Termination of an employee for cause may be justified in cases involving wilful misconduct or serious neglect of duty. It starkly contrasts with the common situation of termination without cause, in which the employee may have more extensive entitlements, such as a common law period of reasonable notice. 

This article looks at termination for cause, including some types of conduct that may justify termination for cause and the implications and risks surrounding such a termination. Termination for cause is fact-specific, and employers and employees are likely to need advice from an experienced employment lawyer.

What is termination for cause?

Termination “for cause” or with “just cause” is a common law concept developed by case law. An employer may be entitled to dismiss an employee for cause if the employee has engaged in conduct incompatible with the employment relationship’s fundamental terms. 

Termination for cause is not a step to be taken lightly by employers. The misconduct needs to be sufficiently serious to cause a breakdown in the employment relationship.

What types of conduct might warrant termination for cause?

Generally speaking, the following types of conduct are examples of what may qualify for a termination for cause:

• dishonesty, such as theft or fraud;
• insubordination;
• workplace harassment, such as sexual harassment;
• neglect of duty that is severe or habitual; and
• conflict of interest. 

However, what constitutes just cause depends on the particular circumstances of each case. 

What are the implications of a just cause termination?

The implications of a just cause termination differ from those following a dismissal without cause. Termination for just cause means that the employer is not required to give reasonable notice of the termination or compensation in lieu of notice (at least as required under the common law).

However, it has become clear that termination for cause does not necessarily remove the employee’s entitlement to the minimum statutory period of notice required under the Employment Standards Act (ESA). This is because, under the Termination and Severance of Employment Regulation, an employee is not entitled to reasonable notice or severance pay under the ESA if the employee is “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”

The Ontario courts have held that the threshold for “wilful misconduct” is higher than required for cause termination under the common law. This was demonstrated in a recent decision of the Court of Appeal for Ontario, in which an employer was found entitled to dismiss an employee for cause after he slapped a co-worker on the buttocks. However, statutory termination pay was required because the court found that the employee’s conduct did not rise to the level of wilful misconduct. The court found that the employee’s conduct was not intentional or deliberate.

How does a court determine whether a termination for cause was justified?

An employee dismissed for cause can sue for wrongful dismissal, arguing that their conduct did not justify termination for cause. The onus is on the employer to prove that it did.

The courts have developed a complex test for determining whether the employee’s conduct justified termination for cause. Firstly, the employer needs to prove the nature and extent of the employee’s misconduct. Secondly, the surrounding circumstances of the employment relationship need to be considered, including the employee’s employment history, role and responsibilities, and the employer’s business, policies and practices. Finally, the employer needs to show that termination for cause was a proportional response to the conduct because it was sufficiently serious to cause a breakdown in the employment relationship.

It is also possible that the threshold for what constitutes just cause may be contained in the specific employee’s employment contract.

What can employers do to manage the risk of claims?

After acquiring all the evidence, employers will likely need to consider a range of factors before taking a decision about whether to terminate an employee for cause. 

Employers should consider the gravity of the misconduct and any policy-setting employee expectations. It may be important to consider whether the employee was directed to the policy and whether they were warned about their conduct in the past and given an opportunity to improve.

This is particularly important when it comes to incompetence or neglect of duty. A single instance of incompetence is unlikely to justify a termination for cause, and employers need to explain the issue and provide an opportunity for improvement before resorting to dismissal. This is why it is important for employers to have a progressive discipline policy. 

Whether the employer has followed a progressive discipline policy is important in a termination for cause. Such a policy sets out the employer’s stages in dealing with performance issues. It should set out the various measures that will be applied (such as training, warnings and suspension), along with other matters, including the timelines and consequences.

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination

Termination for cause is a difficult area of employment law. For employers, terminating an employee for cause can create the risk of costly litigation. It is important to have policies to mitigate the risks and allow the business to move forward following employee misconduct. For employees, it is critical to get advice if you have been accused of misconduct in the workplace in order to preserve your legal rights and your reputation. The Haynes Law Firm helps employers and employees to deal with issues relating to termination for cause. Whether it is through creating a progressive discipline policy to proactively manage the risk or providing effective representation in a specific case, Paulette Haynes will assist you or your organization. Please get in touch with the Haynes Law Firm online or call us at 416.593.2731.