Just Cause
An employer may escape liability for a termination claim where it can establish just cause for termination. It exceeds our present ability to define this, save to say that is a very difficult case for the employer to make. It is the employer that has the burden of proof. Extreme cases such as theft, dishonesty, preparation for and active competition against the employer are readily determined in the employer’s favour. In cases involving performance issues, disobedience, insolence and the like, typically repeated warnings of successively exceeding gravity are required. Fabricated or exaggerated allegations of cause are not favourably received by our courts and as noted elsewhere, may well expose the employer to incremental damages.
It is to be recalled that the standard of cause required to avoid the minimum statutory payments are higher than the common law standard. To succeed in such a defence, the employer must prove “wilful misconduct, disobedience or wilful neglect of duty”, which hence requires evidence of an evident intent of the employee to do wrong, a formidable objective.
Just as in the example of fabricated cause allegations, the failure to pay the minimum statutory payments, without proper justification, will allow for an increased damage payment for bad faith conduct.
The Contract
It is accepted that an employment contract may deny the employee all wrongful dismissal claims and limit the claim to the contracted sum as set out in the contract. For a good reference to a successful defence on a limiting employment contract, see Clarke v Insight Components, a decision of the Ontario Court of Appeal. There are, however, a few rules to be followed to allow the employer to get to home plate safely.
First, the contract must be a valid binding contract. It would be ostensibly unfair for an employee to report to work on the first day, having resigned secure employment (or not ) and be presented with a one sided agreement which limits his termination claim. Typically such a contract would not be enforced. The time for the employee to assess the employment contract is before he acts to his prejudice by resigning or by declining other active job offers, relying upon an existing oral or written offer of employment without the limiting verbiage.
Also, if the employee is promoted to a higher level position, and the initial contract is not then revisited, it is expected that the first contract will not stand.
The contract must always allow for the minimum statutory terms to be paid unconditionally and without the requirement to sign a release. If not, it will not be enforceable and the claim is back to common law rules, as seen in the Supreme Court of Canada decision in Machtinger v HOJ.
The contract, even if valid in minimizing the severance payment will not be able to defend against a claim of negligent hiring, unless that specific term is clearly addressed in the contract. For example, if the plaintiff asserts that he was persuaded to leave his then employment based on the representation that he would serve a newly obtained client and the contract specifically states the converse, the negligent hiring claim would not succeed.
A Signed Release
It is expected that an executed release document, which is provided in exchange for a termination claim will successfully bar a plaintiff from suing. It is arguable, however, that in the case of a not for cause termination, a release which is given for a payment which is less than the statutory payment is not enforceable, or equally one which ties the statutory payments to compliance with a post termination covenant such a non-compete, non-solicit or non-disparagement, is not effective.
Under the Canada Labour Code unjust dismissal remedy, adjudicators and the Federal Court have allowed unjust dismissal cases to proceed to hearing where the employee has signed a release, received payment of a substantial severance sum, in a fact situation where there was evidence of economic duress. (National Bank of Canada and Minister of Labour, Federal Court – Trial Division on a judicial review of the adjudicator’s award and on appeal to the Federal Court of Appeal )
Duress arguments to avoid a release in common law cases are rare. Absent an argument of lack of mental capacity, an adult signing a release for apparent consideration of some sort will face a very steep uphill battle to avoid the impact of the release, subject to the first paragraph above.
Any person facing termination and an offer or non-offer of severance, should seek legal advise before accepting a settlement and signing a release.
Failure to Mitigate
Employers routinely argue that the plaintiff’s claim should be reduced by his failure to seek other employment. It is a tough argument for an employer to make. It is clear that the employer has the burden of proof on this issue. ( See the 1976 decision of the Supreme Court of Canada in Red Deer College v Michaels ) Not only must the employer prove that the plaintiff failed to take reasonable steps to seek other employment, but it must also show that had he done so, he would likely have succeeded in finding an alternate position. Effectively, this means that the employer needs to show evidence from one or more potential new employers, that had the plaintiff applied to it for the vacant position, he likely would have been hired – a formidable objective ! (See Suri v. North American Tea, a decision of the B.C. Supreme Court )
The most dramatic decision on this topic is the 2008 Supreme Court of Canada decision in Evans v Teamsters Local Union 31. This case involved not an allegation of a general failure to seek other employment, but rather a specific one – from the very company that fired the plaintiff.
Don Evans worked as the business agent for the Teamsters Local in Whitehorse for 23 years. After the appointment of a new union executive, he was terminated on January 2, 2003. His legal counsel offered to settle the claim based on a continuous employment of 12 months, followed by a further payment of an additional 12 months. The employer requested that Mr. Evans return to active employment as of June 1, 2003 and work for a further 24 months from the initial termination date of January 3, 2003, after which his employment would terminate. Mr. Evans replied that he would return to work provided that the termination letter was rescinded and further provided that his wife, also employed with the union, replace him as the business agent. Mr. Evans was also aware that other union employees had been terminated and also returned to active work.
Mr. Evans refused the offer as presented and sued. At trial he was successful. The Yukon Court of Appeal set aside the trial decision and concluded that Mr. Evans should have accepted the offer of a return to active employment, albeit on working notice of termination. The Supreme Court of Canada agreed.
The court did state that its decision was not to be regarded as a universal truth. Each case must be examined in its own context. The dismissed employee would not be required to return to work where there was an atmosphere of hostility, embarrassment or humiliation. The court in each circumstance would need to examine the atmosphere, stigma and any loss of dignity, ( the intangible factors ) as well as the nature and conditions of the employment in question. ( the tangible issues).
It is to be noted in this case that the union paid the plaintiff his salary through the period of negotiations for roughly 5 months, that Mr. Evans acknowledged that there was no likelihood of him achieving comparable employment in Whitehorse, and that he was apparently willing himself to return to employment, albeit on his terms. Also there was no evidence of acrimony between the parties.
Care should be taken in assessing the offer made by the employer to return to work as it may, in proper circumstances, be a complete defence to the claim.
References
A complimentary reference letter is of obvious value to a terminated employee in pursuit of new employment. It is arguable that the failure of the employer to provide one, in the case of a not for cause termination, may lead to increased common law damages.
An employer, absent an agreement to the contrary, is allowed to provide a reference to a prospective employer, which may not be accurate and yet still be able to defend a defamation claim. An employer is allowed a qualified privilege, which means that as long as it is acting in ostensible good faith, it may offer a reference which is not necessarily factually accurate.
Hence, if there is an agreement made on termination to provide a complimentary reference, the employer is contractually bound to do so and cannot offer the defence of qualified privilege.
Employers sometimes offer a “tombstone letter” which in essence confirms the dates of employment and positions held. Usually in this letter, the employer states it is its policy not to provide qualitative assessments of past employees. The advantage of even bargaining for this letter is that it takes away the employer’s right to offer negative commentary to potential employers or otherwise, even when acting in good faith.
