineer for Hydro One was recently terminated when his employer found out that he made an offensive and sexist comment to a female TV reporter, Shauna Hunt. To read the Global News story about this, click here. He did not identify himself as a Hydro One employee. However someone saw the story on TV, and told Hydro One who fired him shortly after the story ran on TV.

Is Making a Sexist Comment Just Cause for Termination?

Assuming Mr. Simoes is not a member of a union, he can commence a wrongful dismissal action and claim for termination pay. Hydro One will be ordered to provide him with termination pay unless it can prove it had “just cause” to terminate his employment.

Is making an offensive or unpopular statement in your personal capacity just cause for termination?

The Three-Step Test an Employer must Satisfy to Prove “Just Cause”

The Ontario courts have outlined a three-step approach to determine whether employee misconduct strikes at the heart of the employment relationship.

The first step is determining the nature and extent of the misconduct. Mr. Simoes could argue that he made the comments in his personal capacity and so there is no connection to his employment relationship and therefore no misconduct warranting any kind of discipline. This argument would not work for a teacher who is convicted of sexually assaulting a child, though the two cases are very different. At what point does ones actions in private become subject to an employer’s scrutiny? Is it any time a person’s word or action becomes public? In this case, this employee was fired shortly after the story ran on the news. In the age of social media where any word or action can be simultaneously captured and posted on twitter, facebook, instagram and other social media platforms- can this really be the standard?

The second step involves considering the surrounding circumstances for both the employer and the employee. In this case, the employee was not at work or a work related function and he was not representing his employer. He uttered a deeply offensive phrase that soccer fans have been directing at reporters for about two years. I have not heard anyone suggest that his words in any way reflected Hydro One’s corporate values.

The third step is determining whether a dismissal is warranted as a proportional response to the misconduct. This involves determining whether the misconduct is sufficiently serious so as to give rise to a breakdown in the employment relationship. At this point in the analysis a judge will consider a number of factors including the employee’s length of service, whether he was a face of the organization to the client or the public, his disciplinary record, and whether he apologized. In this case, I suspect a court would also consider whether he had any supervisory responsibilities.

We Are At a Legal Cross Road

We are at a legal cross road where judges are increasingly being asked to decide when private words or deeds can cost a person his or her job.

For a discussion of a recent case involving two firefighters who were fired for sexist tweets, click here.

For my take on the Jian Ghomeshi termination, click here.

The Road Ahead

In the short term, I think the personal sensibilities of individual judges will decide whether an employer can prove just cause in these kinds of cases. Then one of these decisions will be appealed to the Ontario Court of Appeal where a legal test will be articulated for all Ontario trial judges to follow. If a different test is formulated by the court of appeal in one of more other province then this issue could very well be decided by the Supreme Court of Canada. This is how the common law evolves in Canada.

In the meantime, it will be difficult to predict when an offensive personal statement could cost you your job. For employees who work for public sector and quasi public sector employers like Hydro One who can afford to litigate and lose a case to uphold corporate values, I suggest taking great care. For employees who work for small and medium size private sector employers, I suspect that many of these employers will be less inclined to devote money, time and resources to protecting the organization’s reputation/brand/values in this kind of case and will therefore be less inclined to terminate.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising and representing employers in connection with employee terminations. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

 

Severance Packages: Five Things Every Employer Should Know

By , January 13, 2015 8:58 am

Imagine yourself as a senior manager of a small business. Sales have decreased to a point where you have to make some staff cuts. One will be Marsha, an administrative assistant with over 25 years service, and the other is Kent, an expensive employee you hired just last year. How much will these terminations cost? While Kent signed an employment contract, you don’t recall Marsha signing anything. As a long-term employee, how much pay is she entitled too? Questions start to circulate your mind…. what should be included in a severance package?

Without professional help, employee terminations can feel like navigating a difficult maze. To better understand the termination process , here are five questions an employer should consider when putting together a severance package.

1. Is the employee owed any money under the Employment Standards Act?

This includes unpaid wages, overtime pay, statutory holiday pay, termination pay & severance pay.

Some salaried employees are not paid overtime even though they are eligible for overtime pay under the ESA and some employees seek retroactive overtime pay after being terminated. Sometimes it makes sense to pay a terminated employee a little more money to avoid having this kind of issue litigated because if the employer is ordered to pay overtime for the one employee then employees who are similarly situated may start asking for overtime pay.

Until recently the conventional wisdom was that only employers with an Ontario payroll of over $ 2.5 M were required to pay severance pay to terminated employees with 5 or more years service. In a recent case however a judge concluded that the $ 2.5 million payroll was not limited to Ontario payroll. Since long service employees are entitled to up to 26 weeks severance pay under the ESA an employer should consider this potential liability before proceeding with an employee termination.

2. Has the employee signed an employment agreement with an enforceable termination clause?

If so, the employer must provide the notice of termination (and benefit continuation if applicable) set out in the contract.

As a result of recent case law, employees are increasingly challenging the enforceability of termination clauses. You should know whether your termination clause is likely enforceable before you decide to terminate; otherwise, you may end of paying much more termination pay than you expected.

3. If the employee has not agreed to a legally enforceable termination clause, how much notice of termination (or termination pay in lieu of notice) should the employer provide the employee?

This will depend on, among other things, the person’s age, length of service, position and availability of comparable employment given his or her education and experience and the employer’s best guess on how long it will take the employee to secure alternative employment.

4. Should termination pay be paid out as a lump sum amount or in a series of payments?

Unless this issue is addressed in an employment contract, this will depend on, among other things, whether the employer has cash flow constraints, whether the employee has agreed to restrictive covenants, and whether the employer can claw back termination pay if the employee secures alternative employment during the agreed upon notice period.

5. Should the employer provide a reference to the employee?

Generally, there is no legal obligation to provide an employee with a reference but it is often a good idea to do so if just cause is not an issue. For example, if the parties have not reached a settlement agreement then it is usually in the employer’s financial interest for the employee to secure alternative employment as quickly as possible. In this regard, providing a reference will generally help an employee find employment more quickly all things being equal.

Because of these issues and others, it is a good idea to spend a few minutes on the phone with an employment lawyer before you terminate an employee. It could save you thousands of dollars.

If you require assistance preparing an employee severance package for a terminated employee, please contact our Managing Partner, Doug MacLeod by phone at 416 317-9894 or by email at [email protected]

“The material and information provided on this blog and this website are for general information only and should not, in any respect, be relied on as legal advice or opinion. The authors make no claims, promises or guarantees about the accuracy, completeness, or adequacy of any information linked or referred to or contained herein. No person should act or refrain from acting in reliance on any information found on this website or blog, without first retaining counsel and obtaining appropriate professional advice from a lawyer duly licensed to practice law in the relevant jurisdiction. These materials do not constitute legal advice and do not create a lawyer-client relationship between you and any of the authors or the Macleod Law Firm.”

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