It may surprise many, but in most dismissals, whether the employee performed very well or very poorly is entirely irrelevant. While dismissed employees often come to see us with stacks of positive reviews in hand, we usually have to explain that it won’t change their legal position. Conversely, we often explain to employers that unless there is just cause for dismissal, a weak employee is entitled to the same severance as the best employee.
In Ontario, employees can be dismissed in one of two ways: without cause or with cause. The threshold for establishing just cause for dismissal is high, particularly when it is performance-based.
If an employee is dismissed for cause, they are not entitled to any notice or termination pay at all (other than the nominal amount that may be required by statute in some cases). However, if the employee is dismissed without cause, the only issue in most cases is the notice or severance that the employee is entitled to. In determining the employee’s entitlements to notice/severance, performance issues are not a factor.
In a recent decision, Kaminsky v Janston Financial Group, the Ontario Superior Court of Justice held that if an employer dismisses an employee without cause while being aware of grounds to terminate for cause, they cannot plead cause in response to a wrongful dismissal claim. The Court struck out portions of the employer’s pleading alleging performance concerns on the ground that they were irrelevant. This decision is a helpful reminder for employers to carefully consider terminations; if there is just cause for dismissal and the employer dismisses the employee without cause, the employer will be prevented from raising allegations of cause later on unless it was after-acquired cause.
In Kaminsky, the employee was employed by the company for close to 18 years when she was terminated without cause. She was provided with severance (20 weeks’ salary) that was greater than her minimum statutory entitlements, but was not required to sign a release. The employee filed a wrongful dismissal claim, seeking 20 months’ salary plus her lost bonus. During discoveries, the employee refused to answer questions relating to alleged performance concerns, claiming that the questions were irrelevant due to the termination being without cause.
The employee brought a motion pursuant to Rule 25.11 of Ontario’s Rules of Civil Procedure for an order striking a portion of the Statement of Defence containing allegations of performance concerns. The employer brought a motion for an order requiring the employee to answer the refusals relating to alleged performance concerns.
Both parties agreed that the outcome of the employee’s motion should be decided before proceeding with the employer’s motion, and the employer’s refusals motion was adjourned.
The Court accepted the following statements of law:
“(1) a payment to an employee at the time of termination would not preclude an employer from subsequently asserting termination for cause”; and
“(2) an employer is entitled to assert after-acquired cause for termination of employment when facts are discovered by the employer after dismissal that were unknown at the time of dismissal”.
The Court found that in this case, although the employer believed it was entitled to terminate the employee for cause, it did not do so. As a result, the Court held that the portions of the pleading relating to performance concerns were irrelevant.
The employer in this case was prevented from pursuing evidence that just cause for dismissal existed because of the manner in which it carried out the dismissal. Specifically, where the employer knew about the grounds to terminate for cause but chose to unequivocally dismiss without cause, the employer cannot later try to rely on such grounds for cause in litigation.
Dismissing without cause in circumstances where grounds for cause exist can limit an employer’s options. In such situations, we often recommend a hybrid approach: allege cause at the time of dismissal while offering the employee a gratuitous payment in exchange for signing a Full and Final Release. That can allow you to keep your options open, while still offering the employee some financial assistance and mitigating your risk of a claim.
By Nadia Zaman and Stuart Rudner