Honesty is the best policy – Court of Appeal upholds dishonest employee’s dismissal for just cause

Employers are often faced with the galling choice between asserting just cause for termination, and paying potentially large sums of money to departing employees who have been caught lying, cheating, or stealing. Just cause is a very high standard. Often, instead of relying on misconduct or performance issues, employers elect to terminate problem employees without cause.

When employees are terminated without cause in Canada, they must be given reasonable notice of termination, or pay in lieu of notice. Employment standards legislation prescribes the minimum amount of notice required. However, without limiting language in a contract of employment, employees are often entitled to far longer notice periods under the common law.

The Ontario Court of Appeal recently upheld a decision illustrating that when it comes to misconduct, serious dishonesty will often be the straw that breaks the camel’s back, allowing an employer to prove just cause.

The Case

In De Jesus v. Linamar Holdings Inc., the employee was terminated for cause after working as a production supervisor for 19.5 years. The company discovered that, despite being alerted to the problem, he had allowed approximately 1,500 defective camshafts to be processed in a single shift, and had subsequently lied about it.

The employee had insisted at trial that he had carried out regular checks of the line, and had instructed other members of his team to do the same. He also denied that 1,500 camshafts had been produced during his shift.

The trial judge accepted the company’s evidence regarding the number of camshafts produced, and found that it would have been impossible for the defects in question to go unnoticed if the employee had really been performing the checks as he claimed he had. As such, the judge found that he had been lying about the checks.

The Court of Appeal found that the company had met its onus to prove, on a balance of probabilities, that it had just cause to terminate the employee without notice or compensation in lieu of notice.

The Supreme Court of Canada has described the test for whether dishonesty constitutes just cause for dismissal as follows:

…whether the employee’s dishonesty gave rise to a breakdown in the 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.

The Court of Appeal upheld the trial judge’s decision that the employee’s failure to supervise and to take any remedial steps once the problem was brought to his attention, combined with his dishonesty about what had happened, went to the heart of the employment relationship.

The Takeaway

Many employees fail to appreciate that dishonesty can compound any initial misconduct in the eyes of the court. Employers should be encouraged by the Court of Appeal’s ruling, but should still exercise caution when deciding whether to assert cause for a termination.

To minimize risk, many employers include clauses in their employment contracts limiting employees’ entitlements upon termination without cause to the employment standards minimums. Where the case for just cause is not clear-cut, this could save you from having to pay a long-service employee a large sum under the common law.

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