Since employees who are dismissed for cause lose most or all their termination entitlements, adjudicators are often hesitant to side with employers in these matters. However, in Arora v. ICICI Bank of Canada [Arora], the Ontario Superior Court of Justice (“ONSC”) found that the employer’s decision to dismiss an employee for cause was proportionate to their misconduct. Accordingly, Arora underscores the importance of well-drafted policies and thorough investigations when addressing employee misconduct.

Background

The employer, a bank, discovered that one of its employees sent emails containing confidential client information from his work account to his personal email. Upon reviewing the emails, the employer suspected additional misconduct.

In response to the employee’s suspicious activity, the employer formed an investigation committee (the “Committee”). The Committee interviewed the employee, reviewed relevant documents, and produced a report setting out the following misconduct:

• entered into a business in competition with the employer;
• likely took the employer’s proprietary information and work product in furtherance of the business that competed with the employer;
• shared the employer’s confidential information with a competitor;
• used the employer’s systems, time, and resources in furtherance of two other business;
• stored information that could identify the employer’s clients;
• failed to report activities which represented potential conflicts of interest; and
• failed to take advice from a member of senior management regarding whether certain activities were permissible prior to commencing those activities.

The Committee’s report also concluded that the employee’s actions violated the employment agreement and Code of Conduct, including dishonesty during the investigation and a failure to act with integrity.

The employer dismissed the employee for cause, to which the employee responded by claiming wrongful dismissal.

Decision

Just Cause

The ONSC assessed whether the employee’s behaviour justified dismissing his employment for cause.

The ONSC relied on the Supreme Court of Canada’s decisionin McKinley v BC Tel, which established that an employee’s misconduct, including dishonesty, does not necessarily warrant dismissal for cause. Instead, adjudicators must contextually assess whether the misconduct led to a breakdown in the employment relationship.

First, the ONSC set out the nature and extent of the employee’s misconduct, which the Court described as several “serious” breaches. Notably, the ONSC emphasized the cumulative effect of the employee’s privacy breaches, his decision to compete with his employer, and his dishonesty during the investigation.

The ONSC also considered the surrounding circumstances, such as the employee’s lack of disciplinary history, management responsibilities, and the investigation interview in which the employer confronted the employee. Notably, the employer did not provide the employee with advance notice of the allegations made against him or the fact that an investigation interview was occurring at all. While the ONSC afforded the employee “some leeway for the clearly difficult circumstances”, the Court still considered his dishonesty in its overall assessment because he continued to be dishonest post-interview.

Lastly, the ONSC assessed whether the employer’s decision to dismiss the employee for cause was proportionate to the severity of the employee’s misconduct. Accordingly, the employer needed to prove that the employee’s serious misconduct effectively repudiated the employment agreement. The ONSC held that the employee’s misconduct warranted dismissal for cause, as the severity of his breaches went to “the heart of the employment relationship”, despite having a “long, positive, and productive” employment relationship overall. As such, the employee was not wrongfully dismissed and was not entitled to common law reasonable notice.

Moral Damages

While the ONSC acknowledged that no legal authority supports awarding standalone moral damages in a just cause dismissal, the Court still found that the employee would not have been entitled to such damages anyways.

In particular, the ONSC noted that although the investigation interview was not “easy” for the employee, it was neither unfair nor conducted in bad faith. As such, the employer did not breach its duty of good faith in the manner of dismissal. Although the ONSC described the employer’s post-dismissal conduct as “harsh,” the Court found that moral damages were an inappropriate remedy.

Takeaways

The Arora decision highlights best practices for employers to mitigate the risk of employee misconduct, including:

• Conduct contextual assessments before imposing discipline: Before dismissing an employee for cause, employers must conduct a contextual assessment. Just cause is a high threshold for employers to meet and can require a history of conduct accompanied by progressive discipline. However, in certain instances, one or a series of related incident(s) of misconduct can warrant dismissal for cause, including an employee’s dishonesty during an investigation.
  
  For more information about just cause dismissals, please read our blog regarding the Mechalchuk v Galaxy Motors (1990) Ltd. decision.
  
• Investigate alleged misconduct: An investigation is an essential tool for employers when assessing whether an employee engaged in misconduct that warrants discipline. To ensure the respondent in an investigation has a full and fair opportunity to respond to the allegations made against them, it is best practice not to “ambush” the employee. Instead, employers should inform the employee of the nature of the allegations prior to interviewing them.
  
• Clearly set expectations: Employers can proactively prevent employee misconduct by setting expectations through workplace policies. As evidenced by the employer’s success in Arora, well-drafted policies are also an essential tool for employers to rely upon when responding to an employee’s misconduct.
  
• Adhere to post-dismissal duties: It can be costly for employers to engage in bad faith conduct in the manner of dismissal and breach their duties. While the employer avoided paying moral damages in Arora, it is best practice not to engage in heavy-handed litigation conduct and pressure employees into signing a release.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.