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Employees are sometimes accused by their employers of misconduct. This then can result in an employer terminating the employee’s employment “for cause”. This can be a serious issue for employees since a termination for cause can result in a denial of a severance package and employment insurance coverage, as well as cause damage to the reputation of a former employee.

A recent case from the Ontario Court of Appeal (Ruston v. Keddco MFG. (2011) Ltd.), is an important reminder of the principles surrounding termination for cause and the potential liability for employers (and related awards for employees).

Employer Unable to Demonstrate Cause

In June 2015, after 11 years of service, Scott Rushton’s employment was terminated. At the time of the termination, Rushton’s employer informed him that his employment was being terminated for cause because he had committed fraud. The employer provided no other details. When Rushton indicated that he would be hiring a lawyer, his employer advised him that if he did, a counterclaim would be commenced against him and it would be “very expensive”.

Rushton subsequently commenced a claim seeking damages for wrongful dismissal. As promised, the employer responded with a counterclaim that alleged cause and claimed damages of $1.7 million for unjust enrichment, breach of fiduciary duty and fraud, as well as $50,000 in punitive damages.

After a lengthy trial, the trial judge found that the employer had failed to prove cause or any of their allegations against Rushton. The trial judge also viewed the counterclaim as nothing more than a pressure tactic that was meant to intimidate the former employee. In doing so, the court found that the employer had breached its obligation of good faith and fair dealing in the manner of dismissal. The counterclaim was therefore dismissed in its entirety.

As a direct consequence of the employer’s conduct, the court awarded Rushton 19 months of reasonable notice, moral damages, legal costs and a substantial punitive damages award.

The award was later confirmed by the Ontario Court of Appeal. 

Employers Must be Able to Back up a Termination for Cause

Employers should conduct themselves in good faith in the manner of termination. Fabricating cause can come with costly consequences. If an employer is terminating an employee and relying on cause, they should outline the reasons in the termination letter.

Using strategies such as asserting unsubstantiated cause, or any other form of intimidation tactic will not be well received by the courts.

Employees Should Seek Legal Advice Before Signing Documents

Unfortunately, some employers proceed to terminate an employee’s employment for cause simply to avoid paying out termination pay and/or to otherwise use it as a pressure tactic for some other aim.  

It is therefore worth keeping in mind that employers have to meet a high threshold when they decide to proceed with a termination for cause. And in most cases, a single instance or act of misconduct will simply not be enough. 

If your employment is terminated for cause, we strongly suggest that you do not sign a release or accept any gratuitous payments without at least first seeking legal advice. This will allow you to determine whether there is an opportunity to secure payment and/or other recourse in relation to wrongful dismissal.

If you are seeking assistance with respect to any employment matters relating to termination for cause and/or wrongful dismissal, please contact Toronto employment lawyers Sultan Lawyers at mlahert@sultanlawyers.com or 416-214-5111.


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