In cases of serious misconduct, an employer may be justified in terminating an employee for cause. This means the employer does not need to pay the employee certain termination entitlements, such as common law reasonable notice. 

Only sufficiently serious misconduct that is incompatible with the employment relationship can give rise to termination for cause. This raises the question of whether engaging in a relationship with a co-worker could rise to this level.  

This article looks at this issue with reference to the recent decision of the Ontario Superior Court of Justice in the case of Rutledge v Markhaven Inc. In this case, an employee was let go after she admitted to being in a romantic relationship with a co-worker shortly after the time that she was involved in a decision to promote him. 

Termination for cause may be justified if the employee engages in conduct incompatible with the employment relationship

As we have explained in a previous article, an employer may be entitled to dismiss an employee for cause if they have engaged in conduct incompatible with the employment relationship’s fundamental terms. 

However, given that an employee dismissed for cause can sue for wrongful dismissal, it is important for employers to conduct a proper investigation to ensure that the employee’s conduct justifies termination for cause. 

When a court is asked to determine whether misconduct justified termination for cause, it looks at the nature and extent of the misconduct and the circumstances of the employment relationship. It then decides whether the termination was a proportional response to the misconduct because it caused a breakdown in the employment relationship. 

What types of misconduct might cause a breakdown in the employment relationship?

The misconduct must be sufficiently serious to cause a breakdown in the employment relationship. Some types of misconduct that might, depending on the particular circumstances of the case, rise to this level include:

• destroying property or being insubordinate; 
• engaging in dishonest behaviour, such as fraud or theft;
• harassing a co-worker; and 
• interfering with the employer’s best interests by placing oneself in a situation that constitutes a conflict of interest. 

Engaging in a workplace relationship could result in a breakdown in the employment relationship, for example, if the relationship resulted in a conflict of interest. However, this will only sometimes be the case. 

Plaintiff had romantic relationship with co-worker after he was promoted

In the recent decision, the plaintiff employee had worked for over 20 years for a long-term care facility in Markham. By her termination in March 2016, she held the top position of Executive Director. 

The long-term care home was a religious-based facility. It contracted with a company that provided food and housekeeping services to its residents. 

In June 2014, the plaintiff and one of the directors met with the contractor. The facility’s maintenance and supply services manager, who oversaw maintenance, laundry and housekeeping, was not performing his duties satisfactorily. The meeting suggested that the manager of food services, Mr. Sathyaseelan, employed by the contractor, be given an expanded role of also managing the laundry and housekeeping staff. The contractor then asked him if he wanted to take on these new responsibilities. The raise was minimal, about $3,000 per year.

According to both the plaintiff and Mr. Sathyaseelan, their relationship became romantic following this promotion. 

Plaintiff was terminated after an investigation

After the two disclosed their romantic feelings to each other in January 2015, the plaintiff spoke to human resources about whether the relationship raised any conflict of interest. The director of human resources said there was no policy prohibiting it. Justice Dow said:

“There was a sound basis to accept this statement given prior incidents of romantic relationships at Markhaven and, importantly, such as when the Maintenance Manager reported to her spouse who was then the Executive Director.”

The employer then received two complaints about the relationship, which alleged that Mr. Sathyaseelan got the promotion around the same time it started. The Board decided to investigate, with one of the members writing, “this relationship is becoming more obvious and undermines Markhaven’s reputation as a Christian home, bringing disgrace.” 

The plaintiff was suspended with pay after admitting to having been in a personal relationship with Mr. Sathyaseelan. Shortly after, she was terminated and started wrongful dismissal proceedings.

The plaintiff did not engage in conduct warranting termination for cause

The plaintiff agreed that she was in a fiduciary relationship with the defendant and was always expected to put the employer’s best interests ahead of her own personal interests.

However, Justice Dow decided that Mr. Sathyaseelan’s promotion was done in conjunction with his employer, the contractor, in recognition that he was one of their best managers and to deal with an increase in cleaning and food costs. It also happened before any romantic relationship developed.

His Honour decided that the plaintiff had not breached her fiduciary duty to the employer. As a result, the judge determined an appropriate period of common law notice. His Honour applied the Bardal factors and settled on a notice period of 22 months. 

The court awarded the plaintiff almost $250,000 in damages. This included $50,000 in moral damages for some of the defendant’s conduct during the investigation and litigation, which caused mental distress beyond the ordinary psychological damage resulting from dismissal. 

Contact Haynes Law Firm in Toronto for Guidance on Termination for Cause

The Haynes Law Firm helps both employers and employees deal with conduct that could give rise to termination for cause. Paulette Haynes, an experienced employment lawyer, helps employers to respond appropriately to instances of employee misconduct and assists employees in enforcing their rights when an employee is terminated without receiving all their termination entitlements. Please contact us through our online form or by phone at 416.593.2731 to arrange a consultation.