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The law of dismissals: just cause is not a lost cause

Dismissals for cause can be one of the most interesting and challenging issues within the world of HR. While some companies have simply given up, I often say that “just cause is not a lost cause”. As I wrote in detail in my book, You’re Fired! Just Cause for Dismissal in Canada, there are many examples of situations where courts and tribunals have determined that summary dismissal was appropriate.

A summary dismissal is a situation in which a company tells an employee that they have lost their job and must leave immediately because of something dishonest or illegal that they have done.

Poor performance is certainly among the toughest of grounds for summary dismissal to establish, particularly since it does not involve an employee that has engaged in any behaviour that can be seen as morally repugnant. Nevertheless, it is important to remember that the classic definition of just cause, as set out in U.S.W.A. v. Port Arthur Shipbuilding Co., specifically references incompetence:

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 to summarily dismiss the delinquent employee.

The difficulty facing employers that seek to dismiss an individual for cause has been explicitly referenced by courts on occasion. The trial court in McHugh v. City Motors (Nfld.) Ltd. explicitly referenced this:

[there] is a heavy onus on an employer who relies on incompetence as just cause.

According to Mr. Justice John Sproat, a judge of the Ontario Superior Court since 2003 and a leading employment lawyer prior to that time, a finding of just cause for incompetence is exceedingly rare. Mr. Justice Sproat notes that despite the implied warranty of reasonable competence by the employee,

The interviewing and hiring process demonstrates that the employer has also reached the conclusion that the employee has the required competence. It is, therefore, very difficult to persuade a court that the sole issue in a case is competence. In fact, in almost all cases, the allegations of incompetence will merge with other factors of greater severity.

Where the employer alleges just cause based on incompetence, the employee’s quality of performance must demonstrably fall below the average level for the firm or business. Furthermore, in cases involving dismissal for incompetence or performance issues, the courts have held that employers must establish that they:

  1. clearly advised the employee of the requisite standards of job performance;
  2. clearly warned the employee exactly how they have failed to meet the requisite standard;
  3. clearly and unambiguously warned the employee that their job was in jeopardy; and
  4. clearly informed the employee of what was required to constitute satisfactory performance and provided the employee with a reasonable opportunity to improve.

Perhaps more than any other ground for dismissal, poor performance almost inevitably requires that the employer “build a file” before dismissing the employee in question. Employers will also have to show that they did not do anything to impede the employee’s performance. For example, where the organization made a deliberate decision to limit resources in an employee’s sales area, they were precluded from subsequently arguing that poor sales results constituted incompetence warranting summary dismissal.

A good example of some pitfalls in summary dismissal for performance cases is Chester v. Pepsi-Cola Canada Ltd. In this case, the employee was responsible for delivering and updating 35-40,000 individual units of product per month. In assessing his performance, his supervisors would often attend at the outlets where the employee delivered the product to determine whether any of the product was stale or outdated. In the year 2002, the Company found that
the employee had repeatedly failed to update deliveries, with the result that a certain amount of stale product was left at the store. However, in terms of total volume, the number of stale units of product found by the Company was comparatively quite small, about 39 units for the year. The culminating incident that led to the employee’s termination involved 11 units of stale product.

The evidence indicated that the employee was given warnings on three occasions in 2002, and received the progressive suspension program as set out in the employee handbook. However, the Court found that the Company’s standard of near perfection with respect to deliveries and updates was too stringent, particularly in light of the fact that the Company did not provide the Court with development reviews for any of the 12 other sales people employed in 2002. The Court stated that the standard “was unrealistic and likely unattainable by most [sales people]. Perfection is a laudable goal but not likely attainable by many.” This case demonstrates that it is important for employers to set reasonable and achievable performance targets for employees.

At the end of the day, I encourage employers to pursue summary dismissal in appropriate cases. However, they should be cautious and, in the case of performance issues, ensure that their decision is justifiable and that they can prove that they have done all they are expected to before proceeding with dismissal. Employers should also be proactive in ensuring that hiring procedures help identify suitable candidates, and that performance management practices identify areas of concern. I have seen many instances of employers alleging that a particular employee has had `chronic` performance issues since Day 1 of their employment, yet the performance reviews are “average“ and there is not a single indication in the employee file of any concern. Managers do their employer a real disservice when they choose to avoid awkward conversations by not raising performance concerns proactively.

Stuart E. Rudner
Rudner MacDonald LLP

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Stuart Rudner

Employment Lawyer at Rudner MacDonald LLP
Stuart Rudner is a leading HR Lawyer and a founding partner of Rudner MacDonald LLP, a firm specializing in Canadian Employment Law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is the author of You’re Fired! Just Cause for Dismissal in Canada, a textbook and database of summary dismissal cases published by Carswell. Read more
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