The law concerning the rights and responsibilities of Ontario’s employers to dismiss an employee “for cause” , and the rights of employee to nonetheless receive statutory termination pay and severance pay in event of a termination “for cause” finally received such much-needed clarity in the Court of Appeal of Ontario’s decision in Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 310 (CanLII).
While both the facts of the case and the depth of the Court of Appeal’s analysis on the critical point have caused some commenters to challenge the correctness of the court’s ultimate decision, I could not be more ecstatic about the methodology of the court’s approach.
The Set Up
For years now I have been commenting on the fact that under Ontario law there are essentially three categories of dismissal:
- terminations without cause, where an employer is permitted to terminate an employee’s employment for practically any reason, so long as the employer provides the employee with certain prescribed entitlements, such as (reasonable) notice, severance, etc;
- terminations where the employee “has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer,” as such phrase is used in the Termination and Severance of Employment Regulation (O. Reg. 288/01) made pursuant to the provisions of the Employment Standards Act, 2000, in which case the employee is not entitled to the receipt of notice, payment instead of notice, or any other statutorily prescribed benefit; and
- what I have described as a “middle category,” in which the employee is dismissed “for cause,” as such term is defined by the common law, but is nonetheless entitled to the minimum termination and severance entitlements established by the Employment Standards Act, 2000.
In July 2012, I wrote a post titled Careless but not Disentitled, in which I reviewed the 2011 decision of the Ontario Superior Court in Oosterbosch v. FAG Aerospace Inc., 2011 ONSC 1538 (CanLII). At that time, I wrote the following, “Just cause for termination is a thorny issue. Employers often wish to advance it as a means of reducing (hopefully to nil) their obligations to an employee on termination. However, under Ontario employment law, one can be both dismissed for just cause and entitled to termination pay and severance. A fact, I would respectfully submit, lost on many including most judges unfamiliar with the nuances of Ontario employment law.”
Nearly a decade later and until the Court of Appeal’s decision in Render, not a great deal had changed. In October of 2021, I authored a post titled Ontario’s Employers Have Just Cause to be Frustrated in which I “ranted” about the sorry state of confusion concerning the laws concerning termination in this province. In that post, I wrote the following:
Since the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391, the Ontario Superior Court of Justice has taken an interest in ensuring drafters of employment contracts appreciate that there is fundamental difference between “just cause” at common law and “wilful misconduct” in Ontario Regulation 288/01, made pursuant to Ontario’s Employment Standards Act, 2000.
… In its reasons for decision, the court almost invariably uses the phrase “just cause” or “cause” to define a situation in which the employer is excused from providing a dismissed employee with notice of termination of employment or payment in lieu. It almost never uses (until recently) the phrase “wilful misconduct.”
If the court is going to be particular about how parties draft their employment agreements, it could at least use the language expected in its own writing.
… Worse, I would submit, is the fact that almost invariably when an employee claims wrongful dismissal in a “cause” case, the defence provided by the employer is that it had “cause” to terminate the employment relationship. Rarely, and I mean rarely, does the court parse that wording to determine whether the employee was dismissed “for cause” but is, notwithstanding such finding, entitled to the receipt of statutory termination pay. The 2011 case of Oosterbosch v. FAG Aerospace Inc. , 2011 ONSC 1538 (CanLII) is one of those rare cases, and the only one I can name where the court went to the trouble of finding “cause”, but then went on to award the plaintiff his statutory termination pay because his conduct did not rise to wilful misconduct.
I submit that Oosterbosch was correctly decided. Moreover, I submit that where employees are terminated without notice or pay in lieu and elect to sue for wrongful dismissal, it is incumbent on the court, if it finds that the employer had “just cause” to terminate the employee, to then take the analysis one step further and resolve whether the employee was also guilty of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”
… I should also clarify, I have zero doubt that Ontario’s judiciary takes its job very, very seriously. I also have no doubt that the decision of whether an employee should suffer the “capital punishment” of employment law is a decision not easily taken by most judges, in the majority of cases.
But, as above, if the court is going to be critical of how drafters of contracts elect to use words in its agreements, then it would be appreciated if the court would be equally judicious in its own wording and approach.
Court of Appeal’s Decision in Render
The Render case concerned an appeal from the judgment of Justice William S. Chalmers of the Superior Court of Justice, dated November 27, 2019 and March 30, 2020, with reasons reported at 2019 ONSC 7460, that upheld the appellant employee’s dismissal “for cause” by the respondent employer. The appellant was a 30-year employee in a managerial role. His dismissal followed a single incident that occurred in the workplace where the appellant slapped a female co-worker on her buttocks. The trial judge found that the incident caused a breakdown in the employment relationship that justified dismissal “for cause,” the net result of which being that the plaintiff employee’s case was dismissed.
In addition to his appeal of the trial judge’s decision on “cause,” Render sought a finding that he was entitled to benefits under the Employment Standards Act, 2000, an issue that was not addressed by the trial judge.
For the reasons authored by Justice Kathryn N. Feldman, with whom Justices Pepall and Tulloch agreed, Ontario’s top court dismissed the appeal from the finding that there was no wrongful dismissal and the award of no punitive damages, but allowed the appeal with respect to the ESA entitlement and costs.
Justice Feldman’s reasons for finding that Render was entitled to his minimum statutory entitlements, notwithstanding the fact he was properly dismissed “for cause,” were as follows:
[72] Under the ESA, employees who have been employed for eight years or more are entitled to eight weeks of termination pay, unless they are disentitled to such pay under the statute.
…
[74] [A]s stated in ss. 55 and 64(3) of the ESA, certain prescribed employees are disentitled to termination and severance pay. The disentitlement provisions are found in the Termination and Severance of Employment, O. Reg. 288/01 (the “Regulation”), a regulation to the ESA, which provides in relevant part:
2. (1) The following employees are prescribed for the purposes of section 55 of the Act as employees who are not entitled to notice of termination or termination pay under Part XV of the Act... 3. 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.
9. (1) The following employees are prescribed for the purposes of subsection 64 (3) of the Act as employees who are not entitled to severance pay under section 64 of the Act ... 6. 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.
[75] The respondent … argues that having been dismissed for cause, he is not entitled to any benefits in accordance with ss. 2(1)3 and 9(1)6 of the Regulation.
…
[78] In my view, the appellant is entitled to receive his proved statutory benefits unless that entitlement is precluded by the wording of ss. 2(1)3 and 9(1)6. ESA entitlements are statutory and disentitlement cannot be achieved by agreement, unless to provide for a greater benefit to the employee: ESA, s. 5(1). In this case, the issue was raised, at least indirectly, at the trial. I acknowledge that the better approach would have been to raise the entitlement issue directly so that the trial judge could decide at first instance whether the impugned conduct fell within the statutory disentitlement sections. However, in the circumstances of this case, where non-compliance with the statute was raised in the opening statement and the relevant evidence is in the record, I would not prevent the appellant from asserting the claim on appeal.
[79] The law on the interpretation of the prohibition sections has been consistently stated to require more than what is required for just cause for dismissal at common law. In Plester v. Polyone Canada Inc., 2011 ONSC 6068, aff’d 2013 ONCA 47, (the reasons on appeal found it unnecessary to address this point), Wein J. explained that in order to be disentitled from the ESA entitlements under the “wilful misconduct” standard in the Regulation, the employee must do something deliberately, knowing they are doing something wrong. In the case before Wein J., the conduct was not preplanned and not “wilful” in the sense required under the test, which she described as follows at paras. 55-57:
The test is higher than the test for “just cause”.
“In addition to providing that the misconduct is serious, the employer must demonstrate, and this is the aspect of the standard which distinguishes it from ‘just cause’, that the conduct complained of is ‘wilful’. Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the standard. Rather, the employer must show that the misconduct was intentional or deliberate. The employer must show that the employee purposefully engaged in conduct that he or she knew to be serious misconduct. It is, to put it colloquially, being bad on purpose”.
Both counsel seemed to be slightly bemused by the recent authorities that distinguish between the definition of just cause and wilful misconduct. In my view, however, the distinction is quite obvious: Just cause involves a more objective test, albeit one that takes into account a contextual analysis and therefore has subjective elements. Wilful misconduct involves an assessment of subjective intent, almost akin to a special intent in criminal law. It will be found in a narrower cadre of cases: cases of wilful misconduct will almost inevitably meet the test for just cause but the reverse is not the case.
The conduct of Mr. Plester was serious, and his failure to report deliberate. However, it did not rise to the very high test set for disentitlement to the statutory notice benefit. It was not preplanned and not wilful in the sense required under this test. There was an element of spontaneity in the act itself and at most a “deer in the headlights” freezing of intellect in the delay in reporting. On these facts willful misconduct should not be found. [Emphasis added by ONCA.]
[80] The differing standards at common law and under the ESA are further discussed in a number of cases, as well as in the Ministry of Labour’s Employment Standards Act Policy and Interpretation Manual (2020). The Manual states: “this exemption is narrower than the just cause concept applied in the common law and in collective agreement disputes. In other words, an arbitrator or a judge may find that there was just cause to dismiss an employee, but this does not necessarily mean that the exemption in paragraph 3 of s. 2(1) applies.” This principle has also been followed in a number of other authorities: see, e.g., Lamontagne v. J.L. Richards & Associates Limited, 2021 ONSC 8049, at paras. 16, 19, leave to appeal to Ont. C.A. requested, M53078; Cummings v. Quantum Automotive Group Inc., 2017 ONSC 1785, at para. 73; Ojo v. Crystal Claire Cosmetics Inc., 2021 ONSC 1428, 60 C.C.P.B. (2nd) 200, at para. 14; and Khashaba v. Procom Consultants Group Ltd., 2018 ONSC 7617, at para. 53.
[81] In my view, the appellant’s conduct does not rise to the level of wilful misconduct required under the Regulation. While the trial judge found that the touching was not accidental, he made no finding that the conduct was preplanned. Indeed, his findings with respect to the circumstances of the touching are consistent with the fact that the appellant’s conduct was done in the heat of the moment in reaction to a slight. Although his conduct warranted dismissal for cause, it was not the type of conduct in the circumstances in which it occurred that was intended by the legislature to deprive an employee of his statutory benefits.
Commentary
I have four immediate reactions to the court’s decision in Render: (1) I am beyond chuffed that plaintiff’s counsel finally requested ESA entitlements separate from those owing at common law and the court engaged in a two-step analysis; (2) I wish the court of appeal would have done a better job explaining the difference between wilful misconduct and conduct constituting common law cause, especially in this case; (3) I suspect that one result of this case will be a greater number of employees terminated for “cause”; and (4) notwithstanding the fact I expect more employees to now be terminated for “cause,” I also suspect we may see a greater number of employees also receiving something in consideration of the termination of their employment, rather than nothing at all.
The Ontario Two-Step
With respect to my first reaction, i.e. I am happy we now have the court engaging in a two-step analysis, I think my rant from last October really captures why. The failure to engage in the two-step was a failing to employees. Although I titled my earlier post “Ontario employers have just cause to be frustrated,” the fact is Ontario’s employees had even more reason to be frustrated by the court’s failure to engage in such analysis. Or perhaps, to the lay the blame at more proper feet, their lawyers’ failure to properly plead and present the case. Note that even in Render, the Court of Appeal observed that “as we were not directed to anywhere in the record of evidence that the respondent has a $2.5 million payroll, as required under s. 64(1)(b), the court is not in a position to award the requested 26 weeks of severance pay.” Plaintiffs’ lawyers have to be marshalling that evidence in wrongful dismissal cases. The net result of Render being entitled to at least something is more than just his receipt of his statutory termination pay, he won at trial meaning that his employer was no longer entitled to the receipt of its costs for defending the action- a huge economic benefit.
Now, as happy as I am to see the two-step be performed, that is not to say that it was done perfectly. Those who have reviewed the decision have already criticized the result given Render’s actions. What would have helped, I suggest, is an articulation of the test of what constitutes wilful misconduct.
The most frequently cited articulation of what constitutes wilful misconduct comes from, I believe, the 1993 decision of the Ontario Employment Standards Branch: Office of Adjudication in VME Equipment of Canada Ltd. v. Ontario (Ministry of Labour), [1992] O.E.S.A.D. No. 230, in which Member Randall wrote the following concerning an earlier articulation of the regulatory standard:
In addition to proving that the misconduct is serious, the employer must demonstrate, and this is the aspect of the standard which distinguishes it from 'just cause', that the conduct complained of is 'wilful'. Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the standard. Rather, the employer must show that the misconduct was intentional or deliberate. The employer must show that the employee purposefully engaged in conduct that he or she knew to be serious misconduct. It is, to put it colloquially, being bad on purpose.
For what it’s worth, that definition and the definition now found in the applicable reg bear a striking resemblance to what the Court of Appeal observed in the case of R. v. Arthurs, Ex p. Port Arthur Shipbuilding Co., 1967 CanLII 30 (ON CA):
If an employee has been guilty of serious misconduct, habitual neglect of duty, incompetence, or conduct incompatible with his duties, or prejudicial to the employer's business, or if he has been guilty of wilful disobedience to the employer's orders in a matter of substance, the law recognizes the employer's right summarily to dismiss the delinquent employee.
In Render, the Court of Appeal has transformed “being bad on purpose” and the requirement of “serious misconduct” from one not only requiring intentional action, but one apparently also now requiring “preplanning” (see para 81.) I cannot recall previously seeing a “preplanning” criterion in order for an intentional act to meet the test of “serious misconduct.” I worry whether such wording will import more uncertainty into the law.
As someone who does not practice criminal law and only has the faintest passing of an understanding of same, I infer the Court of Appeal’s reasoning in Render to be akin to the differences in the homicide standards. Per subsection (2) of section 231 of the Criminal Code, “Murder is first degree murder when it is planned and deliberate.” Accordingly, as I now understand it, in order to be guilty of “first degree misconduct” (i.e. conduct negating one’s entitlement to statutory termination benefits) the conduct must be both deliberate and planned- absent both elements, one is only guilty of “second degree misconduct” – previously known as common-law cause for termination, which, while still bad is a lower standard. Trying to figure out an employment-law equivilant for manslaughter seems unnnecessary in this already too-confused moment.
The "problem" of course is that until Render, premeditation was not a criterion to wilful misconduct. Whether it has now been made a criterion is yet to be seen. How an employer might prove premeditation is an even larger question. I suspect employment lawyers may soon be making fast friends with those in the criminal bar.
What do I think the practical implications of this decision will be? First, I believe employers will embrace the new-found, but always existent, category to terminate more employees “for cause.” Net result for employers, they get to limit their termination requirements to no more than statutory minimums. Net result for employees, rather than receiving nothing on termination, on the basis of having been terminated for “cause,” such employees will at least receive something. Whether those adjudicating employment insurance (EI) applications will appreciate this nuance is a matter yet to be seen.
Takeaways for Employers
The takeaway for employers is that it may be easier to terminate an employee for “cause,” than you may have previously been led to believe. However, while the doctrine of “cause” is alive and well in Ontario, such doctrine does not entitle an employer to terminate an employee’s employment without providing that employee with anything in consideration of such termination. Employers who believe the employee should not receive anything, given their conduct, should seek out an experienced employment lawyer to discuss how to demonstrate that the employee is guilty of “wilful misconduct.”
If you are an employer and you are considering terminating the employment of one of your employees, why not contact me first? I can be reached via email at sbawden@kellysantini.com or by phone at 613.238.6321 x233.
Takeaways for Employees
The takeaway for employees is that even if your employer alleges that your employment is being terminated “for cause,” that does not mean that it does not owe you anything. While even “cause” remains difficult to prove, what the Render case establishes is that you may still be entitled to severance.
If you find yourself suddenly unemployed, whether for cause or otherwise, it always makes sense to discuss your rights with an experienced employment lawyer. Email me at sbawden@kellysantini.com or call me at 613.238.6321 x233. Do what works for you.
About Me
Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. For 2.5 years he was in-house legal counsel providing employment law advice to one of Canada’s largest corporations. He is also a part-time professor at Algonquin College teaching Employment Law. He has previously taught Trial Advocacy for Paralegals and Small Claims Court Practice.
--
As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.
No comments:
Post a Comment