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Labour & Employment Law Blog

Termination for Cause is Still Possible in Ontario but the Bar for Cause Cases Remains High

To remind our readers, “termination for cause” occurs when the employer dismisses an employee without providing notice of termination or a severance package, as the employer has alleged that there is “cause” for the termination. Termination for cause is appropriate in cases where the employee has engaged in serious acts of misconduct, habitual neglect of duty, grave incompetence, etc. The acts or omissions must have gone to the root of the employment agreement, and it will be impossible for the employment relationship to continue.

In Ontario, the bar in cause cases is high and the onus to prove it is on the employer. Ontario courts use a contextual framework where cause is at issue. Generally, the longer the length of service the less justified it is for a reasonable employer to terminate an employee for just cause based on certain conduct.

Recently, the Ontario Superior Court dealt with a cause case where the employer was successful. You can read that case here. We will discuss this case in this blog and note why the employer was successful given the circumstances. However, we will also discuss why employers should approach this case with caution and perhaps, to use a colloquialism “with a grain of salt” given the general difficulty in navigating an employer’s termination onus. We feel that there may be a safer route to take on the employer’s side to minimize liability for potentially firing an employee for cause when that cause is questionable.

In this case, the plaintiff employee was approximately 43 years-old when his employment was terminated by Costco without notice in April 2015. The employee had deleted Costco’s website that he had created for Costco’s own internal use. In 2014 he had built the google cloud-based website for Costco’s toy department where the department’s employees could share files with one another. There was no dispute between the parties that the website was Costco’s property. The employee had almost 20 years of service with Costco with generally positive performance reviews. At the time of his termination, he was an assistant buyer which was considered a managerial position.

The plaintiff employee had complained of a toxic relationship he had with certain of his colleagues within the toy department such that he ostensibly experienced mental and emotional suffering due to that toxic work environment. He had taken two medical leaves of absence from his employment with Costco and had returned to work from his second medical leave in February 2015. Upon his return, he had requested a transfer and provided a medical note in support of his request. It was not disputed that the relationship between the employee and certain colleagues within the toy department was rather unfriendly.

In April 2015 the employee began his new position in the lawn and garden department. Thereafter, he was in receipt of an email from a colleague (one of the colleagues that he held in contempt given the supposed toxic environment) from the toy department requesting access to the website and to transfer the ownership of the website from the employee to the employee’s colleagues who remained in the toy department. In response, the employee deleted the website. When Costco was able to restore the website, the employee deleted it a second time. In both instances, the deletions of the website were deliberate. In response, Costco terminated the employee’s employment for cause.

The court, in reviewing the relevant case law, concluded that Costco had “just cause” to summarily terminate the employee. The court first cited McKinley v. BC Tel, where the court went on to hold that the “core question” for determination is whether the employee engaged in misconduct that is incompatible with the fundamental terms of the employment relationship. The court goes on to note that this a factual inquiry that must be determined using a contextual examination of the nature and circumstances of the misconduct. Then the court cited Dowling v. Ontario (Workplace Safety and Insurance Board), where the Ontario Court of Appeal held that the aforementioned contextual examination requires a three-step analysis. First, the nature and extent of the misconduct must be examined, then the surrounding circumstances must be examined following a decision on whether or not the dismissal is warranted.

The court went through the above test and set out that the Costco had “just cause” to terminate the employee as the employee’s actions were deliberate and that the employee did not act with integrity or honesty. The court also cited Render v. ThyssenKrupp Elevator (Canada) Limited which is a recent 2022 Ontario Court of Appeal case which addresses the distinction between “just cause” and “willful misconduct” within the Employment Standards Act (“ESA”). For more information about that particular case please read our blog about which can be found here. To remind our readers, the Ontario Court of Appeal in Render went on to set out the law on the prescribed sections of the ESA that would disentitle a terminated employee to receive statutory benefits. Namely, an employee is not entitled to notice, or termination or severance pay under the ESA when an employee has been “guilty of willful misconduct, disobedience or willful neglect of duty that is not trivial and has not been condoned by the employer.” And that under the ESA, “willful misconduct” means that the employee must do something deliberately, knowing they are doing something wrong. In the case at hand, the court concluded that the employee’s conduct also amounted to wilful misconduct that met the test for just cause for summary dismissal statutorily.

As such, the action was dismissed. The court also dismissed the employee’s claims of improper treatment and was not entitled to any damages for mental distress allegedly suffered by the employee as a result of his termination. Nor was the employee entitled to damages for a breach of the duty of good faith and for a breach of the employee’s human rights. The court was not convinced that the employee had suffered emotional distress from the toxic work environment that he claimed he had had to endure.

Our Thoughts

This case is a reminder that summarily dismissing an employee for cause is still possible in Ontario. This case makes no changes to the case law or jurisprudence. Ontario courts moving forward will use the same analysis they had previously used, namely a contextual approach to determine if cause is appropriate in circumstances where misconduct or, in the case of the common law standard, incompetence is alleged. As such, the bar is still high and the onus to prove cause remains on the employer.

We would also like to address certain cautions that we see in this case specifically regarding employers firing employees for cause. The first being that the employee in this case was a long-term employee with 20 years of service with generally positive performance reviews for most of those years. Generally, the bar is even higher in terms of making a successful cause claim where an employee is a long-term employee and has had positive performance reviews.

Secondly, cause cases usually have more than one event or instance of bad behaviour. If the misconduct occurred only once, then the courts are less likely to agree with the employer that the employer does in fact have enough to prove cause.

Thirdly, the employee had made serious claims of a toxic work environment. He had asked the court to look at his actions in the context of that toxic work environment. He had also claimed damages for the breach of the employer’s duty of good faith (or moral damages) and for human rights. To remind our readers, the courts have set out that moral damages are damages that should be awarded to employees in situations where the employer has breached its duty of good faith and fair dealing in the manner of dismissal. For instance, moral damages may be appropriate when the employer engages in conduct that is untruthful, misleading or unduly insensitive at the time when the employee is being dismissed. There is no need for an independent or new cause of action against the employer in order to claim moral damages. However, in order to sustain a claim for moral damages, the employee must show that they endured mental distress because of the actions of the former employer. In this case, the court did not buy the claims of trauma by the employee and set out that those claims by the employee were speculation on his part. The court also refused to look at his actions in the context of the ostensible toxic work environment that he claimed he was suffering from.

In short, despite the above, generally speaking, if there is evidence of a toxic work environment that the employee is suffering form, the courts will use that as a factor in their analysis of whether or not there was cause to dismiss the employee. And while it entirely remains possible for long-term employees with positive performance reviews to be dismissed for cause, the above case ought not to be regarded as a cart blanche or blueprint for the summary dismissal of employees in Ontario. As an employer, look at this case with caution.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.