Termination for Cause: What Does it
Take?
by Paul Broad
Introduction
Termination for cause is the ultimate sanction that an employer can impose on an
employee. Where cause is successfully established, it permits an employer to
summarily dismiss an employee and terminate the employment relationship without
notice or any damages or other payment in lieu of notice.1 Given the importance of
employment to an individual’s dignity and self-worth, courts require solid evidence
of significant wrongdoing before a termination for cause will be upheld.
In this paper, we will highlight some of the cases where courts have found cause to
exist and where they have found cause not to exist. First, however, we shall review
the contextual approach that must be followed when determining whether cause
exists.
The Contextual Approach – The Supreme Court’s Direction
In the 2001 decision of McKinley v. BC Tel,2 the Supreme Court of Canada established
what is now the accepted approach to analysing allegations of cause:
[48]
In light of the foregoing analysis, I am of the view that
whether an employer is justified in dismissing an employee on the
grounds of dishonesty is a question that requires an assessment of
the context of the alleged misconduct. More specifically, the test is
whether the employee’s dishonesty gave rise to a breakdown in the
1
This paper will focus on the common law of dismissal for cause. Under the Employment
Standards Act, 2000, employers need not provide notice of termination nor pay termination
or severance pay where an employee has been “guilty of wilful misconduct, disobedience or
wilful neglect of duty that is not trivial and has not been condoned by the employer”. The
ESA test is not necessarily equivalent to the common law test for cause. The Canada Labour
Code uses a “just cause” test.
2
[2001] 2 S.C.R. 161, 2001 SCC 38 (CanLII).
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 1
employment relationship. This test can be expressed in different
ways. One could say, for example, that just cause for dismissal
exists where the dishonesty violates an essential condition of the
employment contract, breaches the faith inherent to the work
relationship, or is fundamentally or directly inconsistent with the
employee’s obligations to his or her employer.
[49]
In accordance with this test, a trial judge must instruct the
jury to determine: (1) whether the evidence established the
employee’s deceitful conduct on a balance of probabilities; and (2) if
so, whether the nature and degree of the dishonesty warranted
dismissal. In my view, the second branch of this test…is a factual
inquiry….3
As is made clear from other comments of the Supreme Court in McKinley, the Court
was ultimately concerned that the employer’s disciplinary response be proportional
to the employee misconduct when assessed in light of all of the relevant contextual
factors.
The Contextual Approach – The Court of Appeal’s Direction
The contextual approach was considered by the Ontario Court of Appeal in the case
of Dowling v. Ontario (Workplace Safety and Insurance Board).4 Dowling was one of
two managers in the WSIB’s Ottawa office. The trial judge found that he engaged in
numerous acts of misconduct: (1) he purchased two computers from an employer
registered with the WSIB whose account he supervised, at a discount and without
disclosure; (2) he accepted $1,000 from an employer representative, in part for
providing assistance that fell within his work responsibilities; (3) when questioned
about the computers and money, he lied about the money; (4) he contacted the
employer representative throughout the investigation process, thereby improperly
interfering with the investigation; (5) he prepared a false receipt to support a lie
about the $1,000; and (6) at a second interview, he continued to lie to the WSIB
about the money and his contacts with the employer representative.
Despite these factual findings, the trial judge found that the employer did not have
cause for termination. The Court of Appeal overturned this finding, and in doing so,
gave further guidance on the proper application of McKinley:
[49]
Following McKinley, it can be seen that the core question for
determination is whether an employee has engaged in misconduct
that is incompatible with the fundamental terms of the employment
3
4
Ibid. at 187.
(2004), 246 D.L.R. (4th) 65 (Ont. C.A.), 2004 CanLII 43692 (ON C.A.).
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 2
relationship. The rationale for the standard is that the sanction
imposed for misconduct is to be proportional – dismissal is
warranted when the misconduct is sufficiently serious that it strikes
at the heart of the employment relationship. This is a factual inquiry
to be determined by a contextual examination of the nature and
circumstances of the misconduct.
[50]
Application of the standard consists of:
1.
determining the nature and extent of the misconduct;
2.
considering the surrounding circumstances; and,
3.
deciding whether dismissal is warranted (i.e. whether
dismissal is a proportional response).
[51]
The first step is largely self-explanatory but it bears noting
that an employer is entitled to rely on after discovered wrongdoing,
so long as the later discovered acts occurred pre-termination.
[Citation omitted.]
[52]
The second step, in my view, is intended to be a
consideration of the employee within the employment relationship.
Thus, the particular circumstances of both the employee and the
employer must be considered. In relation to the employee, one
would consider factors such as age, employment history, seniority,
role and responsibilities. In relation to the employer, one would
consider such things as the type of business or activity in which the
employer is engaged, any relevant employer policies or practices, the
employee’s position within the organisation, and the degree of trust
reposed in the employee.
[53]
The third step is an assessment of whether the misconduct is
reconcilable with sustaining the employment relationship. This
requires a consideration of the proved dishonest acts, within the
employment context, to determine whether the misconduct is
sufficiently serious that it would give rise to a breakdown in the
employment relationship.5
While the contextual approach ensures that discipline is proportional to the
misconduct, it has also complicated the task of predicting when a court will find
5
Ibid. at 76-77.
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 3
cause to exist. A short survey of decided cases reveals that there is often a very fine
line between cause and no cause.
Misappropriation of Employer Property
Theft and other forms of misappropriation of employer property would probably be
regarded by most employers as extremely serious breaches of trust, generally
deserving of immediate termination. Indeed, in the McKinley case, the Supreme
Court commented as follows:
[51]
This being the case, I conclude that a contextual approach to
assessing whether an employee’s dishonesty provides just cause for
dismissal emerges from the case law on point. In certain contexts,
applying this approach might lead to a strict outcome. Where theft,
misappropriation or serious fraud is found, the decisions considered
here establish that cause for termination exists.
While these are helpful comments, the contextual approach does not always lead
courts to uphold termination for cause.
In the case of Courchesne v. INCO Ltd.,6 the plaintiff was a maintenance supervisor
with a 28-year discipline-free record. The trial judge found that he ordered tiles for
which Inco paid, but which he then took home for his own use. He was also found to
have ordered a pump which was not the type used at Inco, which he also took home
for his own use. He could offer no excuse for failing to use the company’s “passout” system for properly removing company property. These actions amounted to a
violation of the company’s Cardinal Rules. Further, when the company investigated
these matters, the employee attempted to conceal his actions. The trial judge found
that these actions amounted to cause.
Similarly, in Agosta v. Longo Brothers Fruit Markets Inc.,7 the Court found that an
employer had cause to terminate a produce manager for the following incidents: (1)
closing the store early and failing to arm the security system; (2) attempting to
remove store product without obtaining the appropriate consent from the store
manager; and (3) hindering the subsequent investigation. In determining that there
was cause, the trial judge focused on the “pre-meditated and intentional”
dishonesty of the plaintiff, which was exacerbated by his behaviour during the
investigation.
6
7
2005 CanLII 20802 (ON S.C.).
(2006), 50 C.C.E.L. (3d) 77 (Ont. S.C.J.), 2006 CanLII 16843 (ON S.C.).
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 4
In contrast to these decisions, the trial judge in Bouma v. Flex-N-Gate Canada Co.8
found that the employer had not established cause where the plaintiff, a 22-year
Maintenance Manager, ordered steel tubing for the company, and then used one of
the pieces of tubing for his personal use (about $33 worth). In this case, the
employer had a history of allowing employees to do personal work on company time
and using company materials. The only “procedure” required hourly employees to
first seek the permission of a manager, but this did not apply to the plaintiff. Based
on these facts, the Court found that the employer did not have cause to terminate
the plaintiff’s employment.
Criminal Activities
When an employee is charged with or participates in criminal or potentially criminal
activities, employers are often concerned about the impact on the workplace and the
reputation of the employer in the community. But does it amount to cause?
In Kelly v. Linamar Corporation,9 merely being charged with possession of child
pornography was sufficient for the trial judge to find that the plaintiff was properly
terminated for cause. This was so even though the employee used his own computer
and acted entirely on his own time. However, the Court considered the supervisory
role held by the plaintiff and the employer’s reputation in the community (it
undertook significant philanthropic activities directed toward young children). In
this context, the employer was justified in terminating the plaintiff for cause based
on the charges alone.
In contrast, the employer in Murphy v. Clarica Life Insurance Company10 was not able
to persuade the court that it had cause even though one of its agents attempted to
engage in an illegal pyramid scheme on company time, made significant efforts to
encourage fellow employees to join in the scheme, and initially lied to his employer
when asked about the activity. It is not entirely clear why the trial judge did not find
cause, though he was influenced by the fact that the employer relied on certain other
allegations of improper behaviour that were not proven. However, on the whole, it
appears that the trial judge was just not convinced that the behaviour went to the
core of the employment relationship.
Harassment
While serious incidents of sexual harassment will usually support a termination for
cause (especially when the harasser holds a managerial position), not all incidents
8
(2004), 37 C.C.E.L. (3d) 301 (Ont. S.C.J.), supplementary reasons at (2005), 40 C.C.E.L. (3d)
2, 2005 CanLII 10540 (ON S.C.).
9
2005 CanLII 42487 (ON S.C.).
10
(2003), 33 C.C.E.L. (3d) 58 (N.B.Q.B.), 2003 NBQB 381 (CanLII).
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 5
of harassment will justify summary dismissal. It will be more difficult to establish
cause for summary dismissal where the alleged harasser is not in a managerial or
supervisory position, or where the harassment is found to be of a minor nature.
In Fleming v. Ricoh Canada Inc.,11 the plaintiff was the General Manager of Direct
Sales who was found to have engaged in the sexual harassment of two of his
subordinates. His defence relied in part on a claim that the office had a pre-existing
sexualized atmosphere that he had permitted to continue, and had merely joined in
to some extent. This aspect of the defence was properly rejected as it had been by
the Court of Appeal in the earlier case of Simpson v. Consumers’ Association of
Canada.12 Rather, relying on findings of serious sexual harassment and the
plaintiff’s obstruction of the employer’s investigation, the trial judge found that the
employer had cause to terminate the employment relationship.
The case of Dupuis v. Edmonton Cellular Sales Ltd.13 involved a manager who was
alleged to have touched a number of female employees in an inappropriate way.
Generally, the touching consisted of putting his hands on their shoulders, or placing
his hands on their waists to move them out of his way. No one complained to the
manager himself, though certain female employees did report this behaviour to the
manager’s superiors. The trial judge found that there was no sexual intent and
refused to make a finding that sexual harassment had occurred. While the touching
was inappropriate and culpable, it did not amount to cause for summary dismissal.
Rather, the employer should have warned the manager about his behaviour, and
permitted him a chance to change. The trial judge’s decision was upheld by the
Alberta Court of Appeal.
A similar result was reached in Stone v. SDS Kerr Beavers Dental.14 Stone was found
to have consumed alcohol while at work to the point where he was intoxicated by the
end of his shift. This occurred on several occasions. While intoxicated, Stone
engaged in annoying and harassing behaviour with respect to a number of female
employees. However, the trial judge found that the harassment did not amount to
sexual harassment, and noted that Stone did not hold a managerial or supervisory
position. The trial judge appeared to be of the view that the employer had to show
that it had no other alternative to termination, and was critical of the employer for
not following its own procedure. In the result, the trial judge found that the
employer did not have cause for summary dismissal, and this finding was upheld by
the Ontario Court of Appeal.
11
2003 CanLII 2435 (ON S.C.).
(2001), 57 O.R. (3d) 351 (C.A.), 2001 CanLII 23994 (ON C.A.).
13
2005 ABQB 445 (CanLII), affirmed 2006 ABCA 283 (CanLII).
14
2006 CanLII 21073 (ON S.C.), affirmed 2007 ONCA 543 (CanLII).
12
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 6
Conflict of Interest
While not behaviour that will always amount to cause for dismissal, acting in a
conflict of interest with one’s employer is treated as a very serious matter by the
courts.
In Carroll v. Emco Corporation,15 the plaintiff was the branch manager at a company
that sold plumbing and heating supplies to contractors. About three years after
becoming branch manager, the plaintiff began a sexual relationship with a
subordinate. He continued to manage, conduct performance reviews of and award
raises (often higher than the others in the branch) to this subordinate while their
sexual relationship was ongoing. When asked if he was having a relationship with
this subordinate, he repeatedly lied to the company and claimed that they were no
more than friends. Eventually, the relationship broke down, and this had a
significant negative effect on the branch. The plaintiff then compounded his
problems by starting a second sexual relationship with another subordinate. In the
ensuing investigation, the plaintiff continued to deny the relationship with the first
subordinate. Only when the relationship had obviously become public knowledge
did the plaintiff acknowledge its existence. The trial judge found that this behaviour
amounted to a conflict of interest that had a significant negative impact on the
workplace. Termination for cause was upheld.
In Liu v. Tri-Star Seafood Supply Ltd.,16 the plaintiff worked as the Executive Assistant
of the Vice-President of Operations of the employer. The employer operated in the
seafood supply industry, which is a highly competitive industry in which information
on suppliers is kept very confidential. The plaintiff’s wife worked for a competitor of
Tri-Star and ended up employed as a senior buyer. On three separate occasions, the
plaintiff was asked about his wife’s position, and on each occasion he lied and said
that she was employed in an administrative capacity only. When the truth came out,
the plaintiff was terminated for cause. The trial judge upheld the termination. In
doing so, he noted that not every lie would amount to cause, but this was a lie about
a potential conflict of interest involving a competitor of the company.
In Sures v. Calian Technology Ltd.,17 the Court upheld the termination for cause of the
plaintiff who was offered employment with Calian after it purchased the plaintiff’s
company. The types of conflict of interest that led to the finding of cause included:
(1) seeking business opportunities for himself and his associates that could have
belonged to his employer; (2) using company time and resources for his own
business; and (3) lying to his supervisor about his activities.
15
(2006), 50 C.C.E.L. (3d) 48 (B.C.S.C.), 2006 BCSC 861 (CanLII), affirmed (2007), 56 C.C.E.L.
(3d) 176 (B.C.C.A.), 2007 BCCA 186 (CanLII).
16
(2004), 34 C.C.E.L. (3d) 295 (B.C.S.C.), 2004 BCSC 912 (CanLII).
17
2003 CanLII 30321 (ON S.C.), affirmed 2004 CanLII 39043 (ON C.A.).
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 7
Dishonesty Generally
All of the various decisions discussed in this paper could be legitimately
characterized as involving elements of dishonest behaviour. In this final section, we
will review some cases that are not easy to classify, but illustrate that other types of
serious dishonest behaviour can also ground a dismissal for cause.
For example, in Paterson v. DaimlerChrysler Canada Inc.,18 the plaintiff was one of
the most senior executives in DaimlerChrysler’s Canadian operations. He was
terminated for cause for acting in violation of the company’s Integrity Code. His
violations consisted of charging entertainment expenses (including visits to strip
clubs with suppliers) against company projects (meaning that the company was
paying for them), deliberately covering up an Integrity Code violation by a fellow
employee who was a friend, and withholding information from and lying to company
auditors. The cumulative effect of these activities was that the plaintiff, a 32-year
employee with a prior unblemished record, was properly terminated for cause.
Similarly, in Pinto v. BMO Nesbitt Burns,19 the plaintiff was an investment advisor
who engaged in a pattern of unauthorized and impermissible discretionary trading
using client money to do so. She then attempted to cover up her activities and
fabricated evidence to aid in her cover-up. Given the nature of her employment, in
which she was largely unsupervised and entrusted with investing large sums of
clients’ money, this behaviour was found to be cause for termination.
In contrast, in Liebman v. Trafalgar Industries of Canada Limited,20 the plaintiff was a
chemical analyst who was alleged to have either falsified test results or, at best, to
have acted in a seriously negligent manner. The trial judge found that the employer
had a reasonably grounded belief that the plaintiff had fabricated test results, which
would expose it to potential liability or place its operating licence at risk.
Nevertheless, the employer was found not to have cause for summary dismissal.
Rather, the trial judge was of the view that the employer could have pursued other
options, and its failure to do so appears to have been fatal to the employer’s
position.
Concluding Remarks
As this brief survey illustrates, it is not always easy to determine when a court will
find that an employer had cause to summarily terminate an employment
relationship. Where an employee follows up the initial misbehaviour with lies and
denials, the case for cause will clearly be strengthened. Conversely, if the employer
18
2005 CanLII 32576 (ON S.C.).
(2005), 40 C.C.E.L. (3d) 293 (Ont. S.C.J.), 2005 CanLII 18720 (ON S.C.).
20
2004 CanLII 29277 (ON S.C.).
19
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 8
does not follow its own discipline and termination procedures, it may find that its
cause argument is rejected on that basis. All in all, employers should take care
before asserting cause for dismissal, and carefully consider whether it can meet the
high standards required by the courts.
 Copyright 2008, Hicks Morley Hamilton Stewart Storie LLP
Page 9