Terminating for cause: Russian Roulette

Terminating for Cause: Russian Roulette

Nothing is worse for business or moral than a toxic employee. One person can make life miserable for the entire staff. Supervisors or managers spend an excessive amount of time managing the problems created by one person. The economic impact is significant, yet it pales in comparison to the emotional toll imposed. A business owner or manager may be forgiven if they feel like they must fire an offending employee. Cancer must be removed quickly. However, acting can be very expensive if done too quickly, especially if the employer failed to enter into a formal written employment contract. As reviewed in a previous post, unless otherwise agreed in writing, an employee is entitled to receive reasonable notice of employment termination. The Employment Standards Act establishes an absolute minimum notice period. It ranges from one week for one year of service and rises to eight weeks for an employee with ten years or more. However, in addition to the minimum standards found in the act, common law establishes longer periods. It can range from two-four weeks for every year of service.

Risky Business

In cases when you are faced with a difficult employee, you may be tempted to terminate with cause. When terminating someone for cause, you are not obligated to give notice or pay an amount in lieu of notice (usually referred to as severance). Under the right circumstances, an employer can terminate a problem employee without incurring any costs. However, suppose the cause is not sufficient, and the employee takes legal action. In that case, an employer may be on the hook for payment in lieu of notice (severance) and, depending on how the employee was terminated, punitive damages. It’s a risky business. If the cause is sufficient, the employer wins. If the cause is not sufficient, the employee will be entitled to severance while losing work, which could amount to tens of thousands. To make matters worse, courts usually look favourably at the employee. Justice Dickson, for the Supreme Court, had the following to say about the importance of employment:

Work is one of the most fundamental aspects of a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of their sense of identity, self-worth, and emotional well-being. Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC)

As you can see from the statement, an employer will have a heavy burden in justifying termination. When reviewing these cases, courts will adopt a proportionality test. The punishment (termination) must be proportional to the “offence.” An employer will have difficulty justifying termination if an employee steals a few dollars or even a few hundred dollars.

So How Does An Employer Protect Itself?

Unless the employer can show the problem is long-lasting, and the employer took action to redress the offending behaviour, courts will inevitably side with the employee. Documented progressive discipline is essential. As courts have stated, documented progressive discipline serves two purposes: 

1. It provides the employees notice that their behaviour is not acceptable and gives them opportunities to modify the offending behaviour.
2. It provides the employer evidence that it took a measured and proportional approach.

Progressive Discipline

An ideal progressive discipline policy will start with warnings, followed by suspensions without pay, and culminating with dismissal. They could also include a reduction in pay or a demotion if, for example, the employee is being disciplined for incompetence. (They may have been competent in a lower position.)The policy should be in writing and all incidents documented. The employer must also follow its policy in good faith. Courts will not tolerate employer actions if they violate their own policies. This does not mean that all bad behaviour must be tolerated. In certain circumstances, courts will uphold an employer’s decision to terminate for cause without any previous warnings. Sexual harassment or assault, for example, can justify termination with cause. Theft, on the other hand, does not (unless the value was stolen is significant). In any event, termination for cause is always a risky business. Before taking this type of action, employers should ALWAYS consult with a lawyer. The costs can easily attain a year’s worth of salary if done improperly. Most small businesses cannot afford this.

Disclaimer – Legalese

This article is presented for informational purposes only. The content does not constitute legal advice or solicitation and does not create a solicitor-client relationship (this means that I am not your lawyer until we both agree that I am). If you are seeking advice on specific matters, please contact Philippe Richer at 204.925.1900. We cannot consider any unsolicited information sent to the author as solicitor-client privileged (this means confidential).

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