While termination decisions are often challenging for employers, organizations sometimes uncover information after the fact that supports their choice. The Sobolewski v Advanced Completions Technology Services Ltd, [Sobolewski] decision is a useful reminder about the legal concept of “after‑acquired cause”, as dishonest conduct by senior leaders may support a just cause termination, even if the misconduct is discovered post-termination.

BACKGROUND

The employee, who served as the company’s President, was dismissed without cause and received the minimum termination payments required under Alberta’s Employment Standards Code. After the dismissal, the employer discovered that the employee had falsified a document in support of a bid submitted by the company.

As the employee did not have a written employment agreement, he commenced a wrongful dismissal claim, arguing that he was entitled to reasonable notice under the common law.

DECISION

Based on the employer’s discovery of the employee’s falsified document, the employer argued that it did not owe him any termination payments because it had after‑acquired cause (i.e., a reason to terminate employment for cause that was discovered after the employee was dismissed).

To establish after-acquired cause, the employer had the burden of satisfying a three-part test.

First, the employer had to show that the employee’s misconduct occurred before dismissal. As the employee admitted he falsified the document during his employment, the employer satisfied the first element of the test.

The employer was also required to demonstrate that it only learned of the misconduct after the dismissal. The employee stated that the employer knew and condoned his document falsification. However, the judge found the employer’s denial to be more credible, establishing that the misconduct was discovered only post-dismissal.

The employer also had to establish that a dismissal was proportionate to the misconduct. The judge assessed the context of the employee’s misconduct to determine whether falsifying the bid document caused a breakdown of the employment relationship.

Considering the overall context, the judge determined that, if it had been discovered at the time, the employee’s single dishonest act would have warranted dismissal for cause. There were several aggravating factors that supported a just cause dismissal, including that the employee’s misconduct was intentional, planned, and deliberate. The severity of the employee’s misconduct was also heightened by his role as President, as he owed a fiduciary duty to the company and was expected to act ethically.

As the employer satisfied each element of the test for after-acquired cause, the employee’s wrongful dismissal claim was dismissed and he was not entitled to any further termination-related payments.

TAKEAWAYS FOR EMPLOYERS

While the Sobolewski decision demonstrates how after-acquired cause operates in the context of litigation, employers should consider the following best practices to mitigate risk internally:

• Set and enforce workplace standards: To proactively prevent employee misconduct, employers can set expectations through workplace policies and routine training. Policies can also be referenced to support disciplinary decisions when addressing employee misconduct.
• Select appropriate discipline level: While one serious incident of misconduct can sometimes justify dismissal for cause, employers should select proportionate discipline. As the threshold to prove just cause is high, a lower level of discipline, such as a final written warning, may be more appropriate depending on the circumstances and severity of the misconduct. For more information about just cause dismissals, please read our blog regarding the Arora decision.
• Use after-acquired cause sparingly: Employers can rely on misconduct discovered after termination, but allegations should be well-supported. If a court determines that an employer asserted after-acquired cause without merit, the employer might be liable for additional damages. For more information about litigation strategy and risks, read our blog on the Valley Associates decision, where an employer was ordered to pay an additional $75,000 in punitive damages because it made a baseless claim against the employee for after-acquired cause.

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

This information is not intended as legal advice.