Termination for Cause A High Threshold

Termination for cause is called the "capital punishment" of employment law. This is because an employee who is terminated for cause is not entitled to any notice of termination or severance pay. Such an abrupt loss of employment, without compensation, can have serious consequences.

In recognition of the severe impacts of a for cause termination, the Canadian courts have set a high threshold for "cause". Not every allegation of misconduct or poor performance will amount to cause. In fact, it can actually be very difficult for employers to establish grounds for termination for cause.


Establishing "Cause" for Termination:

An employee can only be terminated for cause if they engage in behaviour that results in a fundamental breakdown in the employment relationship. Examples of such behaviour include:

  • Serious misconduct
  • Habitual neglect of duty
  • Incompetence
  • Conduct incompatible with the employee's duties or harmful to the employer's business
  • Wilful disobedience of the employer's orders relating to matters of substance

To assess whether an employee's conduct is sufficient to justify a termination for cause, the Supreme Court of Canada in McKinley v. BC Tel, 2001 SCC 38 held the following three factors should be considered:

  1. The nature and extent of misconduct;
  2. The surrounding circumstances; and
  3. Whether dismissal is a proportional response.

At each stage, the employer bears the burden of proving that they had cause for termination.


(1) Nature and Extent of Misconduct:

The misconduct must be serious. Minor instances of misconduct or occasional mistakes will not normally result in an irreparable breakdown of the employment relationship.

Unless the issue is incompetence, the employer must be able to establish that the employee was deceitful or engaged in some form of knowing misconduct. This is assessed objectively, meaning that the employer must be able to prove, on a balance of probabilities, that a reasonable person in the employee's circumstances would know the conduct was wrong. The wrongful conduct can be one incident or a series of incidents.

Where the issue is incompetence, the employer does not have to prove the misconduct was intentional. However, terminating for cause based on incompetence poses its own difficulties the incompetence must have been over a prolonged period and generally the employer must have provided the employee with opportunities to improve their performance.


(2) Surrounding Circumstances:

Circumstances are crucial. The Canadian courts have repeatedly emphasized that every case must be assessed contextually, taking account of the unique facts.

When applying a contextual approach, the following factors may be relevant:

  • The employee's age
  • The employee's employment history, seniority, and responsibilities
  • The degree of trust place in the employee and the employee's position within the organization
  • The nature of the employer's business
  • Any relevant employment policies or practices

Other factors may also be relevant depending on the circumstances of the case. For example, in the recent Ontario Superior Court case of Attzs v. Saputo Dairy Products Canada G.P., 2020 ONSC 5512 the employee was caught vaping in the employer's dairy product storage facility. In determining whether the employer had cause for termination, the trial judge took account of the health and safety regulations governing the employer's operations as well as Ontario's recently enacted anti-smoking laws.


(3) Proportionality:

The dismissal must be a proportionate response to the severity of the misconduct. This is assessed by considering whether any alternative measures, short of dismissal, would have been sufficient to sanction the employee. Often times, the Court will consider how the employer handled similar misconduct in the past, and whether the dismissal is in line with the employer's previous responses.

For example, in Plester v. Polyone Canada Inc., 2011 ONSC 6068 (affirmed on appeal: 2013 ONCA 57) the Ontario Court concluded the employee's termination for cause following a safety incident was disproportionate. This was in part because the dismissal was more severe than the employer's previous responses to similar incidents. Likewise, in Attzs v. Saputo Dairy Products Canada G.P. the Court took into account the fact that other employees caught vaping had not been terminated when concluding that the employee's termination was disproportionate.


Impact on Statutory Entitlements:

It is important to note that there is a distinction between termination for cause based on the judge-made common law, and termination based on "wilful misconduct" as defined in Ontario's employment standards legislation, the Employment Standards Act ("ESA"). The result is that an employee who is terminated for cause based on the common law principles described above may still have statutory termination entitlements under the ESA. For more information on this topic please see our blog post, Fired for Cause? Severance withheld! Check your contract!


Conclusion:

Terminations for cause are tricky. Generally, the more severe the misconduct, the more likely there is cause for termination, and vice versa. The severity of the misconduct, however, must be assessed based on all of the facts. Termination for cause will only be justified if it is a proportionate response to the misconduct, in light of the employee's unique circumstances.

When dealing with terminations for cause, employers and employees alike are encouraged to seek legal assistance. Lee Workplace Law would be happy to help.