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Employment & Labour

Just-cause terminations can backfire without proper evidence

Firms that terminate someone for “just cause” must be able to support that action with solid evidence, or else the court may award the ex-employee substantial punitive damages, Vaughan employment lawyer Dennis Ovsyannikov tells AdvocateDaily.com.

“Unfortunately, some companies try to use just cause as a tactic to dismiss someone without paying them the termination and severance pay they are entitled to,” says Ovsyannikov, associate with Zeilikman Law. “That is not advisable, and may backfire on the employer.”

He cites the example of a 2018 Ontario Superior Court of Justice ruling, where a former company president was awarded $100,000 in punitive damages.

According to the court judgment, in 2015, at the age of 54, the man was given a termination notice for what he said were unspecified reasons, after 11 years of service with a manufacturing and distribution company.

He launched a claim, stating he was dismissed without notice or cause, and therefore was entitled to damages, court documents show. The judgment states he was advised in a counterclaim by the company that he was terminated for cause because he committed fraud.

In his ruling, the judge noted that that company “chose not to call any witnesses who could provide direct evidence to substantiate the allegations. Again, it appears that the counterclaim was merely a tactic employed by the defendant to induce the plaintiff to drop his claim.”

The judgment references a 2008 Supreme Court of Canada decision that found, “Punitive damages are meant to address wrongs on the part of the defendant ‘that are so malicious and outrageous that they are deserving of punishment on their own.’”

Ovsyannikov says punitive damages are essentially a message from the courts that the conduct of the employer was not proper, and that allegations against the person should not have been made.

In this case, he says the company alleged the former employee committed fraud, but it failed to back that up with any evidence or witness testimony.

“Employers have to be really careful when making an allegation of fraud, especially if they are using it to terminate someone for just cause,” says Ovsyannikov, who was not involved with this case and comments generally.

“Significant evidence needs to be marshalled in order to prove just cause,” he adds. “In this case, the firm failed to present that evidence or to have witnesses testify at trial who could support the allegations.”

Ovsyannikov says he tells clients that judges expect a significant level of supporting evidence and testimony when serious allegations are made against a person.

“If there is concern about an employee’s conduct, we generally advise employers to bring in a third-party investigator who can conduct an appropriate investigation and reach objective conclusions,” he says.

All employers need to treat their staff fairly, Ovsyannikov says, noting that “every employee has to be given a full opportunity to defend themselves against an allegation of wrongdoing, along with being presented with the details of the allegation being made against them.”

Ovsyannikov urges companies to take their time and to seek legal counsel if they are thinking about dismissing someone for just cause.

“The reality is that employers, when faced with suspected misconduct, sometimes overreact and make mistakes,” he says. “It is crucial that they not rush, and they do a proper investigation.”

Firms also need to bring in legal counsel “as soon as possible,” Ovsyannikov says “to discuss the evidence and the merits, or demerits, of terminating someone’s employment.”

Just cause is a great tool in appropriate circumstances, he says, “but only if there is clear and sufficient evidence. That can sometimes be difficult to discern, which is why it is crucial for employers to consult with a lawyer on a clear plan of action.”

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