Terminating Employees for Cause
Terminating employees can be difficult, stressful and, if not done properly, expensive. This is particularly true when an employee has been terminated for cause. In such situations, the employee and the employer will often have substantially different views as to the nature and consequences of the employee’s conduct or performance, and whether the employee is entitled to any compensation for having been terminated. A key issue will often be the employee’s history of misconduct or poor performance, and the manner in which the employer has addressed that history. This includes whether the employee received prior warnings or the employee’s actions were condoned by the employer.
Generally, an employer will not be able to terminate an employee for cause due to an employee’s misconduct or poor performance unless the employer has previously provided that employee with an appropriate warning and an opportunity to improve. While prior warnings may not be required for a single instance of severe misconduct or incompetence, (e.g., substantial theft, fraud or physical assault) lesser forms of undesirable behaviour or poor performance are not typically sufficient to justify dismissal for cause.
When a warning is provided, the employer should clearly communicate that the employee’s conduct or performance has been unacceptable as well as the appropriate standards that must be met going forward. The employer must then give the employee a reasonable opportunity to improve on his or her conduct or performance. Employers may wish to offer to assist the employee in meeting the appropriate standards and may also wish to set up a time-line or schedule for improvement. Finally, and most significantly, any warning must clearly set out that the employee may be subject to discipline, which could include dismissal, if the issues raised are not addressed. The failure to provide appropriate warnings will jeopardize the employer’s ability to terminate for cause.
The employer’s conduct after a warning is given can be just as important as that of the employee who was warned. The mere fact that a warning was given may not be enough to support dismissal for cause if problems continue. Without taking any steps to follow through with the stated recourse, the employer may be deemed to have condoned the continued poor behaviour. Similarly, rewarding an employee that has failed to respond to an employer’s warnings—for instance, with a raise, bonus, promotion, or even just a positive review—could be considered condonation and may nullify the effects of prior warnings. If an employer has condoned the behaviour of some of its employees, it is likely that the employer will be deemed to have condoned such behaviour for all of its employees.
Terminating employees for cause is a complicated and challenging matter, and court disputes often arise. If an employer is unable to establish that appropriate warnings were provided prior to termination, that employer may find itself in a position where it cannot justify termination and may owe the dismissed employee considerable severance as a result.
Matthew Swanson and Brandon Hillis are lawyers at Borden Ladner Gervais LLP. Matthew practices commercial litigation, with an emphasis on contract and construction disputes, and Brandon practices labour and employment law. Send comments to firstname.lastname@example.org.