Wednesday, April 20, 2011

Firing for Cause, but Hedging Bets

In light of the Oosterbosch case hitting the media again (which I discussed to some extent in this post), this time on the Star's Moneyville blog, another comment on it seems appropriate.

First, though, some background.

It has long been the law in Ontario that an employer who provides any amount of pay in lieu of notice of termination is blocked from later arguing that the termination was for just cause.

In 1964, in a decision upheld by the Court of Appeal (in Tracey v. Swansea Construction Co. Ltd., [1965] 1 O.R. 203), Justice Thompson held as follows:

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.
The legal jargon aside, the practical effect is that an employer who says "Yeah, there's misconduct, but it'll be easier to make this go away if we put money on the table" will not generally be able to retract that position if the employee isn't happy with 'a bit' of money.

Considering that (a) many employers don't realize that employees might have entitlements in excess of the statutory minimums; (b) the threshold for just cause is often very high; (c) employers can get hit with moral damages for alleging cause improperly and/or failing to promptly pay the statutory minimums; and (d) the doctrine of 'near cause' - reduced notice periods due to misconduct - has been thoroughly rejected in Canada (though there is still some judicial murmuring from respected sources otherwise), this Swansea doctrine put employers in a very difficult position at the point of termination. There were a lot of reasons to pay the statutory notice except in the clearest cases of just cause, and doing so meant they'd be on the hook for the whole reasonable notice cost.

But now we have the Oosterbosch case which, if it holds up, seems to undermine Swansea. Recall in Oosterbosch that we have an employee who was found to be overly careless justifying summary dismissal, but that the misconduct wasn't wilful so as to disentitle him to the $25,000 in statutory minimums. It seems pretty employee-friendly, but when you turn it around you realize that employers can now use the Oosterbosch decision as a precedent for the proposition that there is nothing inconsistent with terminating for just cause and still having paid statutory minimums. Directly contradicts Swansea, and could end the doctrine that has given employees a great deal of bargaining power for nearly fifty years.

This turnabout isn't uncommon in employment law. Take, for example, the constructive dismissal doctrine that says that, under some circumstances, a constructively dismissed employee might reasonably be expected to stay in the job to mitigate his or her losses (see, for example, Mifsud). Seems pretty employer-friendly, aye? Enter Russo v. Kerr, in which an employee took a significant pay cut, and successfully sued to be topped up through the reasonable notice period while still working for the employer.


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.

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