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Ontario Superior Court Provides Employers with Important Reminders Regarding Just Cause – Employer Ordered to Pay $25,000 Despite Proving Common Law “Just Cause” for Termination

A recent Ontario Superior Court of Justice decision provides employers with some reminders regarding the dismissal of employees for cause. The decision makes clear that proving just cause at common law may not be sufficient to avoid paying termination and severance pay under the Employment Standards Act, 2000. The decision also demonstrates how valuable a well-designed progressive discipline policy can be for an employer.

It is a common misconception that if an employer has just cause to dismiss an employee that the employer is exempt from having to pay the statutory termination and severance pay. This, however, is not always the case. In Oosterbosch v. Fag Aerospace Inc., [2011] O.J. No. 1135 (Ont S.C.J.), the employer was a manufacturer of bearings for the aerospace industry. Being in an industry where a part failure can lead to catastrophic results, quality control is essential and employees are required to be particularly vigilant in the production of parts. The employer terminated one of its employees after 5 incidents that occurred in the span of just over 7 months. The incidents consisted of the employee producing 30 faulty parts, falling asleep in his truck resulting in lateness, five other separate occurrences of lateness, the production of 77 non-conforming parts, failing to recognize incorrectly drilled parts and the falsification of records.

The almost 18 year employee was dismissed at the age of 53 pursuant to the employer’s progressive discipline policy. Under the policy, an investigation was conducted for every incident. The result of the investigation could be anything from no discipline at all to a written warning and suspension. Four written warnings within a 12 month period would lead to a dismissal. The employee was warned multiple times in the form of verbal warnings, written warnings and a suspension before he was ultimately terminated.

The Court held that at common law, just cause “requires proof of misconduct that constitutes repudiation of the employment relationship”. The employer, with the help of its progressive discipline policy, was able to demonstrate that the employee’s “causal attitude towards the seriousness of [his] misconduct” was, in fact, a repudiation of the employment relationship. However, despite the finding that the termination was for cause, the Court still awarded the dismissed employee $25,000 for statutory termination and severance pay.

The reason behind the Court’s decision is that under the Employment Standards Act, Termination and Severance of Employment, O Reg 288/01, in order for an employer to be exempt from paying the statutory termination and severance pay, the employee’s conduct must be "willful misconduct, disobedience or willful neglect of duty". The Court did not equate the employee’s persistent carelessness to willful misconduct and ordered that the employer pay the ESA statutory amounts for an employee with over 17 years of employment –  eight (8) weeks of termination pay, plus approximately seventeen (17) weeks’ severance pay.

While the $25,000 statutory award appears excessive, especially in light of the Court’s finding of a just cause for the dismissal, the results could have been far worse. Had it not been for the employer’s well-crafted progressive discipline policy, which demonstrated the employee’s failure to improve after multiple warnings and coachings and ultimately lead the Court to its finding of just cause, the common law notice period would have likely been anywhere from 13 to 20 months and the Court’s award would have easily been two to three times the statutory amount.

The lawyers at CCP can assist employers with drafting and implementing progressive discipline policies as well as determining whether an employer will be required to pay common law or statutory termination pay.

Please Note: This blog has been prepared as an informational service for our clients and other interested parties. It is not intended to constitute legal advice, a complete statement of the law or opinion on any subject. Although we endeavour to ensure the accuracy of the content, no one should act upon the information provided without a thorough examination of the law after the facts of a specific situation are fully considered.



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