Navigating employment law can be tricky, especially when it comes to termination. Navigating employment law can be tricky, and one common question arises: can an employer change a without-cause termination to with-cause? Understanding the principles behind employment termination and wrongful dismissal is critical for both employers and employees.
A recent Alberta case, Ayalew v. The Council for the Advancement of African Canadians, 2023 ABKB 113, provides an important cautionary tale for employers and employees alike about the distinction between without-cause and with-cause dismissals. Most importantly, it provides guidance on the question if an employer can change a without-cause termination to a with-cause termination afterwards.
This case is an insightful read for anyone seeking guidance from an employment lawyer or a wrongful dismissal lawyer on terminations of employment. While not binding precedent in Ontario, it does provide helpful guidance by emphasizing similar caselaw requirements.
Can an Employer Change a Without-Cause Termination to With-Cause?
The short answer to whether an employer can change a without-cause termination is no: once termination is executed without cause, and severance is provided, courts generally prevent the employer from later asserting cause. Experienced employment lawyers have seen this scenario multiple times, and the consequences of trying to change a dismissal can include legal disputes and claims of bad faith.
Ayalew v. The Council for the Advancement of African Canadians, 2023 ABKB 113
The central issue in the Ayalew case was straightforward but critical: once an employer terminates an employee without cause, can it later argue the dismissal was actually for cause?
The Court’s answer: No.
If an employer knowingly dismisses an employee without cause and provides severance or termination pay, it cannot later change course to claim just cause, even if allegations existed at the time. This ruling underscores the importance of careful decision-making and clear communication when terminating employment. In other words, an employer can’t have their cake and it eat too.
This case underscores the critical importance of employers carefully evaluating termination decisions and clearly communicating the basis for dismissal.
Facts of the Case
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Mr. Tesfaye Ayalew served as Executive Director of the Council for the Advancement of African Canadians for ten years.
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Prior to his termination, multiple employees raised concerns alleging bullying, harassment, sexual harassment, discrimination, and mistreatment.
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The employer placed Mr. Ayalew on administrative leave and initiated an investigation. Interim and final reports could not substantiate the allegations against him.
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Despite the allegations, the employer terminated Mr. Ayalew without cause, providing eight weeks’ termination pay in compliance with the Alberta Employment Standards Code, and offered him an additional payment conditional on a release, which Mr. Ayalew declined.
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Mr. Ayalew sued for wrongful dismissal. The employer later argued that the dismissal was in fact for cause, citing “newly discovered information” and a claimed mistake in relying on the investigator’s report.
Key Legal Issue
Can an employer change a without-cause termination to a with-cause termination when the allegations or conduct supporting cause were already known at the time of termination?
Court’s Decision
The Court concluded no, an employer cannot do this. Key findings included:
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Clear evidence of a without-cause termination
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Termination letter explicitly stated “without cause.”
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No reasons or performance shortcomings were cited at the time of dismissal.
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Employer paid statutory termination pay per employment standards legislation.
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Board minutes confirmed the vote and intention to terminate without cause.
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No mistaken reliance on the investigation
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The employer claimed it mistakenly relied on an all-clear report.
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Evidence showed the employer did not rely on the report, nor offered reasons for the termination.
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No after-acquired information
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All allegations and relevant information were known prior to dismissal (this is not a case of after-acquired cause” for termination).
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No freestanding right to recharacterize
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Caselaw cited by the employer (Foerderer v Nova Chemicals, Lake Ontario Portland Cement) did not support changing a without-cause termination to a termination with-cause.
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Principle of condonation/waiver applies: knowingly terminating without cause and paying severance precludes later asserting cause.
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Practical Insight from an Employment Lawyer
In my practice as an employment lawyer, I have seen employers terminate “without cause” while trying to hedge their bets by later pointing to alleged performance issues or policy breaches. In plain terms, that approach is an employer’s attempt to have it both ways – and it almost always backfires.
Ontario courts, and employment lawyers who regularly deal with termination disputes, recognize that employers generally get only one kick at the can when justifying a dismissal. A termination letter that hints at misconduct while offering a low severance payment does not promote resolution. Instead, it hardens positions and often drives employees to seek legal advice and pursue wrongful dismissal claims. Oftentimes, this can then expand to include claims of breach of the duty of bad faith, mental distress, or discrimination allegations.
I have seen this situation come up several times in practice, and it usually leads to the same result: unclear or heavy-handed termination strategies erode trust, increase legal risk, and make resolution harder rather than easier.
Key Lessons
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Careful Assessment: Employers must thoroughly evaluate whether cause exists before deciding to terminate without cause. Once a decision is made, it is difficult or impossible to later assert just cause.
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Clear Communication: Termination letters must explicitly state the nature of the dismissal. If there is a possibility that just cause may exist, the employer should clearly indicate that a without-cause termination is without prejudice to its position.
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Legal Compliance: Providing severance or notice per employment standards codes confirms the dismissal is without cause and prevents later claims of mistake.
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Consistency Protects Against Litigation: Avoid conflicting messages to the employee; ambiguity can undermine the employer’s legal position and lead to costly disputes.
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Employee Dignity & Corporate Culture: Clear, respectful communication preserves the employee’s dignity, reduces reputational risk, and maintains workplace morale.
Conclusion
Ayalew is a cautionary tale for employers: once an employee is terminated without cause, they generally cannot simply change a without-cause termination to with-cause. Clear communication, careful evaluation, and proper legal guidance protect both the employer and the employee, maintaining trust and reducing legal exposure.
In the realm of Ontario employment law, clarity is not just a virtue; it is a necessity. Put simply, avoiding conflicting messages that may lead employees to seek legal advice.
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