Employment termination with cause presents a huge financial risk for employers. Law experts share how you can avoid making costly mistakes in this guide
Terminating employment for serious reasons – also called just cause – is one of the most important decisions managers and HR professionals must take. If not done right, this move can lead to costly consequences.
In this article, law experts lay down the legal parameters for employment termination with cause in Canada. They will also list some best practices to help prevent employers from making costly mistakes.
If you’re an employer or an HR professional wanting to gain a deeper understanding of how termination for cause works, this guide can help. It’s still best, however, to consult with a labour and employment lawyer to get advice that suits your unique situation.
Canadian courts often refer to termination with cause as “the capital punishment of employment law” – and for good reason. Once dismissed for just cause, an employee faces serious consequences. These include lack of severance pay, ineligibility for employment insurance (EI), and tarnished reputation brought about by termination.
When employment termination with cause happens, an employer dismisses an employee without providing notice of termination or pay in lieu of notice. This is because the employee has engaged in serious acts that have undermined the entire employment agreement, making it impossible for the relationship to proceed.
“When you’re terminating an employee for cause, the reason that you’re doing that is because there’s been such a fundamental breach in the employment relationship that it can’t continue,” explains Lindsay Craig, associate at Sultan Lawyers, in an interview with CHRR. “Essentially, [there’s] willful misconduct.
“It’s really looking at what is the behaviour that has occurred, and does it meet that standard? But some factors would be looking at: Does this make the employment relationship irreparable? Are we able to continue based on this or has there been a complete lack of trust? Does this behaviour or pattern of behaviour show that the employee is not willing to cooperate with the employer?”
An employee can be terminated with cause for several reasons, but these require the employer to prove that such actions justify the termination. These include:
In a 2019 analysis for CHRR, then Stikeman Elliott partner Hélène Bussières and associate Charif El-Khouri explained the concept of cause.
“The Civil Code of Québec (CCQ) does not define the concept of ‘serious reason,’ but case law has generally defined it as an employee’s breach of his obligations that is serious (severe) in nature or repeated, as seen in the 2016 decision Garneau v. Gestion Universitas inc.,” the lawyers wrote.
“Serious reason or cause can take many forms. It can consist of one act or a multiplicity of acts. The more severe the act, the lesser the requirement that it be repeated. Of course, establishing cause is subject to the overarching principles of proportionality and progression of sanctions.”
The lawyers noted that cause can be classified in two ways:
“For example, an employer may have administrative cause to terminate an employee’s employment in a case of chronic absenteeism, if the absenteeism in question is not culpable. However, if it is culpable (unjustified by medical or other legally sufficient reasons), cause would be disciplinary in nature,” the lawyers wrote.
The lawyers added that this distinction has a direct impact on the threshold of proof that the employer must meet to establish its case before a tribunal.
In cases of employment termination with cause related to non-culpable underperformance – which is administrative – the employer must meet a specific burden of proof. Here are the Court of Appeal of Québec’s requirements for employers to establish performance-based termination, according to the lawyers:
the employee is aware of the objectives and standards they must meet
the employer advised the employee of the performance issues and their deficiencies in meeting these objectives and standards
the employer provided the employee with the required support to meet these objectives and standards
the employer provided the employee with a reasonable period to meet these objectives and standards
the employer clearly advised the employee that they would face termination with cause if they were unable to meet these objectives and standards
The lawyers also noted that “the concept of cause is one in constant evolution.” They cited the 2017 Superior Court of Québec ruling in Forget v. Technologies Clemex inc. The Superior Court upheld on judicial review an arbitral decision that essentially added a sixth criterion. This is that “the employer must attempt to re-assign the employee to a different position or department in an attempt to find an alternate solution less drastic than termination.”
Find out what recent rulings say about termination with cause in this article.
To establish whether employment termination with cause is justified requires an assessment of the alleged misconduct's context. According to Doug MacLeod, founder and principal of MacLeod Law Firm, the test is aimed at determining whether the employee’s misconduct gave rise to a breakdown in the employment relationship.
“The principle of proportionality underlies this approach: an effective balance must be struck between the severity of an employee’s misconduct and the sanction imposed,” he explains.
To find out if the misconduct is “sufficiently serious to strike at the heart of the employment relationship,” he says that the court follows a three-step approach:
He explained how the court followed these steps to come up with a decision on Fernandes v. Peel Educational & Tutorial Services Limited.
McLeod also listed some lessons that employers can learn from the case:
Before terminating an employee for just cause, keep the three-step approach to assessing just cause in mind. The court signaled that employers should be aware of any difficulties an employee may have that could affect job performance.
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 costly wrongful dismissal actions.
It is generally very difficult — but not impossible — to prove just cause. Employers should therefore consult with an employment lawyer before terminating an employee for just cause.
Read about two landmark cases that changed the way employers approached drafting employment agreements and termination clauses.
An unjustified decision to terminate an employee for cause can be costly. Here are some of the consequences an employer may face if employment termination with cause is proven to be wrongful.
A wrongfully terminated employee may seek payment in lieu of notice of termination of employment. This is equivalent to their total compensation for a period of reasonable notice of termination.
Reasonable notice of termination of employment is calculated based on all relevant factors. These include an employee’s position, compensation, and years of service. Reasonable notice is typically capped at 24 months.
Wrongfully terminated employees may also get other types of compensation, including those for moral or punitive damages and legal costs.
Unlike in most provinces, employees in Québec cannot renounce in advance their rights to receive reasonable notice. This means a contractual severance provision that yields entitlements below reasonable notice is unenforceable.
Moreover, Québec employees with two or more years of service – except for senior managers – who believe they were terminated without cause may file a claim for reinstatement. This can be done with the labour standards watchdog, Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST).
CNESST will then represent the employee free of charge before the Labour Administrative Tribunal (TAT). If it is proven that the employee was terminated without cause, the TAT may order reinstatement of employment plus backpay. This includes all compensation lost from the time of termination until reinstatement.
Check out what a law expert says about justifying employment termination for cause in this article.
Once the decision to terminate employment with cause is made, the employee must be advised of this decision. This execution phase can be fraught with its own perils, according to Bussières and El-Khouri. That is why the lawyers provided these best practices to help employers avoid costly mistakes:
The termination letter must describe the reasons for the employee's dismissal.
The termination letter must be drafted carefully, especially in Québec where the law does not recognize the concept of after-acquired cause. This means that once a reason is provided, the employer may not invoke independent causes for termination that it failed to invoke at the time of the termination.
Termination meetings should be conducted in a confidential setting. It should also be held with a company representative who will act as an observer. This is in addition to the representative who will advise the employee of the news.
After the termination meeting, the employer may offer the employee the following options:
Employers should avoid systematically escorting employees back to their office and out after the termination meeting. This is unless it is justified considering the company’s business and the nature of the faults committed by an employee.
If the employer alleges cause for the dismissal but still wishes to extend a settlement offer to the employee, the offer should be provided in a document separate from the termination letter. This ensures the employer is not forced to disclose the settlement offer should it file the termination letter in court. It also prevents the employer from having to seek court authorization to redact portions of the termination letter.
Employment termination with cause continues to be one of the biggest financial exposures for employers. While there’s no set formula for success, you can greatly mitigate risks by ensuring diligence in building the termination file and applying best practices once a decision is made.
If you’re looking for an expert to guide you through the process, our Best in HR Special Reports page is the place to go. In this section, we feature only industry professionals and companies that have been nominated by their peers and vetted by our panel of experts as dependable and respected market leaders.
Recently, we unveiled our five-star awardees for the Best Employment Lawyers and Law Firms in Canada. These legal experts can help ensure that your business is compliant with the labour and employment regulations in your jurisdiction.
Do you have experience in terminating employment with cause? How did it go? We’d like to see your story below.
