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Employers may be able to rely upon after-acquired cause

Although I have been known to reassure employers that “just cause is not a lost cause”, it is fair to say that the threshold for establishing that summary dismissal is warranted is a difficult one to meet in most circumstances. One question that often arises is what an employer is to do when they only learned of reasons for dismissal after the dismissal has already taken place. This can occur in situations where an employee was dismissed on a without cause basis, or in situations where the termination was for cause. Either way, the issue is what an employer can do with subsequently obtained information, which is typically referred to as “after-acquired cause”.

The simple answer is that after-acquired cause is a legitimate legal concept in Canada, and information obtained by an employer subsequent to dismissal can be relied upon in order to justify dismissal for cause. As the British Columbia Court of Appeal stated in Carr v. Fama Holdings Ltd., “an employer may dismiss an employee, giving wrong reasons, provided that causes which would justify dismissal did in fact exist at the time.” However, after-acquired cause should be “scrutinized carefully as to its accuracy” and the “subject to strict proof”, according to the British Columbia Supreme Court in Kirby v. Amalgamated Income Ltd. Partnership, a 2009 decision.

Courts will accept after-acquired cause in appropriate circumstances, but are wary of employers who simply attempt to throw everything but the kitchen sink into their allegations. Of course, all of the usual requirements with respect to summary dismissal must still be met. In other words, the employer cannot consider the alleged misconduct in isolation. Rather, they must engage in a contextual analysis which takes into account all relevant factors.

With respect to after-acquired cause, the argument put forward by the employer is that if they had known about the conduct in question, they would have been entitled to dismiss the employee at that time with cause. What often happens is that an employer will make the decision to dismiss for cause, and either at the time of termination, or when the termination is challenged, will then go on a fishing expedition and seek to bolster their case with additional evidence of misconduct. However, after-acquired cause will not usually be well-received by a court if it is based upon information that was readily available to the employer previously. In other words, an employer should not turn a blind eye to transgressions and then seek to rely upon them when they perceive doing so as being legally advantageous.

Another often misunderstood issue regarding after-acquired cause is the fact that it does not, in the majority of circumstances, refer to post termination conduct. In other words, the fact that an employee may behave improperly or engage in misconduct after they were dismissed should not, theoretically, be used as a basis to justify dismissal. The decision to dismiss should generally be assessed based upon the situation at that time. That being said, there have been cases where judges have agreed to consider such evidence, and appear to have relied upon it as part of their assessment of the employee’s character and the ability of the employer to continue to trust him as an employee. The Alberta Provincial Court considered such a situation in Gillespie v. 1200333 Alberta Ltd, where allegations were made that after being dismissed, the employee took confidential information, contrary to well-known policies. The court took that misconduct into account even though it was a direct response to the dismissal itself.

One theory is that post-termination conduct is relevant because it reveals the character of the employee, and the question of whether just cause for dismissal exists often comes down to whether or not the employer could trust the individual. In other words, had the employment relationship been irreparably harmed? If that is not the case, then summary dismissal is likely going to be deemed to be unwarranted. Of course, a counter-argument is that post-termination conduct would not have taken place if there was no termination.

Late last year, the Supreme Court of British Columbia considered the case of Campbell v. Harrigan Rentals and Equipment Ltd., in which the plaintiff was dismissed for cause after more than 14 years of service. The plaintiff sued for wrongful dismissal and, interestingly, both parties agreed that the action could be dealt with by way of summary trial despite the conflicting evidence on various points. Part of the basis for alleging that just cause for dismissal existed was evidence that the employer only learned of post-dismissal. Specifically, there was evidence of two unauthorized salary advances taken by the employee as well as a $700,000 variance in the accounting, for which the plaintiff was responsible, which he was aware of but did not report.

Ultimately, the court found that the original reasons for terminating the plaintiff did not amount to just cause for dismissal, but that the unauthorized salary advances and the unreported error did rise to that level. As a result, the dismissal was upheld.

While the case law is clear that employers may be able to rely upon after-acquired cause, it is wise for an employer that is considering dismissal for cause to take the time, before dismissal, in order to investigate whether there are other “skeletons in the closet”. This may help them to determine whether or not just cause for dismissal exists, and will also make any allegations of just cause more credible than allegations that only arise long after dismissal.

Stuart E. Rudner
Rudner MacDonald LLP

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Rudner Law, Employment / HR Law & Mediation

Employment Lawyers and Mediators at Rudner Law
Rudner Law is a firm specializing in Canadian Employment Law. They provide clients with strategic advice regarding all aspects of the employment relationship, negotiate and advocate on their behalf and represent them before courts, mediators and tribunals. Blog posts are written by Stuart Rudner, the principal and founder of Rudner Law, Brittany Taylor, a Senior Associate at Rudner Law, Nadia Zaman, an Associate at Rudner Law and Anique Dublin, a Law Clerk at Rudner Law. Read more
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