Important of Consistent Messaging in Terminating Employees

A recently released decision by the New Brunswick Court of Appeal serves as a reminder to employers to stand by their decision when asserting just cause.  

In Abrams v. RTO Asset Management, 2020 NBCA 57 (Abrams), a 55 year old employee with approximately thirty years of service was terminated after a workplace investigation found that he had engaged in an inappropriate sexual relationship with a subordinate he had hired, made several business decisions for her benefit, provided her with confidential information, and lied about the relationship when questioned by the Company. In terminating him, the employer advised that he was being terminated on a “without cause” basis, despite the employer’s belief that his conduct amounted to “just cause.” This language was again reflected in the employee’s termination letter, which contained the following:

“…without prejudice to our ability to take the position that your employment has been terminated for just cause, the Company has decided to terminate your employment, effective immediately, on a without cause basis.”

The employee later sued for wrongful dismissal claiming that he had been terminated without cause and without reasonable notice and sought a 28-month notice period for his nearly thirty years of service. In its Statement of Defence, the employer asserted that the claim should be dismissed because his employment was properly terminated with cause or alternatively, that the employee had received pay in lieu of notice as prescribed by the termination clause in his employment contract. In his Reply, the employee pled that since he had been terminated without cause, the employer was now estopped from asserting just cause as a defence. The employee brought a motion for summary judgement on the matter, while the employer sought an order dismissing the claim in its entirety.

The motions judge sided with the employer in finding that it had just cause for dismissing the employee. As such, there was no further issue requiring a trial and no notice owing.

The employee appealed the decision. The Court of Appeal upheld the finding that the employer had just cause basis for dismissing the employee. Despite this, it found that the employee had been terminated on a without cause basis, based on the following factors:

The Court of Appeal clarified that once the employer had made the decision to terminate him on a without cause basis, they could not now go back and change their decision in order to escape their common law obligations. In doing so, it held that having been terminated without cause, and having found that without cause termination clause in his Employment Agreement was unenforceable, that the employee was entitled to twenty-four months’ notice.

The case is a sobering reminder to employers to carefully consider the steps they take when terminating employees for cause. Though employers may often provide gratuitous severance packages or an ROE which states that an employee was terminated without cause in order to be eligible for EI, this case demonstrates the pitfalls of doing so.

It is important for employers to note that the bar is set very high for “cause” as cause is essentially the “capital punishment” of an employment relationship.  Having said that, if the bar is met and the decision has been made by the Company to assert cause when terminating, it is important not to flip flop. This case has taught us that consistency is key when asserting cause – once such a decision has been made to terminate an employee for cause, it is wise to ensure that all of the employer’s further correspondence and actions are in line with and do not undermine the original position. 

These types of terminations are complex and risky. Employers should make sure they take all the right steps and get proper legal advice before proceeding. Should you have any concerns about the terminations or restructuring within your organization, please reach out to us for assistance at [email protected] or complete our contact form here.