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Bulletin | The HR Space

Court Upholds with Cause Termination Despite No Prior Discipline and No Singular “Major” Incident

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Overview

Labour, Employment & Human Rights Bulletin | HR Space

In an encouraging decision for employers, the Ontario Superior Court of Justice upheld the with cause termination of a long service employee.[1] The termination was upheld despite the fact that the employee had no prior discipline and that none of the incidents that led to the termination were sufficient, standing alone, to warrant termination with cause. The court’s decision highlights that employers may be able to terminate for cause for a series of incidents of misconduct in a short period of time even if none of the incidents are “bad enough” on their own.

The Facts

The employee was employed as an Executive Director of a small not-for-profit organization. The employer, a Chamber of Commerce, was responsible for promoting the commercial, social and civic interests of the community. It was governed by a volunteer board of directors. The board of directors was responsible for the governance of the organization but relied entirely on the Executive Director for the day-to-day management of the organization.

The employee had no issues during her employment until the eighteen (18) months leading up to the date of termination. During that time, a new member on the board of directors detected a number of irregularities in the financial matters of the organization. In particular, the board of directors learned that the employee had, among other things: altered a direction sent to the bank regarding the transfer of funds from one account to another; taken vacation pay in lieu of vacation days; received a three percent salary increase to which she was not eligible; and wrote cheques with only one signature.

The employee was placed on a leave of absence pending a further investigation into her conduct. At the end of the investigation, the employee’s employment was terminated for cause. 

The termination letter cited numerous “financial matters” and a number of other listed grounds as forming the basis for the termination. In total, fifteen grounds were listed in the termination letter.

The employee had been employed for 17 years and was 75 years old at the time of termination.

The Decision

The court began by considering whether the employee was a fiduciary. The court noted that there were traditional relationships where fiduciary duties could be implied, such as trustee-beneficiary, agent-principal, lawyer-client, etc., but noted other relationships could impose such duties, depending on the context. In the circumstances of the case, the court concluded that the employee stood in the position of a fiduciary to her employer and owed the employer duties of loyalty, honesty, good faith and an avoidance of conflicts of interest. The court noted that the employer was vulnerable to the exercise of the employee’s discretion given the modest oversight of the employee’s position.

The court then turned to consider whether the employer had cause to terminate the employee. Although the termination letter had provided fifteen grounds for termination, the employer focused on only six grounds during the trial and argued that the six grounds taken together cumulatively supported the with cause termination. The court began by considering each of the six grounds individually. In reviewing the six grounds, the court concluded that the employee had altered a document with the intention that it would be sent to the bank, and did not correct an administrative error that resulted in the employee receiving an unauthorized three percent raise. The court noted that neither of the incidents of misconduct were “major” but found the misconduct to be significant because of the dishonesty involved. The court also found that the employee had not provided prompt access to records when requested by the board of directors, and generally had engaged in “poor judgment” in the last eighteen months of her employment.

The court concluded that “any one of the incidents of malfeasance or the exercise of poor judgment would not […] be sufficient to support a termination for cause” but “taken together they do”. Given the importance of honesty, faith and trust in the employee’s role, the court found that the employee’s immediate termination was justified. The court found that the employee’s conduct also met the standard of wilful misconduct under the Ontario Employment Standards Act, 2000.

The court went on to find that it was unnecessary for the employer to provide warnings or to implement a stepped approach to discipline given that all of the issues that led to the termination of the employee came to a head around the same time period.

Takeaways

Although in most cases, progressive discipline and/or prior warnings will still be required, if an employee engages in a number of incidents of misconduct in a short period of time, the lack of prior discipline will not be fatal to upholding a termination for cause. This case also highlights the importance of considering the entire factual background and circumstances surrounding an employee’s conduct, and suggests that incidents of misconduct should not be viewed in silos. Further, in circumstances where an employee operates with little supervision, a higher degree of honesty, loyalty and good faith to the employer may be required, justifying more significant penalties for misconduct.



[1] Goruk v. Greater Barrie Chamber of Commerce, 2021 ONSC 5005

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