Earlier this month news broke about Yahoo CEO Scott Thompson having represented himself as having a degree in accounting and computer science from Stonehill College, when in fact he had never received a computer science degree. He resigned as a consequence of the scandal.
But here's an interesting new twist: A case came out recently in which an employer alleged just cause because the employee had made representations regarding the sales he could bring to the company, and these promises didn't pan out.
The case is McGregor v. Atlantic Packaging Products Ltd. The employee, Mr. McGregor, was hired in April 2005 to manage the employer's Niagara Peninsula branch, and fired in October 2007.
Incidentally, just cause was not alleged at the time of the dismissal. He was offered a package. The package wasn't good enough, so he sued in February 2008. The employer defended, again not alleging just cause, then in 2010 amended its pleadings to allege just cause. By trial, the only allegation of just cause still being pursued was the above, that he made promises in the interview that he couldn't keep.
McGregor had spent 25 years with another company in the same industry, and was the VP Sales when he left. There was a restrictive covenant preventing him from competing for 18 months; towards the end of the 18 months, he entered into discussions with Atlantic for them to hire him to set up a distribution centre in Niagara. They asked him to put together a business plan, which he did, including a sales forecast. He was hired after his non-comp clause expired.
The employer's allegations, which the trial judge ultimately didn't accept, was that the sales numbers had been promised based on clients which McGregor guaranteed he would be able to bring to Atlantic. The trial judge concluded that, based on the business plan, there was no evidence of any such 'guarantee'. Moreover, Atlantic knew that McGregor had not been in contact with his old clients for 18 months, and it seemed obviously unreasonable to believe that he could actually guarantee that clients would come over to Atlantic. (Also, in a more general sense, the trial judge did not find the employer's witnesses to be credible.)
Suffice it to say that the Niagara centre didn't work out. In August 2006, the employer decided to cut its losses and close the facility, and transitioned McGregor to its Burlington office, until he was fired in October 2007.
He had not received any discipline whatsoever nor any performance evaluations, nor was he advised of any performance concerns at the time of his termination. Only three and a half years later did the employer first allege gross misconduct as justification for summary dismissal.
Suffice it to say that the employer was unsuccessful in its defence. The judge didn't believe that the employee had made fraudulent misrepresentations in the first place, but in any event the fact that the employer had kept McGregor on for over a year after determining that the Niagara plan was "hopeless" amounted to 'condonation'. They knew of all the relevant facts at that point, and nonetheless continued to employ McGregor.
When an employer has just cause, he has to act on it. Use it or lose it. He can't just sit on it until he decides he wants to be rid of the employee for whatever reason, and play it then like a trump card.
To be fair to the employer's position, the employer gave evidence that McGregor had essentially admitted in a conversation in September 2007 that he knowingly lied about the numbers to trick Atlantic into giving him the job. If true, that may have defeated the condonation argument - okay, we knew that the numbers hadn't panned out, but it wasn't until just before we fired him that we knew that he had knowingly and intentionally deceived us. One problem, though: The trial judge didn't believe the employer. The overall lack of credibility of the employer's witnesses on the point, particularly combined with the lack of written records that one would expect following such an important conversation - memoranda, correspondence, written notes, etc. - caused the judge to reject this evidence.
The trial judge's alternative reasoning is that condoning it until the termination would be fatal to the employer's defence (even if the defence had merits in the first place). But there's a further point that the trial judge didn't address: There is case law suggesting that dismissing a person on a non-for-cause basis is further condonation of misconduct of which the employer is aware.
In 1965, the Ontario Court of Appeal affirmed a decision by Justice Thompson in Tracey v. Swansea Construction Co. Ltd., with the following passage:
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.
It's not a hard-and-fast rule that you can't assert just cause after the fact. Particularly in cases of "after-acquired cause", where the employer didn't know about the misconduct until after the dismissal, it can't be argued that the employer ever 'condoned' the misconduct. But it undermines the employer's case for cause when, knowing of the misconduct later alleged, the employer nonetheless dismissed the employee on a not-for-cause basis.
Aside from the technical 'condonation' argument, the further difficulty is this: Just cause is an extremely high threshold in the first place. If the employer equivocates and hedges by failing to allege just cause at the outset, the employer will tend not to be as credible when arguing, at the eventual trial, that the misconduct should be perceived as rising to the level of just cause.
In this case, the employer was faced with an impossible task: If these alleged misrepresentations were so important, then why didn't you fire him in 2006? Why didn't you raise the issue when you finally did fire him in late 2007? Why didn't you even raise them in your statement of defence in 2008?
I would have been shocked had the defence succeeded. Indeed, on the facts as presented by the judge's reasons, I'm surprised that the employer actually amended its pleadings to allege just cause in 2010. The argument itself seems fairly tenuous, and the condonation response is pretty academic. And you can certainly expect that this will not have a favourable result on costs for the employer - when the main issue at trial (reasonable notice and mitigation were also argued, but these alone seldom require a trial) wasn't even raised until more than 2 years into the litigation process, and was unsuccessful, it doesn't look good 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.