As an employment lawyer, I am typically asked to determine whether an employer has justification to fire an employee “for cause.” Basically, these are situations where an employer is so upset about an employee’s workplace behaviour that it fires them on the spot, and refuses to provide prior notice or any form of compensation (i.e., termination pay and severance pay). The problem? If the termination is successfully challenged by the employee as unlawful, it could result in a claim of wrongful dismissal – and the employer having to pay significant severance pay and bad faith compensation.
Definition of “Termination for Cause”
A termination of employment (also called a “dismissal”) is an action taken by an employer to end the employer/employee relationship. While employers have a fundamental legal right to terminate an employee’s job at any time, this freedom comes with important limitations. Most importantly, employers must comply with Ontario’s employment standards legislation and human rights law, as well as a common law requirement to treat employees fairly and in good faith.
When an employer exercises its right to terminate an employment contract, it can generally do so in one of two ways: termination “with cause” or “without cause”.
Termination Without Cause in Wrongful Dismissal Claims
In a termination without cause, an employer is free to terminate the employee’s job for any reason, or no reason at all. Generally, this means that the employee’s job is being terminated for reasons that are not related to misconduct. As such, the employer is required to provide prior notice of termination, or pay them adequate compensation (termination pay, benefits continuation and severance pay).
The term “notice of termination” refers to the amount of time between when the employer first informs the employee in writing that their job will terminate, and the date upon when the termination takes effect (i.e., the employee’s last day on the job).
Alternatively, an employer can choose to provide the employee with “payment in lieu of notice” (instead of prior notice of termination), which means that the employer terminates the employee’s job “effective immediately,” and also pays the employee for the weeks of notice required by the legislation or, if greater than that required by legislation, as agreed to in an employment contract.
As a bare minimum, the employer must provide the requirements of the Employment Standards Act, 2000. However, this only applies if the employee has signed a valid employment contract that properly limits their severance entitlements to the statutory minimums. Otherwise, employers are required to provide much compensation by paying common law pay in lieu of notice of termination. Important to note: an employment contract between an employer and employee cannot provide for less notice of termination (or termination pay) than the minimum requirements set out in the employment standards legislation.
Termination with Cause in Wrongful Dismissal Claims
In employment law, the word “cause” means sufficient reason. termination with cause or termination with just cause means that an action or omission by the employee has irreparably damaged the employment relationship between the employer and the employee. Usually, termination with cause occurs when an employee is dismissed for a serious reason related to the employee’s conduct.
As a general rule, employers are required to prove the employee committed “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”.
Practically speaking, a termination with cause allows an employer to fire the employee immediately (i.e., without notice or payment in lieu), particularly where the employee is incompetent in their work performance, or the employee’s conduct is so unacceptable that it seriously impacts the company’s operations and/or destroys the trust required to continue the employment relationship.
Some Grounds Employers Rely on to Justify a Termination with Cause
- fraud, embezzlement or theft that is serious enough to warrant immediate dismissal
- insubordination, where an employee repeatedly breaks company rules, policies or procedures, and prior corrective discipline has not resulted in a change in behaviour
- wilful misconduct that is harmful or damaging to the company, its reputation, products, services, or customers
- any unauthorized disclosure of the employer’s confidential information
- engaging in a business that competes with the employer
- continued failure to perform duties owed to the company
- incompetence, where the employee’s performance is substandard and has not improved, despite the employer providing the employee with clear instructions and expectations, tools, guidance, support, training, prior warnings and enough time and opportunities to improve
The general rule of thumb is that employers have an incredibly difficult time justifying a termination with cause. For instance, for long-term employees with strong work performance, employers will also have to show that the incompetence or misconduct has not been condoned by a lack of action on the part of the employer over a long period of time, or that they only decided on a termination with cause as the “final straw” after following a progressive discipline process.
Given the serious consequences in depriving an employee of severance pay, a termination for cause is considered by the courts to be the “capital punishment” of employment law. Put simply, the courts expect employers to only use this form of discipline to punish employees for the worst aspects of workplace misconduct, including dishonesty, theft, insubordination or repeated bad performance.
Given the complicated nature of employment law, most employers find the entire process of dismissing an employee to be extremely difficult. Apart from obtaining the assistance of an employment lawyer to properly deal with an employment termination, it is important for employers to:
- become familiar with and act in compliance with employment standards legislation (Employment Standards Act, 2000 or Canada Labour Code, depending on the type of employer)
- have valid employment contracts and workplace policies
- treat employees fairly, honestly and act in good faith at all times, especially during the dismissal process
- handle the termination process in a professional way, to ensure it respects the employee’s dignity, privacy and self-esteem
What Constitutes a Wrongful Dismissal?
If an employer has failed to provide the employee with either reasonable notice of termination, or payment in lieu of notice, the employee may have grounds to sue the employer for wrongful dismissal. As employment lawyers, we typically notice that most severance packages do not include a dismissed employee’s full legal entitlements under common law (pay in lieu of notice), which means most terminations are wrongful dismissals.
In a typical wrongful dismissal claim, the employee’s main dispute is that:
- the employer terminated their job without cause but did not receive adequate notice or compensation
- the employer unjustly terminated their job with cause and did not provide severance pay
- the employer has unilaterally made significant changes to the employee’s terms and conditions of employment without the employee’s permission, which forces the employee to resign and claim a constructive dismissal
Contact an Employment Lawyer
If you are an employee in Ontario whose employment was recently terminated, you may be entitled to severance pay compensation. For instance, if you were offered a severance package, it is important for you to speak with an experienced employment lawyer to review and negotiate the termination package to learn about your rights and options to maximize your severance pay. In fact, most employees are entitled to more severance pay than their employers initially propose in the severance package, and with the assistance of an experienced employment lawyer, are able to improve their severance packages.
Bune Law is a Toronto employment law firm with expertise in wrongful dismissal claims and severance packages. If you believe you have been wrongfully terminated, call Bune Law at 647-822-5492 for guidance. Speaking with an employment lawyer will help you determine if you were wrongfully dismissed, what your options and next steps are, and help you secure what you are owed by your employer before accepting a termination package.
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