An employer bears the legal burden of proving that the employee committed the act (or acts) of misconduct that were sufficiently serious to justify its decision to terminate the employee’s employment for cause. However, even if an employer meets this burden an employee still has several defences.
The Employer Condoned the Misconduct (Failure to Warn)
If the employer has knowledge that an employee has committed an act of misconduct but fails to respond the result may be that the employer will not be entitled to rely on the employee’s misconduct to support its allegation of cause. Put another way, if the employer ignores or forgives conduct that it later alleges is unacceptable; the court will likely find that the employer condoned the employee’s conduct.
In 1889 the Ontario Court of Appeal, in McIntyre v. Hockin,1 described the principle of condonation as follows:
When an employer becomes aware of misconduct on the part of his servant, sufficient to justify dismissal, he may adopt either of two courses. He may dismiss, or he may overlook the fault. But he cannot retain the servant in his employment, and afterwards at any distance of time turn him away. It would be most unjust if he could do that, for one of the consequences of dismissal for good cause is, that the servant can recover nothing for his services beyond the last pay day, whether his engagement be by the year or otherwise. If he retains the servant in his employment for any considerable time after discovering his fault, that is condonation, and he cannot afterwards dismiss for that fault without anything new. No doubt the employer ought to have a reasonable time to determine what to do, to consider whether he will dismiss or not, or to look for another servant. So, also, he must have full knowledge of the nature and extent of the fault, for he cannot forgive or condone matters of which he is not fully informed. Further, condonation is subject to an implied condition of future good conduct, and whenever any new misconduct occurs, the old offences may be invoked and may be put in the scale, against the offender as cause for dismissal. [Citations omitted]
- the employer fails to investigate the employee’s alleged misconduct;
- the employer fails to discipline other employees whom it discovers to be engaging in similar conduct;
- the employer provides the employee in question with favourable performance reviews despite its awareness of the misconduct; and
- the employer fails to warn the employee in question prior to summarily dismissing the employee.
The employee bears the onus of proving the employer condoned his or her conduct. Condonation must be specifically pleaded in the statement of claim. It is a question of mixed fact and law.
The takeaway for employers is the importance of ensuring that employees who engage in acts of misconduct or other unacceptable behavour are notified, in writing, that their actions are unacceptable. If an employer allows the improper behaviour to persist, without responding, only to decide at a later date that the employee’s employment can no longer continue it will be too late to go back in time and generate a list of reasons to support a decision to terminate the employee for his or her employment for cause.
A Causal Link Exists between the Misconduct and a Protected Ground under the Human Rights Code
An employer who disciplines an employee for misconduct may breach the Human Rights Code3 if there is a sufficient causal connection between the employee’s misconduct and a protected human rights ground. Instead, the employer will have the obligation to accommodate the employee up to the point of undue hardship.
The employee bears the burden of proving a link between a protected ground of the Code and his or her conduct. In Walton Enterprises v Lombardi4 Justice Swinton, writing for the Divisional Court, emphasized this point at paragraph 39, stating:
I note that in cases dealing with an employee who claims his or her misconduct was caused by a disability such as drug addiction or alcoholism, the employee has been required to prove a causal relationship between the addiction and the misconduct (Fleming v. North Bay,  HRTO 322 at para. 73).
An example of a causal link requiring accommodation is an employee who repeatedly makes racist, sexist or homophobic remarks in the workplace will normally be at risk of being terminated from his or her employment for cause. However, if the employee suffers from Tourette’s syndrome the employer will be required to accommodate the employee if the employee’s use of obscene language was a symptom of the employee’s medical condition.
The question of the existence of a causal link most commonly arises in situations where an employee who is addicted to drugs or alcohol has engaged in some type of misconduct such as theft, insubordination or workplace absenteeism. Upon being confronted by the allegation of misconduct the employee either claims (or the employer should have suspected) that a causal link exists between the employee’s addiction and the misconduct.
In Dixon v. Mississauga (City)5 the Ontario Human Rights Tribunal considered the application of a full-time transit operator who was dismissed from her employment as a result of a serious of disciplinary incidents. The acts of misconduct included:
- allowing another employee to use her identity card to punch in for a shift;
- parking her bus in a restricted area;
- being late to work;
- not showing up for an overtime shift; and
- wearing earphones and listening to music while driving her bus.
The applicant took the position that her misconduct was causally related to her menorrhagia, a menstrual disorder causing excessive bleeding during menstruation. However, the applicant did not provide any evidence, medical or otherwise (other than her own testimony) to support her position that her condition was related to or caused her misconduct. The Tribunal dismissed her application.
In Ontario (Human Rights Commission) v. Ford Motor Co. of Canada Ltd.6 the Ontario Divisional Court dismissed the employer’s appeal of a decision of Human Rights Board of Inquiry which found the employer’s decision to dismiss the employee for acts of misconduct was discriminatory because the misconduct took place within the context of a poisoned work environment. The employee had been dismissed for several acts of misconduct including making threats and an incident where the employee had made physical contact with another employee during an argument. The Board of Inquiry found that the employee’s acts of misconduct had to be viewed in the context of the poisoned work environment in which he worked. The employee, who was South Asian and dark-skinned, had endured ongoing racial taunts and harassment. The Board found that although the employee’s threats and physical contact were disciplinable acts, the employer’s decision to dismiss the employee was too severe when viewed in the context of a poisoned work environment. The dismissal was, therefore, discriminatory and in breach of the Code.
There are, however, limits to an employer’s duty to accommodate an employee whose engages in serious misconduct is linked to a protected ground. In Walton, the Divisional Court considered an employee who was fired after he had started a fistfight with another employee. The Ontario Human Rights Tribunal had found that the dismissal was discriminatory based on its finding that there was a causal link between the fistfight and the fact that the employee suffered from depression and had been harassed by a third employee. Justice Swinton, in quashing the Tribunal’s decision as unreasonable, noted at paragraph 39 that even if an employee can establish the necessary causal link it will not automatically result in the employer’s decision to dismiss being found to be discriminatory:
Both the British Columbia and Alberta Courts of Appeal have held that an employee who engaged in misconduct that rose to the level of a crime could not prove discrimination on the basis of disability where the disability played no part in the employer’s decision to dismiss and the employee suffered no greater impact for the misconduct than any another employee would have suffered (British Columbia (Public Service Agency) v. British Columbia Government and Service Employees’ Union, 2008 BCCA 357 (CanLII), 2008 BCCA 357 at para. 15; Wright v. College and Assn. of Registered Nurses of Alberta, 2012 ABCA 267 (CanLII), 2012 ABCA 267 at para. 58).
Similarly in Hall v. Ottawa Police Services 7 the Divisional Court noted the importance of weighing the competing interest when considering whether misconduct linked to a disability must be accommodated. The police officer, who suffered from a cocaine addiction, had been fired after he committed several acts of serious misconduct including stealing drugs being held as evidence and shaking down drug dealers for money and drugs. In refusing the dismissed police officer’s application for judicial review Justice Cunningham wrote at paragraph 79:
The extent of the duty to accommodate is a determination that must be made on a case-by-case basis. It cannot be the case that no matter how outrageous and reprehensible the conduct, there is a duty to accommodate provided that the conduct is causally related to addiction. Instead, the extent of the duty to accommodate and the scope of the right of persons with addictions to be free from discrimination will depend on the nature, legitimacy and strength of the competing interests at stake in a given case
The Business Judgment Rule
Senior executives can rely upon the “business judgment rule” if their employers terminate their employment for cause based on allegations of incompetence or negligence. A corporate law concept, the business judgment rule sees courts give deference to the business decisions made by corporate boards, directors, and officers. It recognizes that business decisions are often made under time pressure, without detailed information, and for high stakes. Although a decision might ultimately prove to be unsuccessful, at the time the decision was made it may have been reasonable and defensible. Judges are legal experts, not business experts and a court will avoid the temptation to use 20/20 hindsight when reviewing a senior executive’s decisions. In short, a court will defer to a senior executive’s decisions as long as the executive used an appropriate degree of prudence and attentiveness.
The business judgment rule has found its way into employment law cases, particularly in circumstances when a senior manager or officer has been terminated for cause based on allegations of incompetence or poor performance. It is not a true defence in that the employee does not bear the burden of proof of establishing the business judgment rule. Instead, it is better viewed as an analytical prism through which the court will review the actions of a senior executive when determining whether just cause exists for his or her dismissal. Although application of the rule to date has focused on senior executives, there is no principled reason why it should not be used in dismissal cases involving junior employees as long as the allegations of cause relate to impugned decisions or actions of the employee in circumstances where the employee was granted a relative degree of freedom to act independently.
The leading corporate law decision that sets out the business judgment rule is the Supreme Court of Canada Peoples Department Stores Inc. (Trustee of) v. Wise.8 In Peoples, the Court cited with approval Weiler J.A.’s explanation of the business judgment rule at p. 192 of Maple Leaf Foods Inc. v. Schneider Corp.:9
The law as it has evolved in Ontario and Delaware has the common requirements that the court must be satisfied that the directors have acted reasonably and fairly. The court looks to see that the directors made a reasonable decision not a perfect decision. Provided the decision taken is within a range of reasonableness, the court ought not to substitute its opinion for that of the board even though subsequent events may have cast doubt on the board’s determination. As long as the directors have selected one of several reasonable alternatives, deference is accorded to the board’s decision. This formulation of deference to the decision of the Board is known as the “business judgment rule”. The fact that alternative transactions were rejected by the directors is irrelevant unless it can be shown that a particular alternative was definitely available and clearly more beneficial to the company than the chosen transaction. [references omitted.]
The Supreme Court then stated that the courts are ill-suited and should be reluctant to second-guess the application of business expertise to the considerations that are involved in corporate decision making. However, courts are capable, on the facts of any case, of determining whether an appropriate degree of prudence and diligence was used in reaching what is claimed to be a reasonable business decision at the time it was made.
In Puhl v. Katz Group Canada Ltd.10 the plaintiff had been employed for 7 years as CEO and Vice-Chair of the company. A new management team believed the poor performance of the company was the result of the plaintiff’s management decisions. The plaintiff was eventually terminated for just cause for his alleged failure to carry out his duties, negligence, incompetence, misrepresentations and breach of fiduciary duty.
The trial judge held that the business judgment rule should be applied when determining whether the plaintiff’s performance was cause for dismissal. The Court, applying Peoples, held the standard of care of a CEO, director or officer to be a reasonably informed individual, writing:
In determining whether directors have acted in a manner that breached the duty of care, it is worth repeating that perfection is not demanded. Courts are ill-suited and should be reluctant to second-guess the application of business expertise to the considerations that are involved in corporate decision making, but they are capable, on the facts of any case, of determining whether an appropriate degree of prudence and diligence was brought to bear in reaching what is claimed to be a reasonable business decision at the time it was made
The Court held that the actions of the plaintiff were entitled to deference in accordance with the business judgment rule. The Court found that the defendant had not proven just cause and awarded the plaintiff damages for the remainder of his contractual term.
Double Jeopardy – An Employee Can Only Be Disciplined Once for the Same Offence
An employer cannot discipline an employee who has committed an act of misconduct and then, at a later date, terminates the employee’s employment for cause for the same offence. Doing so still runs afoul the rule against double jeopardy.
As noted by Pattillo J. in Garreton v Complete Innovations Inc.11 at paragraph 32: “An employee can only be disciplined only once for the same offence.” Justice Pattillo made this statement of law when rejecting the employer’s argument that it could suspend an employee for an act of misconduct and then, after the employee had served her suspension, terminate her employment for cause.
The rule against double jeopardy must be distinguished from an employer’s right to take into account an employee’s previous acts of misconduct when formulating a punishment for a new act of misconduct. It is common for employers to rely upon a number of incidents of misconduct when alleging just cause.
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- McIntyre v. Hockin, 1889 O.J. No. 36 (ONCA) (Q.L. registration required);
- Harris, David: Wrongful Dismissal, Release 6 (Toronto: Carswell, 2013), 3-94.4;
- Human Rights Code, RSO 1990, c H.19;
- Walton Enterprises v. Lombardi, 2013 ONSC 4218 (Div. Ct.);
- Dixion v. Mississauga (City), 2012 HRTO 1383;
- Ontario (Human Rights Commission) v. Ford Motor Co. of Canada Ltd., 1999 CanLII 18727 (ON SCDC);
- Hall v. Ottawa Police Service, 2008 CanLII 65766 (ON SCDC);
- Peoples Department Stores Inc. (Trustee of) v. Wise, 2004 SCC 68;
- Maple Leaf Foods Inc. v. Schneider Corp. (1998), 42 O.R. (3d) 177;
- Puhl v. Katz Group Canada Ltd, 2008 CanLII 433 (ONSC);
- Garreton v Complete Innovations Inc., 2016 ONSC 1178;