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Employment & Labour

Proceed with caution when considering employee dismissal

In recent posts on his Canadian HR law blog, Ontario employment lawyer Stuart Rudner explained why employers should avoid rushing to judgment when dismissing an employee, as well as the importance of making sure any alleged misconduct is investigated fairly before dismissal.

As Rudner, founding partner with Rudner MacDonald LLP, explains, when it comes to the law of summary dismissal, his firm always cautions employers “not to react too hastily, and to remember that whether just cause existed will be assessed using a contextual approach which will consider not only the conduct in question, but all relevant factors.”

In most cases, he writes, some degree of progressive discipline will be required — including clear warnings that the misconduct is unacceptable and that further misconduct will lead to discipline up to and including termination.

Although the threshold for summary dismissal is high, Rudner says there are cases every year in which courts or arbitrators find that just cause for dismissal existed, including the recent decision in Sinclair and Shaw Cablesystems Ltd. (Unjust Dismissal), Re.

In that case, he explains, the employer became concerned about apparent dishonesty on the employee's timesheets, after discovering similar misconduct on the part of a colleague.

Although Rudner says every case must be assessed based upon its own particular circumstances and caution is always warranted, he adds that the decision in Shaw “does provide some reassurance to employers that the courts will take a common sense approach to such situations and will not necessarily be overly protective of the dishonest employee.”

In this case, the adjudicator found that just cause for dismissal existed as a result of the dishonesty in completing timesheets.

“The adjudicator found that the dishonesty had destroyed the trust that was necessary in order to have a viable employment relationship, and that the relationship had therefore been irreparably harmed. In so doing, the adjudicator took note of past performance issues, including warnings of discipline, up to and including dismissal, if there was no improvement.”

At the same time, Rudner says, the law of summary dismissal is complex and unpredictable — so employers should always avoid rushing to judgment, and should consult with an employment lawyer before making any decisions regarding discipline or dismissal.

“Employees should be mindful of the fact that misconduct does not automatically mean that summary dismissal is warranted. If they find themselves on the wrong end of a summary dismissal, they should consult with an employment lawyer in order to ensure that the dismissal was justified at law. Otherwise, they may be entitled to substantial compensation, which is the reason why employers should proceed with caution,” he writes.

Rudner says investigations are also crucial when considering summary dismissal.

“I have written and spoken extensively regarding the need to investigate allegations or suspicions of misconduct before imposing discipline or dismissal. If an employer fails to investigate, or purports to conduct an investigation of alleged misconduct but does so unfairly, they can face significant liability,” he explains.

For example, says Rudner, the recent British Columbia Supreme Court ruling in Lau v. Royal Bank of Canada overturned a dismissal and ordered that the employer pay severance pay plus extraordinary damages and legal costs.

“This is the risk facing employers: If they are found to have dismissed without cause due to a failure to properly investigate, they may end up spending far more money than if they had simply packaged the employee out. This can include severance, bad faith/moral damages, punitive damages, aggravated damages, damages for infliction of emotional distress, their own legal fees, and compensation for the individual’s legal fees. The stakes are high.”

As Rudner explains, in Lau, the plaintiff worked as an account manager with the bank and met a client in his office in January 2012. The client directed Lau to make some changes to her investments. Lau processed the changes as “new money” rather than “retained money.” The client subsequently complained and the bank’s corporate investigation team became involved.

Lau asserted that while he had tracked the sale improperly, this was in accordance with the instructions of a colleague who had also attended the client meeting, and evidence showed this was a common practice within the branch, Rudner writes. Video evidence was not available at the hearing and there was some question regarding its reliability. 

The bank dismissed Lau for cause and filed a report with the Securities Commission stating that the dismissal was due to falsification of bank records and failing to tell the truth when questioned regarding an alleged joint session with a client.

However, Rudner writes: “The B.C. Supreme Court did not find that there was just cause for dismissal. As often discussed, courts will take a contextual approach and consider all relevant factors. In this case, two factors in Lau’s favour were his immediate acknowledgment of wrongdoing and his previously clean record. The questionable investigation was also a significant factor.”

The court identified a number of failings in the bank’s investigatory process, including that video surveillance footage was inconclusive and not available at trial and Lau was never given an opportunity to view the video.

In addition to damages for pay in lieu of notice (severance), the court awarded Lau an additional $30,000 in aggravated damages. The bank also had to pay legal costs.

“As a result, this was a costly lesson and a reminder for all employers: Ensure that any alleged misconduct is investigated fairly before dismissal. Summary dismissal is not often ‘rubber stamped’ by our courts; While I often assure employers that ‘just cause is not a lost cause’, the threshold for establishing it is high,” writes Rudner.

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