In the sphere of Ontario employment law, the concept of termination for "Just Cause" is frequently cited as the most severe sanction available to an employer. Often described by the judiciary as the "capital punishment of employment law," a successful termination for cause results in the immediate cessation of employment without the provision of reasonable notice or pay in lieu thereof.
Because the consequences of such a dismissal are financially and reputationally significant, Canadian courts have established a high evidentiary threshold for employers seeking to rely on this defense. This article provides an in-depth examination of the legal framework governing just cause in Ontario, the bifurcation of statutory and common law standards, and the procedural requirements mandated by judicial precedent.
1.0 The Legal Framework: Context and Proportionality
The foundational principle governing summary dismissal in Canada is the contextual approach, firmly established by the Supreme Court of Canada in the landmark decision of McKinley v. BC Tel (2001). Prior to McKinley, there was debate regarding whether certain categories of misconduct (such as dishonesty) automatically warranted dismissal. The Supreme Court rejected the notion that any specific misconduct is absolute grounds for termination.
Instead, the Court mandated a principle of proportionality. When assessing whether just cause exists, a court must determine if the specific misconduct, when viewed in the context of the entire employment relationship, is of such severity that it violates an essential condition of the employment contract or irreparably breaches the trust required for the relationship to continue.
In applying the contextual approach, adjudicators consider several factors:
The Nature and Gravity of the Misconduct: Was the act trivial or fundamental?
The Employee’s Tenure: Long-service employees are generally afforded more protection than short-service employees.
Disciplinary History: Is the misconduct an isolated incident or the culmination of a pattern of behaviour?
The Employee’s Position: Senior executives and fiduciaries are often held to a higher standard of conduct than junior staff.
Extenuating Circumstances: Were there external stressors or provocations that provide context to the behaviour?
Under this framework, conduct that might justify a warning for a long-term employee could potentially justify dismissal for a probationary employee, and vice versa.
2.0 The Bifurcated Standard: ESA vs. Common Law
A critical distinction in Ontario law is the existence of two separate legal standards for dismissal without notice. An employee’s conduct may be sufficient to establish cause under the common law (judge-made law) while simultaneously failing to meet the stricter standard under the Employment Standards Act, 2000 (ESA).
2.1 The Common Law Standard
Under the common law, "just cause" relieves the employer of the obligation to provide reasonable notice of termination. Reasonable notice is a common law remedy, often calculated using the Bardal factors (age, length of service, character of employment, and availability of similar employment). If common law cause is established, the employee loses their entitlement to this often-substantial notice period.
2.2 The Statutory Standard: Wilful Misconduct
The ESA provides a statutory floor of rights that cannot be waived. Regulation 288/01 under the ESA states that an employee is disentitled to statutory termination pay and severance pay only if they have been guilty of "wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer."
The inclusion of the word "wilful" creates a higher threshold than the common law. For an employer to deny ESA entitlements, they must prove that the employee’s misconduct was intentional or deliberate, rather than merely negligent, careless, or incompetent.
The "Plester" Distinction
The distinction is illustrated in cases like Plester v. Polyone Canada Inc.. Conduct that is careless, such as failing to follow a safety procedure or failing to lock a facility, may constitute "cause" at common law (due to the seriousness of the risk), potentially eliminating the entitlement to common law notice. However, if the act was not done with the intent to harm the employer, it arguably does not meet the "wilful misconduct" standard. In such scenarios, the employee remains entitled to their minimum termination pay and benefits under the ESA, even if the dismissal itself is upheld.
2.3 Contractual Enforceability and Waksdale
The interaction between these two standards was the subject of the Ontario Court of Appeal decision in Waksdale v. Swegon North America Inc. (2020). The Court ruled that if an employment contract’s "termination for cause" provision attempts to deny ESA entitlements for conduct that falls short of "wilful misconduct" (i.e., by relying on the broader common law definition of cause), the entire termination clause is void. This renders the contract unenforceable, reverting the employee’s entitlements to the more generous common law regime.
3.0 Categories of Misconduct and Judicial Interpretation
The following sections analyze how Ontario courts adjudicate specific allegations of cause.
3.1 Dishonesty, Theft, and Breach of Trust
While dishonesty is serious, it is not automatically cause for dismissal. The McKinley analysis requires an assessment of whether the dishonesty goes to the core of the employment contract.
Theft and Fraud: Theft of employer property or falsification of financial records (e.g., expense account fraud) is typically viewed as a fundamental breach of the employment relationship. The value of the theft is relevant but not determinative; a breach of trust can occur regardless of the monetary amount.
Deceit regarding Status: In McKinley, the employee was dishonest about their medical restrictions. The Court found this was not cause because it did not irreparably destroy the employment relationship.
Competing with the Employer: An employee who solicits clients for a personal business or works for a direct competitor while employed is generally considered to be in breach of their fiduciary duties or duty of fidelity, often constituting just cause.
3.2 Insubordination and Insolence
Insubordination is the refusal to obey a lawful and reasonable order. Insolence refers to derisive or abusive language or behaviour towards superiors.
To constitute just cause, insubordination usually must be:
Intentional and Deliberate: A misunderstanding of instructions is not insubordination.
Persistent: A single instance is rarely sufficient unless the order defied was critical (e.g., a safety protocol).
Without Reasonable Excuse: Refusing unsafe work under the Occupational Health and Safety Act is statutorily protected and cannot constitute cause.
In Ojielo v. Lloyd’s Register North America, Inc., the court examined an employee with a history of abrasive behaviour. It was determined that while the employee was difficult to manage, the employer had failed to provide clear warnings that the specific behaviour would result in termination. Consequently, the dismissal was wrongful.
3.3 Performance and Incompetence
A frequent misconception is that poor performance equates to just cause. Canadian jurisprudence distinguishes between misconduct (bad behaviour) and incompetence (inability to perform). Incompetence alone is rarely sufficient to justify summary dismissal without notice.
To establish cause based on performance, an employer must satisfy the rigorous "Edith Cavell" test (derived from Ecclestone v. Edith Cavell Scarth Road Manor Ltd.):
Standard: The employer must define the level of job performance required.
Communication: The standard must be communicated to the employee.
Instruction: The employer must provide reasonable supervision and instruction to enable the employee to meet the standard.
Warning: The employee must be given a clear warning that failure to meet the standard will result in dismissal.
Opportunity: The employee must be afforded a reasonable time to correct the deficiency.
Failure: The employee must fail to meet the standard despite the above.
Failure to document these steps typically results in a finding of wrongful dismissal.
3.4 Sexual Harassment and Workplace Violence
Since the introduction of Bill 168 and Bill 132, Ontario’s Occupational Health and Safety Act imposes strict duties on employers to address workplace harassment and violence.
Zero Tolerance: While employers often have "zero tolerance" policies, courts still apply the McKinley contextual analysis.
Render v. ThyssenKrupp Elevator: In this 2022 decision, the Ontario Court of Appeal upheld a termination for cause where a long-service manager slapped a female subordinate’s buttocks. Although the employee argued it was a "joke" and there was no prior record of misconduct, the Court found the act was an assault that fundamentally breached the employment relationship. Interestingly, the Court noted that while this constituted common law cause, it might not have constituted "wilful misconduct" under the ESA, illustrating the dual-standard complexity.
3.5 Off-Duty Conduct
Generally, an employee’s conduct outside of working hours is private. However, off-duty conduct may constitute cause if it:
Harms the employer’s reputation or product.
Renders the employee unable to perform their duties.
Leads to the refusal, reluctance, or inability of other employees to work with them.
In Kelly v. Linamar Corporation, the employee was charged with possession of child pornography. The court found that due to the employer’s prominence in the community and the nature of the charges, the reputational risk was sufficient to justify termination for cause, even before a criminal conviction was registered.
3.6 Substance Abuse and Human Rights
When misconduct is linked to a substance use disorder, the Human Rights Code is engaged. Addiction is recognized as a disability.
Duty to Accommodate: If an employee’s misconduct (e.g., absenteeism, intoxication at work) is caused by a dependency, the employer has a duty to accommodate the employee to the point of undue hardship—typically by offering time for rehabilitation—rather than terminating for cause.
Recreational Use: If the substance use is recreational and not a disability, the standard rules of misconduct apply, and accommodation may not be required.
4.0 Procedural Fairness: The Investigation
An allegation of cause imposes a duty of procedural fairness on the employer. A flawed investigation can fatally undermine a defense of just cause, even if misconduct occurred.
Judicial expectations for a workplace investigation include:
Neutrality: The investigator should be unbiased.
Right to Respond: The accused employee must be informed of the specific allegations and given a meaningful opportunity to respond.
Evidence Collection: The employer must interview relevant witnesses and review objective data.
Administrative Suspensions: During an investigation, an employee may be placed on administrative suspension. Unless the employment contract explicitly asserts the right to suspend without pay, such suspensions must generally be paid. An unpaid suspension pending investigation may be treated as a constructive dismissal, allowing the employee to claim severance immediately.
5.0 Post-Termination Mechanics and Litigation
5.1 The Record of Employment (ROE)
Upon termination, an employer must issue a Record of Employment. The code selected has significant implications for Employment Insurance (EI) eligibility.
Code M (Dismissal): Used when the employer alleges the employee was fired for cause. This typically results in an initial denial of EI benefits by Service Canada.
Service Canada Adjudication: Service Canada applies its own independent test for misconduct, which aligns closely with the ESA "wilful" standard. It is not uncommon for an employee to be denied severance under common law (just cause) but granted EI benefits because the misconduct was not "wilful" in the eyes of the federal statute.
5.2 The Burden of Proof
In a wrongful dismissal action, the burden of proof lies strictly with the employer. The standard of proof is the "balance of probabilities." The employer must prove that:
The misconduct occurred; and
The misconduct was sufficiently severe to warrant summary dismissal; and
Lesser forms of discipline (such as suspension or written warnings) were insufficient or inappropriate.
5.3 After-Acquired Cause
The doctrine of After-Acquired Cause permits an employer to rely on misconduct discovered after the termination to justify the dismissal. For example, if an employee is terminated without cause, and the employer subsequently discovers evidence of embezzlement, the employer may amend their defense to allege cause. However, the misconduct must have occurred during the employment tenure, and the employer cannot use the discovery process as a "fishing expedition" to manufacture cause where none was known at the time of dismissal.
6.0 Damages Categories
If a court determines that an employer failed to prove just cause, the employee is entitled to damages.
6.1 Compensatory Damages (Pay in Lieu of Notice)
This is the primary remedy, calculated to replace the income and benefits the employee would have received during the reasonable notice period.
6.2 Moral (Aggravated) Damages
Also referred to as Honda damages (stemming from Keays v. Honda Canada Inc.), these are awarded if the employer engaged in bad faith conduct in the manner of dismissal. Conduct that attracts moral damages includes:
Making unfounded allegations of cause to gain leverage.
Attacking the employee’s reputation.
Terminating an employee to avoid disability obligations.
Unduly insensitive conduct during the termination meeting.
Moral damages are compensatory in nature, intended to address the mental distress caused by the bad faith conduct.
6.3 Punitive Damages
Punitive damages are an extraordinary remedy, distinct from compensatory damages. They are not awarded to compensate the plaintiff, but to punish the defendant and deter "malicious, oppressive, and high-handed" conduct. In Ruston v. Keddco Mfg. (2011) Ltd., the Court awarded $100,000 in punitive damages against an employer who manufactured allegations of cause and threatened a counterclaim for $1.7 million as a negotiation tactic. The Court found this strategy to be an abuse of power and the legal process.
7.0 Summary
The distinction between an employer’s dissatisfaction and the legal threshold for "Just Cause" is substantial. The law in Ontario presumes that termination will be accompanied by reasonable notice unless the employer can discharge the heavy burden of proving that the employment relationship has been irreparably frustrated by the employee’s misconduct.
The duality of the ESA and common law standards, combined with the principle of proportionality, ensures that summary dismissal remains a specific and limited response to serious workplace infractions, rather than a tool for routine performance management or cost reduction.
Legal Disclaimer: This article provides general information regarding Ontario employment law and does not constitute legal advice. The application of the law depends on the specific facts of each case. Always consult with a lawyer prior to taking action.
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