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Serious insight for serious situations.

Serious insight for serious situations.

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#1 Termination pay, termination notice, termination with or without cause and pay in lieu of notice (Part 1)

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There are a lot of overlaid concepts under this rubric so the first thing I’ll do is break those down into their components. Given the number of components in this topic, my response to this first “issue” will be posted over several days, so keep on coming back for updates!

Termination with or without cause

The Common Law Position

Where an employer is unilaterally exercising its rights to terminate employment, the first question it must ask itself is whether or not the termination is “for cause” or “without cause”. This determination is critical as it will impact on an employee’s entitlements on termination. Simply put, an employee who is terminated “for cause” is not entitled to any notice (or pay in lieu) whereas an employee who is terminated “without cause” may have substantial entitlements to notice (or pay in lieu) on termination.

Determining whether an employer has cause to terminate employment is a two-step test. First, there must be conduct on the part of the employee that fails to meet performance expectations. Second, it must be assessed whether the employee’s failure is of such a serious nature as to create a fundamental breakdown in the employment relationship that cannot otherwise be remedied. To quote the Supreme Court of Canada: “…just cause for dismissal exists where the [conduct] violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamentally or directly inconsistent with the employee’s obligations to his or her employer.”

The most common reasons supporting a termination for cause are serious misconduct (significant breach of workplace rules or standards of conduct), repeated unexcused and unsupported absence and/or tardiness, habitual neglect of duty, incompetence, gross insubordination (willful disobedience of an employer’s orders), and insolence (mocking, disrespectful and abusive conduct).

Given the second step of the “cause” analysis, outlined above, except the most serious and rarest cases, a single act will not be sufficient to justify termination for cause. Similarly, an employer will often have an obligation to apply progressive discipline, that is to apply increasingly severe forms of discipline (from a verbal warning, to a written warning, to potentially more serious forms of discipline) and clearly communicate the corrections in conduct expected before it will be able to terminate for cause.

The Employment Standards Act Position

The final (and most confusing) wrinkle in this puzzle is that even where an employer can meet the test for “cause”, as defined by the courts, the employer may still be required to give the minimum notice and severance pay required by the Ontario Employment Standards Act (ESA). This results from the fact that the ESA defines “cause” much more restrictively than do the courts. Specifically, in order to be disentitled to ESA notice and severance, the employer must be able to demonstrate that the employee is “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial”. So, for example, an employer may have the ability to terminate for cause where it can demonstrate incompetence, as incompetence does not meet the ESA test. The employer will still be required to provide minimum ESA notice and severance pay.

Practical Advice

The level of discipline to be applied in any given instance, and whether any one or successive instances will be sufficient to ground a termination for cause, will be dependent on all of the circumstances of the case. As a result, there is no sure-fire guidance that can be provided of when an employer will have cause to terminate. More than in any other issue arising in the workplace, it is imperative for an employer to consult legal counsel prior to proceeding with a termination for cause.

An employer must meet an extremely high threshold in order to successfully assert cause. As a result, except in the clearest of circumstances, it would be unusual for an employer to rely on cause. Even then, employers asserting cause for termination will often offer a without prejudice separation package in exchange for a full and final release of all claims.

Adrian Ishak

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About the Author: Toronto Employment Lawyer Adrian Ishak’s practice focuses on all aspects of employment law including employee relations, terminations, wrongful dismissals, employment contracts, and employment policies. He provides strategic counselling on a number of human resources, privacy and human rights issues. With a joint Ontario and Québec call and with experience in both jurisdictions, Adrian guides his clients through employment standards matters, pay and employment equity, and human rights obligations in Canadian common law and Québec’s civil law jurisdiction. Adrian represents clients in both English and French.