In Humphrey v Mene (2021 ONSC 2539) Justice Papageogiou was faced with this issue. Here is what the judge said about the law on this issue
136 In my view, the following principles emerge from the above cases:
a. Where an employer alleges cause and fails, or withdraws its cause allegation, or repudiates an employment agreement through acts which constitute constructive dismissal, the employer is not precluded from subsequently invoking a without cause termination provision for the purpose of calculating the employee’s damages: Roden, Moore, Simpson;
b. However, in all cases, it is a question of construction of the without cause termination provision before the Court as to whether, properly construed, the without cause termination provision applies. Such clauses are subject to strict construction: Ebert, Matthews.
c. Even if the contract, properly construed, permits an employer to terminate without cause after a failed for cause termination, there are some breaches or acts of repudiation which are so significant, or of such an order of magnitude, that they render a without cause termination provision unenforceable: Dixon. Although Dixon has not specifically been considered and accepted by appellate courts I find the reasoning compelling. All employment agreements are negotiated and agreed to on the basis of certain implied minimum expectations as to how the employer will conduct itself, the duty of good faith being one. An employee’s agreement to accept terms which significantly impact on the employee’s common law rights must be taken to be made in the expectation that the employer will comply with these minimum implied expectations. Where the employer significantly departs from such expectations, in my view, the employee should not be held to extremely disadvantageous provisions which he, she or they agreed to. This is not rewriting the contract but giving effect to what the parties must reasonably have intended.
d. However, minor or technical mistakes made in good faith by the employer will not constitute a repudiation sufficient to prevent the employer from relying upon the without cause termination provision: Amberer, Oudin.
In this case the Employer first alleged just cause but withdrew the allegation before trial. The court found that the Employer had so mistreated the Plaintiff that their behaviour disentitled the Defendant from relying upon the Without Cause Termination Clause. This is what the Court said:
137 I am satisfied that in the circumstances of this case outlined above, Ms. Humphrey has established on a balance of probabilities that Men’s conduct, objectively viewed, demonstrates an intention to no longer be bound by the December 2018 Employment Agreement, thus repudiating it. The conduct which I have found includes setting her up to fail, subjecting her to a toxic workplace, embarrassing and humiliating her before co-workers and clients after her suspension, significantly exaggerating performance issues and the evidence it had in support of these at the time of termination, and alleging cause when it knew or should have known it did not have it. These are not mere technical breaches made in good faith. Men’s conduct in this case goes to the heart of the employment relationship.
138 I also find that these many acts of repudiation are of such a magnitude that Men is disentitled from relying on the Without Cause Termination Provision.
By the way, this case is a great read, if only to see how outrageous the Defendant acted and what the Judge did about it. The Plaintiff was a 32 year old COO of a start up with under three years service.
She was awarded:
12 months notice, and
$50,000 in aggravated damages and
$25,000 in punitive damages.
I can’t wait to see what the costs award looks like.
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