For many people, work plays a significant part in their lives, but an employment relationship may not last forever. For instance, an employee may move to a different city, find another role, or change careers. In some cases, the employment relationship may have ongoing issues that lead to a termination for cause. This can be an uncomfortable process but may be necessary if an employer can no longer protect their company and mitigate risk while employing an individual. It is, therefore, important to understand when a for-cause termination would be valid, as it may not be appropriate in all situations.
This post will discuss the principles for determining whether a for cause termination was valid. This post aims to provide key takeaways for employees seeking to understand their rights in the event of a termination and employers seeking to fulfill their obligations in the event of a termination. Also, we will examine a case example, Pirani v. Canadian Imperial Bank of Commerce, 2023 ONSC 5991, in which the court found a valid termination for cause. This recent case example will help illustrate how the principles for just cause termination apply.
What Is a For Cause Termination in Employment Law?
A termination for cause is contrasted with a termination without cause. For without cause terminations, an employee may be entitled to certain rights and benefits upon termination. For instance, they may have been laid off and receive a severance package as a result, pursuant to the employment contract.
Employees can be terminated for cause, meaning they were terminated for a reason and are therefore not entitled to certain rights. The employment contract typically states what would occur if the employer terminated the employee for cause. For example, the employment contract may stipulate that the employee would not be entitled to the severance package set out in the contract if they were terminated for cause.
However, this does not allow the employer to decide when a termination is for cause. The termination clause, including any portions concerning termination for cause, must meet the minimum standard in the Employment Standards Act (ESA). Under the ESA, the employee must have engaged in willful misconduct to find that there was a valid for cause termination. This is a higher standard than the “just cause” standard, the common-law standard set out in case law. If a for cause termination provision does not specify the standard, it could be interpreted to mean that it requires just cause, which does not meet the ESA’s minimum standard and could be invalid.
The employer bears the onus to prove that the for cause termination was valid. Some examples of circumstances where an employee may be terminated for cause include the following:
- The employee is guilty of serious misconduct;
- The employee has habitually neglected their duties;
- The employee is incompetent;
- The employee’s conduct is incompatible with their duties or prejudicial to the employer’s business;
- The employee is guilty of wilful disobedience to the employer’s orders.
The evidence provided must be clear, convincing, and cogent. Also, the employer must show that the termination was proportionate to the misconduct at issue, given the surrounding circumstances and the nature or degree of the misconduct. The court will assess whether the misconduct was sufficiently serious to result in a breakdown in the employment relationship such that a termination for cause was justified. For instance, this may include misconduct that is clearly inconsistent with the employee’s duties under the employment contract. The misconduct must have violated an essential part of the employment contract or breached the faith inherent in the employment relationship.
These principles highly depend on the facts of the case, including the type of role involved. For instance, in the Pirani case, the court found that there was valid termination for cause after an employee failed to follow the policies set out by the employer, which were significant as she worked in the banking industry.
Failure To Follow Banking Policies Leads to For Cause Termination
In the Pirani case, the employee was terminated from her role as Senior Financial Services Representative at a bank after eight and a half years of service. The employer claimed that she was terminated for cause, as the employee continued to breach the bank’s Code of Conduct, policies, and procedures. The employee was also provided two warnings concerning her conduct, which was described as violating the bank’s policies. After a final warning, the employee was dismissed for cause. The employer claimed that there was cause for termination as the breaches were of a serious nature and resulted in a breakdown in the employment relationship.
The employee claimed she was wrongfully terminated and sought special damages for overtime, damages for reasonable notice of 48 months, severance under the ESA, and $300,000 for mental distress and moral damages. She also sought an additional $200,000 in punitive damages.
The employee agreed to follow the bank’s policies and procedures in the employment contract. These policies and procedures were available to her throughout her employment. Her role involved assisting clients with their financial needs based on their situation, risk profile, intended time period, and personal factors. She was required to accurately capture and validate clients’ personal and financial information to ensure they aligned with the bank’s policies and procedures.
In November 2010, the bank provided a warning letter to the employee outlining her failure to review overdraft reports. The letter stated that she was required to strictly follow all procedures, not just those that pertained to reviewing overdraft reports. Also, the letter stated that she would be subject to ongoing reviews to ensure she followed procedures, and further issues would result in disciplinary action. The court found that the employee’s actions posed a serious risk to the bank.
The employee also did not fulfill her requirements for charting notes but claimed that she did not understand parts of the template. However, she had previously worked for eight years in a higher position as a financial advisor for the bank. The employee had filled out the same content for different clients and stated that this did not pose any risk to the bank because a mistake could be caught later. The court found that she disregarded the requirement to keep accurate records, which went against the bank’s need to maintain client service, comply with regulations, and mitigate risk. Also, the court found that this was a serious lack of judgment by the employee that put both the bank and the clients at risk.
The employee was also found to have accessed clients’ credit bureau information without signed consent, which the court concluded could have put the bank at risk of privacy breaches.
Ultimately, the court concluded that the employee’s misconduct was enough to justify a for cause termination.
To find cause for termination, the employer must show that the employee engaged in willful misconduct that was serious enough to warrant a termination. This can include conduct that puts the employer at serious risk, such as in the Pirani case.
Contact Haynes Law Firm in Toronto for Advice on Termination and Wrongful Dismissal Claims
Employers and employees should carefully consider the termination clauses set out in the employment contract and any factors that may be relevant for cause termination. Our experienced employment law legal team at Haynes Law Firm in Toronto can assist you with issues that arise from termination. For employees, our goal is to ensure that they understand their rights and receive maximum compensation in wrongful dismissal cases. Haynes Law Firm also assists employers in avoiding liabilities that may arise from terminations that are not permitted by the legislation. We are dedicated to finding the best resolution for you.
To book a consultation, please contact us online or by phone at 416-593-2731.