When clients wish to terminate for cause, there can sometimes be confusion about the difference between 1) “just cause” under the common law and 2) “wilful misconduct” under Ontario’s Employment Standards Act, 2000 (“ESA”).
In Ontario, for an employee to lose their minimum entitlements to notice and severance pay under the ESA, they must have intentionally participated in an act or course of conduct detrimental to the workplace or that fundamentally alters the relationship of trust between employer and employee. By contrast, just cause does not require an intentional act on the part of the employee.
As such, it is possible for there to be just cause to dismiss an employee under the common law – disentitling the employee to common law reasonable notice – but not wilful misconduct under the ESA – in which case, the employee may still be entitled to statutory notice and severance.
Generally, an employee’s statutory entitlements are less than their entitlements under the common law. However, a long service employee can still create considerable liability for an employer even under the ESA.
It is therefore important for employers to appreciate the difference between just cause and wilful misconduct, and plan accordingly.
The Common Law – “Just Cause”
Just cause is misconduct that is sufficiently serious that it strikes at the heart of the employment relationship. It can be a single act or several acts, and a court will consider the surrounding context to determine whether dismissal is a proportionate response. Significantly, as noted above, just cause does not require the employee to commit an intentional act.
In Hucsko v A O Smith Enterprises Limited, the Court of Appeal for Ontario found that sexual harassment of a coworker, coupled with a refusal to apologize and participate in sensitivity training, constituted just cause under the common law. The court found the failure to accept the opportunity to remediate and show remorse resulted in an irreparable breakdown in the employment relationship. The court noted:
… the core question … is whether an employee has engaged in misconduct that is incompatible with the fundamental terms of the employment relationship. … [t]he 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 of the misconduct.
The ESA – “Wilful Misconduct”
To disentitle an employee to notice or severance under the ESA, an act must be, “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”. In other words, the actions of the employee must be intentional, in that the employee engaged in conduct they knew or ought to have known to be serious misconduct. Here, the test is subjective, and intent is key.
In Render v. ThyssenKrupp Elevator (Canada) Limited, the employee was dismissed after striking a female co-worker on her buttocks. The trial judge found the incident caused a breakdown in the employment relationship that justified dismissal for cause.
The Court of Appeal found the employer had just cause to dismiss the employee under the common law, but the misconduct did not meet the ESA standard of “wilful misconduct, disobedience or wilful neglect of duty”. As such, the employee remained entitled to his ESA minimum entitlements.
Significantly, the Court of Appeal held that “wilful misconduct” requires more than what is required to satisfy just cause under the common law. It requires that an employee deliberately do something they know or ought to know is wrong.
Referring to an earlier decision of the Ontario Superior Court, the Court of Appeal noted:
… Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the standard. Rather, the employer must show that the misconduct was intentional or deliberate. The employer must show that the employee purposefully engaged in conduct that he or she knew to be serious misconduct. It is, to put it colloquially, being bad on purpose.
Takeaways for Employers
The first takeaway is to appreciate the difference between just cause under the common law and wilful misconduct under employment standards. The key distinction is whether the employee’s actions were intentional.
The second takeaway is to plan accordingly. Of course, gathering the facts and knowing an employee’s intent at the relevant time is easier said than done. Moreover, the fact-specific nature of a just cause analysis makes it difficult to predict how a court will evaluate an employee’s conduct.
To help mitigate risk, the third takeaway is to reach out to your legal counsel before deciding to terminate employment. This will ensure you understand the case that must be met and have an opportunity to plan accordingly. Terminating employment without careful analysis and planning can lead to a far more complicated and expensive litigation.
 Ibid at para 33
 Ibid at para 55