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Can an employer argue cause when discovered after dismissal?

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An employer decides to dismiss an employee without notice and without legal cause. Subsequent to the dismissal, in reviewing the employee’s work, the employer discovers a number of errors which, if known at the time, would have been sufficient to support a dismissal for cause. Can the employer successfully argue cause in defence of a wrongful dismissal claim? This is a question I have been asked many times by employers, as a review of a dismissed employee’s work after dismissal often reveals significant errors or, in some cases, outright dishonesty.

Case law in the area distinguishes between misconduct that occurred prior to the termination, but was not discovered until subsequent to the termination, and post-termination conduct which could retroactively be considered as cause.

This issue was at the centre of Gillespie vs. 1200333 Alberta Ltd., a recent decision of the Alberta Court of Queen’s Bench released on February 16, 2012. In this case, the plaintiff, an occupational therapist, was the subject of a number of performance concerns voiced by the doctors with whom she worked. Following a meeting with her supervisor to discuss these concerns, and a subsequent conflict with one of her co-workers, the employee was given a letter of reprimand. Shortly thereafter, she was dismissed, effective immediately. The employer did not offer the employee a chance to rectify her behaviour. The employee returned to her office, removed a number of documents from her desk and left the premises.

The employer subsequently determined that the documents the employee removed were confidential health records belonging to the clinic. The employer sought to rely on this breach of policy as after-acquired cause. The employee sued for wrongful dismissal in small claims court where the trial judge held that the improper removal of documents was sufficient cause for termination, and that the after-acquired knowledge of that removal was enough to support a finding of cause.

On appeal to the Court of Queen’s Bench, the Court distinguished between cases where wrongdoing that occurred during employment is only discovered after termination and cases where misconduct itself occurs after dismissal. The Appeal Court concluded that after-acquired knowledge of misconduct that existed at the time of dismissal can be relied on as cause. On the other hand, an employer can only rely on conduct that occurs after dismissal for an argument for cause when the misconduct demonstrates that the employee was not, in fact, fit to be carrying on his duties during the course of his or her employment. In Gillespie, the conduct in question occurred post-termination.

The case law in Ontario has determined that there are two circumstances in which post-termination conduct can be relied on to support an argument of cause:

  1. When the post-termination conduct supports the reasonableness of the termination; or
  2. When the post-termination conduct by the employee reveals some undesirable element of an employee’s character, such as dishonesty.

It is, of course, open to the employee to argue that the post-termination conduct has no connection to the purported grounds for dismissal relied on by the employer. In the Gillespie decision, the Court of Queen’s Bench found that the trial judge erred in fact by neglecting to distinguish between after-acquired knowledge of existing misconduct and post-termination misconduct. Since the employee’s conduct occurred post-termination, the defendant had to prove that the conduct met the test above. But it could not do so. This is one of the grounds on which the appeal was rejected. The Court also rejected the trial judge’s finding that the removal of the documents was a clear breach of the non-disclosure agreement, sufficient for a funding of cause. The Court found that, as the employee was “stunned and devastated” when advised of the termination, the removal of the documents at that time could not be held against her. The Court therefore overturned the trial judge’s finding of cause.

As is often the case in employment litigation, much will turn on the unique set of facts of each case. If, for example, an employer terminates an employee without cause and subsequently discovers dishonesty such as theft of funds or disclosure of corporate secrets, it is suggested that will be sufficient grounds for after-acquired cause. However, if the discovered breach is not so significant as to constitute a clear breach of the employment relationship, it may not be sufficient. As the Court in Gillespie stated, determining which type of post-termination conduct will justify termination will be “a matter of both logic and fairness.” Employers that do discover such potential grounds for dismissal following termination, should obtain specific legal advice based on the facts of their individual cases.

Earl Altman
Garfinkle Biderman LLP

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Earl Altman

Legal consultant at EA Consulting
Earl Altman was a partner at Garfinkle, Biderman and now heads his own consulting firm. Earl has practiced commercial and employment litigation. Earl’s practice focuses on employment disputes, including acting for employees and employers in wrongful dismissal claims, and in breach of contract and breach of fiduciary duty claims. Read more
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