In Ontario, employers who dismiss employees for just cause often have an uphill battle. Just cause is a high standard, and one that is not met by every day types of misconduct. As a result of this high threshold, employees who are terminated for just cause often challenge the employer’s cause even in clear cut cases, hoping to capitalize on this uncertainty or otherwise leverage the cost of a just cause trial to strong arm an employer into settling for a cash payment.
However, a recent cost decision from the Ontario Superior Court of Justice suggests that employers who successfully defend themselves may be entitled to recoup a significant amount of their legal costs.
In Cordeiro v. Pinnacle Caterers Limited, an employee brought a wrongful dismissal action against their former employer. The employer asserted just cause and counterclaimed for amounts allegedly stolen by the employee.
After the litigation was commenced but prior to trial, the employer offered to settle the action on a without costs basis. In essence, this offer allowed the employee to simply walk away from the litigation with no strings attached. This offer was reiterated to the employee on multiple occasions leading up to the trial, but on each occasion, it was turned down. The employer does not appear to have ever wavered from that offer.
After a six-day trial, the trial judge terminated that the employer’s allegations of theft were substantiated and found just cause. The employer was also awarded $15,000 for cash stolen by the employee.
Since the action was a court proceeding, the court had to determine whether one of the parties was entitled to have some of its legal costs defrayed by the other party. The usual rule is that the successful party is entitled to have some of their legal costs paid by the unsuccessful party. This case was no different.
The employer claimed $152,343.89 in legal costs for the trial. In support, they pointed to the length of the trial, which involved ten witnesses. The employer also relied on their offer, which if accepted would have avoided all of the legal costs associated with the trial.
The employee, on the other hand, argued that the costs claimed by the employer were disproportionate. At the end of the day, the employee argued, the total amount involved in both the claim and counterclaim was roughly $45,000, far less than the amount claimed by the employer in costs. In addition, the employee suggested that he was of limited financial means and that it would be cruel to subject him to a large cost award.
The Court, however, rejected the employee’s arguments. It found that the employee was aware of the likely cost and length of trial, and nonetheless insisted on proceeding with the trial over a relatively small amount. The Court found that the employee could not very well take an aggressive position at trial, and then claim that he was impecunious when costs were awarded. The Court also relied upon the offer, which if accepted, would have been a better result for the employee. As a result, the employer was entitled to costs on the increased substantial indemnity scale.
The Court ultimately awarded the employer $150,000 in costs.
Given the employee’s admitted impecuniosity, collection of those costs by the employer could be difficult. However, this case does show that the defense of meritorious claims of just cause by employers can result in significant costs awards. Hopefully this decision will help to put caution into the approaches of employees who are terminated for just cause, and make them think twice about bringing frivolous actions in an attempt to leverage an employer into a settlement.