Just Cause – Dishonesty

Not every employee who faces termination of employment will have an action for wrongful dismissal. A termination is “wrongful” when an employee is terminated without cause and is not provided with reasonable notice of his or her termination.

A discussion of the types of conduct which the courts have held to constitute “cause” is beyond the scope of this article. However, it has long been accepted that acts of dishonesty may provide cause for termination. The leading case in this area is McKinley v. B.C. Tel. In its decision, the Supreme Court of Canada disagreed with the Appeal Court’s ruling that dishonesty was always cause for termination regardless of the degree. Such an approach, the Court observed, would entitle an employer to dismiss an employee for cause after a single act of dishonesty, no matter how minor, fostering results that were both unreasonable and unjust. The Court concluded that employee dishonesty must result in a breakdown of the employment relationship in order to justify dismissal.

In the recent case of Misty Rae v. Attrell Hyundai Subaru, the defendant employer alleged cause for termination based upon dishonesty. The defendant operated an auto dealership. The defendant alleged that the plaintiff had created fictitious work orders to cover up the fact that she was having work done on family members’ vehicles and not paying for the work done. The Plaintiff conceded that she had brought her sister’s car to the dealership for inspection by a technician. Parts were required but were not available at the dealership. The plaintiff took the car away with the intention of bringing the car back at a later time to have the parts installed. The plaintiff did not make payment for the inspection undertaken by the technician.

The plaintiff acknowledged that she owed the defendant for the work done on her sister’s car and the Court so ordered. While it is not always clear where the Courts will draw the line in determining whether the conduct in question constitutes cause for termination, the facts of this case, even with the admission by the plaintiff, did not establish that the plaintiff had acted dishonestly or establish cause for termination. The trial judge noted: “when just cause consists of allegations of dishonesty there must be clear and cogent proof.” The evidence in this case did not supply the degree of proof required.

Once a Court establishes that the employer did not have cause for termination, the Court will turn to the issue of determining the appropriate notice period. In the circumstances of this case, the Court awarded the plaintiff, a four-year employee, seven months pay in lieu of notice including a component for bad faith damages. In reaching its decision, the Court considered the fact that the plaintiff had been terminated two weeks before she was scheduled to give birth. In confirming that an extension of the notice period was warranted, the Court of Appeal stated that where it can be shown that the employer’s conduct in the manner of termination demonstrates “something akin to intent, malice or blatant disregard for the employee”, bad faith damages are warranted. The Court of Appeal in Rae observed:

“With respect to Wallace damages, the trial judge took into account that the appellant sent the notice of termination of employment two weeks before the respondent was to give birth. Given the context, this was the kind of conduct that may properly be stigmatized as a blatant disregard for the employee.”

This case demonstrates the high burden placed on an Employer should it wish to rely on cause to terminate without notice or pay in lieu of notice. Although not impossible, a Court will look to the evidence that an Employer has to substantiate its claim of cause, as well as analyze whether the act complained of, even if true, produces the requisite breakdown in the employment relationship.