While just cause can be difficult for employers to prove, the Ontario Superior Court of Justice (“ONSC”) in Pirani v CIBC, 2023 ONSC 5991 [Pirani] upheld the employer’s just-cause dismissal and reaffirmed that failing to prove just cause does not result in an unenforceable termination clause.

Pirani also reminds employers that taking proper steps to assess whether just cause exists and to support just cause is crucial.

Background Facts

The employee, a Senior Financial Services Representative, had worked with the employer, a bank, for more than eight years. Her employment agreement required her to comply with all the employer’s policies and procedures, and she was able to review these policies and procedures throughout her employment.

During the employee’s tenure, she received two written warnings for failing to follow the employer’s compliance procedures. She received the first warning for failing to review overdraft reports and to take appropriate action regarding an overdrawn client account. The warning required the employee to “immediately adhere to all procedures” and not just those she previously breached. The warning also noted that the employer would conduct ongoing reviews to ensure she complied with policies and procedures. The employee then received a second and final warning for pulling credit bureau records for clients without their signed consent.

After receiving her final warning, the employee was dismissed for cause and subsequently brought a claim for wrongful dismissal damages as well as extraordinary damages. At trial, the employee argued that her employment agreement was repudiated because she was dismissed for cause. She also argued that the termination clause was unenforceable, given that she should have still received her minimum entitlements under the Employment Standards Act, 2000 [ESA], despite being dismissed for cause.

The ONSC Decision

Just Cause

The ONSC dismissed the employee’s wrongful dismissal claim, finding the employer had just cause to dismiss the employee. In assessing whether cause existed, the ONSC relied on the following facts:

1. The employee was aware of the employer’s policies, rules, and procedures. In fact, she was required to take annual courses, was coached, had the opportunity to ask questions, and was directed to further resources;
2. The employer’s rules were reasonable, clear, unequivocal, and designed to protect the privacy of its clients, in compliance with its legal obligations;
3. The employee was aware of the consequences for breaching the employer’s policies and procedures, but intentionally continued to breach them;
4. The employee was dishonest and misled the client;
5. The employer engaged in progressive discipline, keeping a diligent record of verbal coaching sessions, policy breaches, and written warnings; and
6. The employee committed to comply with the employer’s policies and procedures in both her employment agreement and warning letter.

The ONSC also highlighted that the employment relationship was “based on a high level of professionalism, trust, honesty, and integrity”, which was evidenced by both express terms included in the employment agreement and implied employment terms. This was particularly important due to the sensitivity of the personal financial information the employee was handling daily. The ONSC found that the employee’s failure to follow policies and procedures resulted in repeatedly exposing the employer to the risk of fraud, privacy breaches, and reputational harm. Ultimately the dismissal was a proportionate response to the harm posed to the employer.

Given the employer’s reasonable conduct, the employee was also not entitled to extraordinary damages.

Enforceable Termination Clause and No Repudiation of Employment Agreement

The ONSC disagreed with the employee that the employment agreement had been repudiated when the employer dismissed her for cause.

At trial, the employee attempted to argue that had the employer been unsuccessful in proving cause, the employer would have repudiated the employment agreement and therefore, the employer cannot rely on its termination provision. The ONSC relied on a previous case and maintained that “an employer’s failure to establish just cause does not disentitle an employer from enforcing an otherwise valid without-cause termination provision”.

The ONSC also noted that the ESA standards did not apply to the employee, because her employer was federally regulated. As such, her employment was governed by the Canada Labour Code, which does not have the “for cause” and “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer” distinction. Her termination clause therefore remained enforceable.

Takeaways

Pirani is a good decision for employers, as it reaffirms that employees are responsible for establishing repudiation, and failing to prove just cause does not result in an unenforceable termination clause.

However, employers are responsible for proving just cause, and just cause remains a very high threshold to meet. Employers should consider the following important steps:

1. Ensure policies and procedures are clear, accessible, and consistently implemented: Employers’ expectations should be clearly drafted and communicated to employees. As in Pirani, annual training can help ensure that employees understand their obligations, as well as providing employees with opportunities to ask questions. When employees breach policies and procedures, breaches should be addressed consistently so that employees do not receive mixed messages.
2. Make compliance with policies and procedures an express employment term: Employers should consider explicitly requiring employees to follow policies and procedures in their employment agreements to underscore the importance of same.
3. Properly document progressive discipline: Employers should ensure they are not only documenting written warnings, but coaching meetings, verbal warnings, and policy or procedural breaches. Discipline should also outline the consequences for continued breaches, so that employees understand the seriousness of the breaches.  

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

This information is not intended as legal advice.