Different standards for denying fired employee common law notice, statutory minimum pay
It is important for employers in Ontario to remember that when they are terminating an employee’s employment “for cause” they need to be looking at two different standards – the common law standard of termination for just cause that disentitles an employee’s right to reasonable notice of termination and the wilful misconduct, disobedience or wilful neglect of duty standard under the Employment Standards Act, 2000 (ESA) which disentitles an employee’s right to minimum termination pay under the Act.
It is therefore possible that the same conduct may reach the threshold of “just cause” under the common law but will not reach the higher threshold of wilful misconduct, disobedience or wilful neglect of duty under the ESA. Such circumstances would disentitle the employee from common law reasonable notice, but leave them with the entitlement of minimum standards termination pay under the ESA.
A recent case from Ontario demonstrates this.
Cabin Country Realty Ltd. is a real estate brokerage based in Kenora, Ont., that focuses on cottage buyers and sellers in Northwestern Ontario. The defendant, Harold Warkentin, was the former owner of Cabin, which he founded in 1990. At the time of the this matter the principles for the plaintiffs were Chris Clark and Graham Chaze.
For years Warkentin was the sole officer and director and worked as a realtor and Broker of Record for Cabin. Despite this, he did not have an employment agreement with Cabin. In December 2016 Warkentin agreed to sell Cabin to 2551965 Ontario Ltd. A Share Purchase Agreement (SPA) was executed wherein Warkentin would become an employee as a real estate agent. This SPA also included other covenants, including non-compete and non-solicitation clauses.
In April 2017, a conflict developed between Warkentin and Chaze which led to an altercation between them at Cabin’s offices. Warkentin was then terminated for cause on Oct. 10. The reasons for his termination were provided to him and included:
Warkentin was accordingly not provided with any termination pay - neither his minimum termination pay under the ESA nor any reasonable notice.
The issues relating to his termination were determined to be: whether Cabin had just cause to terminate his employment; and whether his conduct constituted willful misconduct and willful neglect of duty under the ESA.
The court found that Warkentin engaged in three acts which gave Cabin just cause for termination, which included: writing unprofessional and insulting notes in the Top Producer system; threatening Chaze with violence; and engaging in conflict of interest on a sale.
Warkentin admitted to writing at least four unprofessional and insulting notes in Cabin’s in-house computer system, Top Producer, including comments calling Chaze a “greedy a--hole.” The court found that these notes spoke for themselves and that they were unacceptable, unprofessional, and inappropriate messages for a database that all employees could see and access.
Regarding the verbal altercation, the court found that Warkentin had “started” the altercation by saying “f--- you Graham” to Chaze in front of Chaze’s wife, young child, and two office staff. Warkentin then threatened Chaze by saying, “If you ever talk to me like that again I am going to hit you.” The next day Warkentin refused to apologize to Chaze and instead told Chaze that he “had no balls.” The court found that Warkentin did not utter these threats spontaneously and had ample time to think about them before making them. Accordingly, the misconduct was significant and unacceptable.
Regarding the conflict of interest, the court found that Warkentin misled a buyer with respect to which broker was actually representing him and that Warkentin facilitated the buyer signing a listing agreement with another brokerage, without the permission of Cabin. The court found that Warkentin willfully and intentionally engaged in this conflict of interest.
The court found that only two of these acts rose to the level required for acts of wilful misconduct and wilful neglect of duty within the meaning of the ESA, which included threatening Chaze with violence and engaging in a conflict of interest in a sale. The court gave the same reasoning for the threats that Warkentin made to Chaze as he did when analyzing whether these actions reached the threshold of just cause under the common law. With regard to the conflict of interest, the court found that Warkentin’s actions led the buyer to the conclusion that Warkentin was affiliated with Cabin, and that retail customers cannot be expected to understand the nuances of agency law. The court found that Warkentin was acting out of “pure spite” with this transaction.
The wrongful termination suit was therefore dismissed.
It is important for employers to remember that there are two standards by which to measure inappropriate conduct when terminating an employee’s employment for just cause. The first is the just cause standard at common law that, if met, would disentitle an employee’s right to reasonable notice of termination. However, an employee’s behaviour may meet this threshold but still not go so far as to meeting the threshold of wilful misconduct, disobedience, or wilful neglect of duty under the ESA, which disentitles an employee to their minimum standards of termination pay under the act.
Hayley Smith is an employment lawyer and workplace investigator at Turnpenney Milne in Toronto.
