Employer Strategies When Alleging Cause for Dismissal

Given the relatively high hurdle placed in front of an employer before it can establish that it has cause to terminate the employee’s employment, some employers follow a practice of dismissing employees without cause even in circumstances when the employer has just cause to dismiss. Employers follow this strategy of least resistance because of the perception that cause is too difficult to prove at trial and to avoid the cost of litigation.

Phil White is an employment lawyer practicing in Toronto. He can be reached at pwhite@grosman.com or 416.364.9599

Phil White is a Toronto employment lawyer. He can be reached by email at pwhite@prwlaw.ca or by phone at 416.613.1381 or 1.888.350.9204 (toll-free)

The better view is that employers should be prepared to terminate employees for cause in appropriate circumstances. Although there are circumstances where the best decision for an employer will be to terminate an employee’s employment without cause even though the employer believes that cause exists, employers who gain a reputation for not being willing to summarily dismiss their employees in appropriate circumstances may lose the ability to effectively manage the workplace. Employers should instead be prepared to build a case and terminate for cause any employee whose misconduct is so severe that it represents a fundamental breach of the terms of employment.  

In contrast to employers who are too timid to dismiss for cause even in the clearest of circumstances, some employers allege cause knowing that they do not have just cause to dismiss the employee. Cause is alleged on the presumption (or hope) that the dismissed employee will not challenge the dismissal and, as a result, the company will not have to pay severance. The tactic is also used in order to pressure the dismissed employee to accept a significantly lower settlement package than the employee is entitled to at law. A tactic used by some employers in Toronto is to provide a dismissed employee with two dismissal letters – one alleging cause and the second “without prejudice” letter offering the employees a severance package well below the employees’ legal entitlements.   

Employers who follow the strategy of alleging cause when cause for dismissal does not exist risk paying a dismissed employee moral damages and/or punitive damages (in addition to wrongful dismissal damages) as a result of their bad faith behavior.  Employers should be extremely wary of any adviser who recommends terminating an employee for just cause when just cause obviously does not exist. The expert’s “advice” is not in the best interest of the employer. The most likely beneficiary of this strategy will be the lawyer (this type of vicious legal fight normally generates significant legal fees). Both the employer and employee will likely be worse off. Moreover, this type of unethical behaviour will become known by the employer’s remaining employees with the obvious result being poor moral and shattered loyalty.  Therefore, as a human resource strategy, the tactic of asserting cause when cause does not exist is fundamentally flawed. The long-term costs outweigh any short-term savings.  Even the goal of short-term savings may not be achieved. If the employee remains steadfast and refuses to be cowed, the short-term cost to the employer will be significantly higher than if it would have if it simply offered a fair severance package at the time of dismissal. 

A wrongful dismissal action that proceeds to trial is a zero sum game. The outcome will be all or nothing. Either the employer will successfully argue that it had cause with the result being that the employee will not be entitled to an award of damages (and also likely required to pay a portion of the employer’s legal costs) or the employer will fail and the dismissed employee will be entitled to damages for the failure of the employer to provide the employee with proper notice of dismissal. If the employer does not prove that it had just cause, the court will not reduce the amount of the notice period in recognition of the fact that the employer had legitimate concerns about the employee’s performance or misconduct.