There are two main ways that an employer can terminate an employee; with cause and without cause.

An employer always has the right to terminate the employment relationship without cause (assuming it wasn’t done on prohibited grounds), provided the employee is given sufficient notice of termination, or pay in lieu of notice. For the most part, employers don’t need a reason to terminate an employee without cause as long as they provide them with their employment entitlements. The main area to beware of is terminating an employee by discriminating against them under Ontario’s Human Rights Code, RSO 1990, c H 19 (“the Code”). The Code is very clear on its definition of discrimination: “Every person has a right to equal treatment with respect to employment without discrimination because of race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, gender identity, gender expression, age, record of offences, marital status, family status or disability.” If an employee feels they have been discriminated against, they can make a claim with either the Human Rights Commission of Ontario or in the courts on the basis of wrongful dismissal. It is important for employees to remember that the onus will be on them to prove discrimination.

A termination for cause is one of the worst things that can happen to an employee and has been called the capital punishment of employment law because employees are not entitled to any notice, pay in lieu of notice, or even employment insurance when terminated for cause.

Assessing what does or does not constitute cause is easier said than done though.

According to the Employment Standards Act, 2000 (“ESA”), an employer can terminate an employee for cause when an “employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”

Some of the most common reasons that fall under wilful misconduct include:

Theft, Disobedience, Dishonesty, Violence, Threats, Bullying, Falsifying Records, Disclosing Confidential Information, and Sexual Harassment. The onus is on the employer to prove cause and the bar is set very high, however if the employer does prove cause the employee will not be entitled to notice.

Cause can be found either where there is one very serious incident of wilful misconduct or a series of a continuous events that have persisted despite the employer’s attempt to address it with the employee. An example of this would be a habitual neglect of duty. If an employer plans to terminate an employee who has regularly performed their positions in a poor manner, it is very important to give regular written warnings to the employee, otherwise, a court may rule that just cause was not established.

There are some areas of wilful misconduct which are plain and obvious and will lead to dismissal for cause. Sexual abuse or harassment would clearly fall into this category, however it is important for employers to remember that proving this conduct to warrant a dismissal for cause carries a high threshold.

Similarly an employer might feel that theft is clearly an offense for which they can easily terminate an employee but courts have not been so quick to agree. In the case of Dennis v Ontario Lottery and Gaming Corporations, 2014 ONSC 382, Brenda Dennis had worked for the Ontario Lottery and Gaming Corporations (“OLG”) for over 13 years in a senior position where she supervised over 50 employees. Ms. Dennis was originally dismissed without cause and accepted a severance package of 53 weeks pay. After terminating Ms. Dennis, the employer found out that she had stolen approximately $1000 while volunteering her time selling tickets to Canada’s Wonderland and the money had come from proceeds of sales of the tickets. Ms. Dennis had every intention of paying the money she had stolen back, however the OLG alleged “after acquired cause” which means they found out about wilful misconduct after termination and therefore they refused to honour the severance package they had awarded her. The court found that in Ms. Dennis’ mind, she was not stealing the money but rather borrowing it with a plan to repay it and the money she took was not during the course of her regular employment duties. As a result, the misconduct did not amount to just cause.  Employers would be wise to document every issue and have as much proof as possible prior to making a decision to terminate an employee.

Additionally, terminating an employee for cause can be a challenging proposition if the employee’s contract for employment has clauses which are ambiguous. The words of termination clause must adhere to the ESA or the clause will be held to be void and the entire contract may be nullified, regardless of whether termination was with or without cause.

With regards to termination for incompetence, courts have laid out The Edith Cavell test for an employer to follow prior to terminating for cause. The employer must meet the following criteria:

  1. the employer must define the level of job performance required;
  2. the employer must establish that the standard expected was communicated to the employee;
  3. the employer must show and give reasonable supervision and instruction to the employee and afford the employee the opportunity to meet the standard;
  4. the employer must establish an inability on  the part of the employee to meet the required standard to an extent that renders the employee incapable of performing the job and that reasonable efforts were made to find alternate employment in the competence of the employee; and
  5. the employer must disclose that reasonable warnings were given to the employee and a failure to meet the standard could result in dismissal.

If the employer does not meet these criteria, a court will very likely find that just cause has not been established and the employee will be awarded pay in lieu of their common law reasonable notice.

Therefore, to employers, a word to the wise. Prior to terminating an employee for cause, make sure to cross all the t’s and dot all the i’s to ensure that just cause can be established and avoid very expensive litigation.

For the employees, never sign any termination letter your employer has given you without first contacting an employment lawyer and even if you are fired for cause speak with a lawyer because your employment rights may have been violated.