Thursday, May 27, 2010

Termination of Employment: For Cause or not For Cause?

An employer with a misbehaving employee has a difficult question: Terminate on a "for cause" basis, without notice? Or terminate the employee without cause and pay notice?

It's a tough question. Just cause is a high threshold, and only significant misconduct meets it. Further, alleging cause wrongfully can expose an employer to additional damages. There are few clear-cut "cause" cases, and terminating for cause frequently invites litigation. Even if an employer wins such a suit, legal expenses are significant.

Particularly when dealing with long-term employees who might have lengthy common law notice entitlements, it's tempting for an employer to terminate, pay out the statutory minimums, and hope that the employee goes away, or maybe offer a small additional amount in exchange for a full and final release...then, if you get sued and have to pay out the legal expenses anyways, to allege cause and say that you shouldn't have to pay anything at all.

Trouble is that it doesn't work that way. When you're terminating, you pretty much have to make a decision as to whether or not it's "for cause". Even if you don't say so expressly, you're going to have to engage in conduct which tends toward one or the other - namely, in most cases, payment or non-payment of statutory minimum notice entitlements, and/or filling out the reason for issuing the Record of Employment. You can't just fence-sit until you know if you're getting sued.

Why not? Why should a bad actor get away with the misconduct and walk away with a golden parachute just because you tried to pay him a bit to go away in the first place?

Justice Thompson answered this effectively in 1964, in Tracey v. Swansea Construction Co. Ltd., [1965] 1 O.R. 203, in a passage which has been quoted a few times in the decades since:
The simple position appears to me to be this. The defendant desired to dismiss the plaintiff. If there was misconduct or default sufficient to justify discharge it had one of two courses open to it. It could have summarily dismissed for cause or it could have decided to overlook, waive or condone the misconduct and terminate upon notice, or payment in lieu of notice, in accordance with the provision of the contract for termination implied by law. It could not do both, for one would operate as a repudiation of the contract for a breach thereof, and the other, conversely, would operate as an affirmation of the contract and the adoption of its provisions for termination. The fact that the defendant was in error as to the length of, or sufficiency of, the notice given could in no way alter the effect of its intention as expressed by its conduct.
By paying notice in the first place, an employer acknowledges that the contracts continues to exist despite the employee's misconduct. You can't retroactively repudiate a contract.


This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

No comments:

Post a Comment