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Ontario employers are often surprised to learn that there are two different regimes governing employee termination entitlements. At common law, employees are presumptively entitled to “reasonable notice” of termination or pay in lieu unless, among other things, an employee is terminated for “just cause”.1 At the same time, employers generally must provide a terminated employee with advance notice of termination or pay in lieu, and sometimes severance pay, under the Employment Standards Act, 2000 (the “ESA”) unless the employee is dismissed for “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”. Whether “wilful misconduct” and “just cause” mean the same thing has been the subject of debate and discussion for some time.

The Court of Appeal for Ontario recently considered this issue head on in Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310. In that case, the employee – who had 30 years’ service – was fired without notice or pay in lieu after he touched a coworkers’ buttocks while inappropriately “joking around” with coworkers. He brought a wrongful dismissal action to challenge the just cause finding. The trial judge dismissed the lawsuit on the basis that there was just cause for dismissal. The employee appealed, asserting (among other things) that (1) there was no just cause; and (2) he was entitled to, at least, his ESA termination and severance entitlements because even if there was just cause, his conduct did not constitute “wilful misconduct” under the ESA.

The Court of Appeal affirmed the finding of just cause but allowed the appeal on the basis that the trial decision should have awarded the employee his ESA termination and severance entitlements.

Court confirms that the just cause test does not require procedural fairness

The Court of Appeal confirmed the applicable test for just cause: the employer must prove that the employee “engaged in conduct that is incompatible with the fundamental terms of the employment relationship”. Dismissal for just cause is warranted “when the misconduct is sufficiently serious that it strikes at the heart of the employment relationship.” To address these questions, the court must:

1. determine the nature and extent of the misconduct;

2. consider the surrounding circumstances; and

3. decide whether dismissal is warranted (i.e. whether dismissal is a proportional response).

The appellant employee argued that the employer could not prove that it actually engaged in this 3-part analysis before terminating his employment. In other words, the employee argued that the employer did not actually consider, before firing him, whether other disciplinary options were more appropriate. However, the Court of Appeal made it clear that the employer was under no procedural obligation to do so:

[64] The appellant is correct that the onus was on the respondent to prove that there were no other disciplinary measures that it could reasonably have taken and that dismissal was proportionate in all the circumstances. However, I do not agree that the respondent had a standalone duty to consider alternative measures, provided that in the result, the disciplinary measure that was ultimately imposed was proportionate.

[65] The core question on a case of just cause dismissal is “whether an employee has engaged in misconduct that is incompatible with the fundamental terms of the employment relationship”: Dowling, at para. 49. In order to meet its onus on this question, the respondent does not have to prove that it went through the process of applying the three-part test prior to terminating the employee, although that would certainly be the best practice in order to satisfy its onus in court…

The Court upheld the trial judge’s conclusion that the employee’s behaviour warranted a termination for just cause. Although not directly related to the “just cause” finding, the Court also made noteworthy general comments about overly “relaxed” or unprofessional workplaces:

[70] I would also add that this was a most unfortunate situation that arose out of an overly familiar and, as a result, inappropriate workplace atmosphere that was allowed to get out of hand. As this court said in Bannister almost 25 years ago, it is a workplace atmosphere that can no longer be tolerated. Although some may perceive it to be benign and all in good fun, those on the receiving end of personal “jokes” do not view it that way. And when things go too far, as they did in this case, the legal consequences can be severe. Every workplace should be based on mutual respect among co-workers. An atmosphere of mutual respect will naturally generate the boundaries of behaviour that should not be crossed.[1]

Employers may be ordered to pay ESA minimums even when there is just cause for termination

The noteworthy aspect of the Render decision is that the Court of Appeal concluded that though there was just cause for termination, meaning the employee had no entitlement to common law damages for wrongful dismissal, the employee was entitled to his ESA termination/severance entitlements because the evidence did not establish that the employee was fired for “wilful misconduct” for the purposes of the ESA.

The Court of Appeal agreed with and applied the following passages from an earlier decision, Plester v. Polyone Canada Inc.2011 ONSC 6068, aff’d 2013 ONCA 47 [emphasis added]:

The test is higher than the test for “just cause”.

In addition to providing that the misconduct is serious, the employer must demonstrate, and this is the aspect of the standard which distinguishes it from ‘just cause’, that the conduct complained of is ‘wilful’. Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the standard. Rather, the employer must show that the misconduct was intentional or deliberate. The employer must show that the employee purposefully engaged in conduct that he or she knew to be serious misconduct. It is, to put it colloquially, being bad on purpose.

… the distinction is quite obvious: Just cause involves a more objective test, albeit one that takes into account a contextual analysis and therefore has subjective elements. Wilful misconduct involves an assessment of subjective intent, almost akin to a special intent in criminal law. It will be found in a narrower cadre of cases: cases of wilful misconduct will almost inevitably meet the test for just cause but the reverse is not the case.

In short, for an employee to be disentitled to ESA termination/severance pay due to “wilful misconduct”, the employee must knowingly engage in conduct that he/she knows is misconduct. In the Render case, the Court of Appeal concluded that the employee’s intentional behaviour – i.e., touching his coworkers’ bottom – was not intentional misconduct:

While the trial judge found that the touching was not accidental, he made no finding that the conduct was pre-planned. Indeed, his findings with respect to the circumstances of the touching are consistent with the fact that the appellant’s conduct was done in the heat of the moment in reaction to a slight. Although his conduct warranted dismissal for cause, it was not the type of conduct in the circumstances in which it occurred that was intended by the legislature to deprive an employee of his statutory benefits.

As such, in a decision that is perhaps surprising, the Court of Appeal held that the employee should be paid his ESA termination/severance entitlements.

Terminating employees for just cause/wilful misconduct always carries unique risks. If your business or organization requires advice with respect to an employee termination, contact any member of Siskinds’ Labour and Employment Group.

1 Of course, employers and employees can generally contract out of the common law with a good employment agreement, which is one of the primary benefits of a written employment agreement prepared by legal counsel.

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