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Last summer a significant amount of media attention was focused on employees being terminated for actions that occurred outside of working hours. One of the most notorious cases involved a unionized Hydro One employee who was dismissed for making vulgar and sexist comments to a television news reporter while he was intoxicated at a soccer game.

The employee was not at a Hydro One event, nor did his comments indicate any affiliation with his employer. Rather, the employee’s comments received significant attention on social media, where a number of individuals identified him as a Hydro One employee. This, in turn, led to coverage in more mainstream media and calls for his termination; calls that Hydro One ultimately heeded.

News reports this week indicate that the employee has since been reinstated to his position at Hydro One. This begs the question: how can employers best protect their business identities and goodwill when employees engage in potentially damaging conduct?

Regulating Off-Duty Employee Conduct

Employees must act with good faith and fidelity to the employer. Both courts and arbitrators have clearly established that an employee who engages in conduct that is prejudicial to the safe and proper conduct of the employer’s business may be subject to discipline, regardless of whether the conduct occurs at work or off duty. Where the conduct occurs in the employee’s private life, discipline may be appropriate where a loss of public confidence might occur if the employee’s misconduct is associated with the employer’s business.

For example, in Kelly v. Linamar Corporation, 2005 CanLII 42487 (ON SC), the Court found that the employer had cause to dismiss an employee who had been charged with (rather than convicted) of possession of child pornography. Although the employee had not been convicted, the charges alone risked the reputation the employer had built in the community, which included promotion of activities involving youth. The Court upheld the termination, finding that the employer had built up a positive reputation in the surrounding community and that “a company is entitled to take reasonable steps to protect such a reputation and the termination of [the employee] was just such a step” (at para 31).

Importantly, however, employers must apply a contextual approach in determining whether to terminate an employee for cause, without notice or payment in lieu of notice. The Supreme Court of Canada has clearly stated that employers are required to take into account all relevant factors arising from the context of the employment relationship, and to balance the severity of an employee’s misconduct and the sanction imposed. In other words, a “one size fits all” approach to an employee’s misconduct, whether at work or home, may be difficult to support in the event that it is challenged before an arbitrator or court.

The Hydro One Case

In public statements immediately after the employee’s dismissal, Hydro One made clear that its decision to terminate the employee was based largely on a violation of the company’s Code of Conduct and the “reprehensible” nature of the employee’s actions.

Importantly, Hydro One’s then-CEO Carmine Marcello stated that his priority upon becoming CEO was to transform Hydro One’s culture which, in turn, led to the development of the Code of Conduct and a brochure available to all employees outlining the company’s “core values”. The terminated employee, Mr. Marcello was quoted as saying, “clearly… did not demonstrate those values”.

The Value of Settlement?

As noted above, the employee has since been re-instated to his position at Hydro One. It is not clear whether the re-instatement was as a result of an arbitrator ordering Hydro One to re-instate the former employee after a hearing. However, given the fact that the incident only occurred in May and the lengthy timelines usually involved in grievance arbitration, it would not be surprising to find that the re-instatement was as a result of a settlement between Hydro One and the employee’s union.

If that is the case, some may question why an employer in Hydro One’s position would settle such a case rather than proceed to arbitration?

There are multiple reasons an employer may consider such a course of action. For example, arbitrations can be extremely costly in terms of preparation time and legal fees, with no way of recovering those costs. Furthermore, given the extremely high bar set by arbitrators and the courts for upholding a termination for cause, there is significant risk in all but the clearest of cases that the employer would be unsuccessful at arbitration. However, where an arbitrator finds that some level of discipline is warranted, he or she is generally free to substitute another form of punishment (for example, a suspension). As a result, it is sometimes more practicable for the employer and union to agree to re-instate the employee with a suspension, avoiding the time and resources on an arbitration hearing.

Finally, in cases like Hydro One it is sometimes necessary for business reasons, including public perception and/or employee morale, to take strong action in the face of apparent employee off-duty misconduct, even if those decisions may ultimately be successfully challenged in court or at arbitration. Where such a case is settled, and those settlement documents are kept confidential, the employer may still able to maintain its strong public position against the offending behaviour, despite the ultimate outcome of the case.

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