When Can an Employer Terminate an Employee for Just Cause?

Sep 20, 2016

“Just Cause” is a legal term that describes when employers are justified in terminating an employee without providing the employee any notice of termination.

In a recent decision, the Court found that a teacher’s misconduct was serious enough to warrant a just cause termination.

The Case, Fernandes v. Peel Educational & Tutorial Services Limited.

A private school terminated a teacher for just cause after discovering that the teacher had submitted falsified and incorrect student marks. The teacher still submitted inaccurate marks although given two opportunities and lied to his employer to cover up for the mistakes.

The Test for Just Cause

An employer is justified in dismissing an employee for just cause when the employee’s misconduct is “sufficiently serious that it struck at the heart of the employment relationship.” There are three important factors:

  1. determine the nature and extent of the misconduct;

Recognizing that teachers occupy a special position of trust and have professional obligations to students and the school, the teacher’s actions constituted serious misconduct. The school trusted the teacher to properly evaluate student progress. The teacher intentionally acted against these interests.

  1. consider the surrounding circumstances;

The courts will look at both the employer and employee’s circumstances to determine whether just cause exists. Most importantly for the teacher, he did not describe anything going on in his life that would affect his job performance. If he did, this could have explained his actions.

For the employer, the fact that the school could have suffered serious harm mattered greatly. It was a private school whose accreditation relied on proper evaluation standards. The teacher endangered the school’s accreditation. The Court stressed that even though the school did not suffer harm, it is the severity of the potential harm that is considered in just cause.

  1. decide whether dismissal was warranted.

This last factor combines the above two to determine whether dismissal was warranted. Despite the duration of the acts was short, 2 months, and the teacher was a long serving employee, the misconduct was sufficiently serious that it struck at the heart of the employment relationship.

Lessons to be Learned:

  1. Before terminating an employee for cause, keep the three above factors in mind. The Court signalled that employers should be aware of any difficulties that the employee may have that could affect job performance.
  2. Terminating an employee for just cause is a serious decision and should not be made lightly. If employers do not have just cause, they could face a costly wrongful dismissal action.
  3. Some judges refer to an employee termination as economic capital punishment. It is generally very difficult – but not impossible – to prove just cause. Employers should therefore consult with a lawyer before terminating an employee for just cause.

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

There are many ways to attack the termination clause in an employment contract. 

I am now surprised if employee counsel does not claim that their client’s  termination clause is not legally enforceable - usually because the termination clause does not allegedly comply with the Employment Standards Act.

This blog considers a case, McKercher v Stantec Architecture Ltd., 2019 SKQB 100, where an employee successfully attacked the termination clause in his contract because he did not explicitly agree to it after being promoted. 

The Facts

In 2006, Mr. McKercher commenced employment as a staff architect. The termination clause in his employment contract stated: 

Termination other than for cause will be with notice or pay in lieu of notice, based on your length of service. If the Employer terminates your employment for other than just cause you will receive the greater of:

  1. a)   Two weeks notice or pay in lieu of notice during the first two years of employment increasing by one week for each additional completed year of employment to a maximum of three months notice or pay in lieu of notice.

      or

  1. b)   The minimum notice of termination (or pay in lieu of notice) required by applicable statutes.

Eleven years later, when Mr. McKercher was employed as a Business Centre Sector Leader, his employment was terminated. The employer paid him the three months termination pay he was owed under his employment contract.

 

Another way to attack a termination clause: What is the changed substratum doctrine?

An Ontario judge in a 2012 case, MacGregor v National Home Services, 2012 ONSC 2042 (CanLII), described this legal doctrine as follows: "The changed substratum doctrine … provides that if an employee enters into an employment contract that specifies the notice period for a dismissal, the contractual notice period is not enforceable if over the course of employment, the important terms of the agreement concerning the employee’s responsibilities and status has significantly changed."

 

The rationale for this doctrine has been described by one judge, Schmidt v AMEC Earth & Environmental Ltd., 2004 BSCS 2012 (CanLII), as follows: "In my view, it was incumbent on the defendants to advise Mr. Schmidt that they intended to continue to rely upon the termination provision set out in the Agreement when substantial changes in his employment occurred. This would have allowed him to consider the matter and to negotiate for other terms. If the defendants wished to continue to rely on the termination provisions there ought to have been a ratification of the provisions as the nature of Mr. Schmidt’s employment changed."

 

Decision

The judge hearing this case relied on the following factors when deciding not to enforce the termination clause in the employment contract: ”...there is no evidence that (the employer) made it clear to the (employee) that the notice of termination provisions were intended to apply to the positions to which he was promoted. The employment agreement contains no express wording to this effect, nor does it contain any wording to support the inference of such an intent. Further, and in keeping with the analysis in Schmidt, the Court received no evidence that, as it promoted the plaintiff, SAL reasserted its understanding and expectation that the notice of termination limit would remain in effect.”

 

Lesson to be learned:

An employer should make it clear that the termination clause in an employment contract applies when an employee is promoted. This expression of this intent should be in writing and should be clear and unambiguous. I recommend that an organization’s employment be reviewed by an employment lawyer every year or two. If your employment contract does not address this issue then think about doing so the next time it is reviewed.

 

For 30 years, Doug MacLeod of   the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

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