After-acquired cause for dismissal

The situation: A salesman was fired because of his poor work performance. He claims, however, that he was a highly skilled salesman and challenges his dismissal by filing a complaint for unjust dismissal. A few weeks before the hearing, the employer learns that the employee had committed a fraud by illegally appropriating the company's money while employed with the company. Such breach would have no doubt justified his dismissal had the employer known about it in due time. Can the employer now invoke this new ground in order to demonstrate a just and sufficient cause for dismissal?

A recent case in British Columbia sheds interesting light on the possibility for an employer to invoke grounds for dismissal which it is unaware of at the time of the employee's termination of employment. We review this recent case since its practical implications may apply, not only in common law provinces, but also in Quebec.

The plaintiff worked as manager of health and safety for a shipbuilding company in Vancouver. His responsibilities included ensuring company's compliance with drug policies.

Hired in 2011, the employer notified the employee of his dismissal without cause in February 2013 and paid him compensation equivalent to four weeks' pay in lieu of notice. The employee brought an action for wrongful dismissal.

At the time of his termination, the employee had to return the company's cellphone used during the employment. By examining the content of the phone, the employer became aware of a series of text messages the employee sent to his coworkers during working hours, while still employed, in order to obtain illegal drugs for the purpose of resell.

To counter the employee’s action, employer decided to invoke the existence of cause for dismissal based on the a posteriori discovery of his illegal activities.

However, could the employer invoke as cause for dismissal the illegal activities carried out by the employee while he was still employed, despite the fact that such activities were discovered only after the dismissal?

Discovering cause after dismissal doesn’t mean it can’t stand: Court

The B.C. Court of Appeal did not hesitate to conclude that the plaintiff's activities related to the sale of drugs constituted a cause for dismissal. The court held that such activities were not only incompatible with employee's responsibilities regarding health and safety, but further irreversibly affected the employment relationship.

Moreover, the Court of Appeal held that the fact that the employer became aware of the employee’s illegal activities only after the dismissal did not prevent the employer from invoking such new cause for dismissal.

Quoting an old case from the Supreme Court of Canada, the court concluded that the fundamental issue was whether the employer had cause for dismissal at the time it took place, regardless of whether the employer acquired knowledge of such grounds only after the dismissal:

“The Supreme Court of Canada set out the principle behind after-acquired cause in Lake Ontario Portland Cement Co. v. Groner, [1961] S.C.R. 553 at 563-564, as follows:

The fact that the appellant did not know of the respondent's dishonest conduct at the time when he was dismissed, and that it was first pleaded by way of an amendment to its defence at the trial does not, in my opinion, detract from its validity as a ground for dispensing with his services. The law in this regard is accurately summarized in Halsbury's Laws of England, 2nd ed., vol. 22, p. 155, where it is said:

It is not necessary that the master, dismissing a servant for good cause, should state the ground for such dismissal; and, provided good ground existed in fact, it is immaterial whether or not it was known to the employer at the time of the dismissal. Justification of dismissal can accordingly be shown by proof of facts ascertained subsequently to the dismissal, or on grounds differing from those alleged at the time.

Regardless of whether dismissal for after-acquired cause or for cause is being argued, the issue is whether the employer can establish that, at the time of dismissal, there were facts sufficient in law to warrant a dismissal. If an employer knew of the misconduct and had expressly or implicitly condoned it, then claims of after-acquired cause will be defeated.”

The court therefore held that the employer may invoke grounds for dismissal of which it became aware after the employee's dismissal, provided, however, that the employer could demonstrate: 1) it did not have knowledge of the misconduct at the time the employee was dismissed and 2) it did not tolerate the misconduct by omitting to take timely action.

Thus, according to the court, an employer who, at the time of a dismissal, is aware of a misconduct, but decides or fails to invoke it at that time, is precluded from invoking it thereafter.

In this case, at the time of the employee's dismissal, the employer was unaware that the employee had engaged in illegal activities related to drugs trafficking during working hours. For that reason, the court allowed the employer to invoke these new grounds and concluded that, in the circumstances, the employer was justified to dismiss the employee.

The approach taken by the court concerning the possibility for the employer to invoke grounds for dismissal of which the employer became aware only after the employee's dismissal seems reasonable. As such, the employer can demonstrate that a cause for dismissal existed and invoke facts of which it became aware after the employee's employment is terminated, provided, however, that it can demonstrate it was unaware of these facts when the employee was dismissed and its actions did not indicate it tolerated the employee's misconduct.

In M.U.A., local 6869 c. Cie minière Québec Cartier, a Quebec case, the Supreme Court of Canada recognized that an arbitrator may consider evidence from subsequent events, to the extent that such evidence is relevant in determining whether the dismissal was reasonable and appropriate at time the measure was taken.

The Supreme Court of Canada did not specifically address the question of whether an employer may invoke totally new grounds for dismissal based on events preceding the dismissal, of which he became aware solely after the employment was terminated. However, the possibility to consider relevant evidence from subsequent events must necessarily imply that facts preceding the dismissal, but known only after they took place, always to the extent that these facts provide evidence of the reasonable and appropriate nature of the dismissal can be considered.

In a unionized environment, it is relevant to mention that many collective agreements include a requirement that the employer must state in writing all grounds for dismissal. Some collective agreements also provide that the employer may not invoke grounds for dismissal which are not stated in the notice of dismissal. In such a case, it may be more difficult to convince an arbitrator to accept to consider evidence concerning grounds for dismissal which are not stated in the notice of dismissal.

However, an employer who is required under a collective agreement to state all grounds for dismissal would not be without recourse if he were to discover new grounds after the termination of employment. Indeed, some arbitrators have acknowledged the possibility of taking measures for a second dismissal following a first dismissal, when the employer is informed of new grounds for dismissal.

Second dismissals

Thus, in the case Pavillon du Parc inc. c. Ferland, an employee was fired for the first time in June 1996. As he was challenging such measure by way of a grievance, the employer decided to fire the employee a second and third time for defamatory and disloyal statements. The Superior Court, upheld by the Court of Appeal, held that the arbitrator erred in refusing to consider evidence relating to the second and third dismissal.

In a more recent case, the arbitrator acknowledged the right of the employer to take measures for a second dismissal based on new facts, but pointed out that these new facts must be communicated to the employee in a timely manner:

“Usually, when an incident involving an employee which has already been fired occurs and the grievance procedure is initiated, the employer will bring the employee's misconduct forward whenever it considers that it is an aggravating factor or if it confirms the employer's initial decision to terminate the employee's employment. The employer then informs the employee of the facts which followed his dismissal that it intends to invoke before the arbitrator. A discussion is then initiated before the arbitrator on the admissibility of the facts which followed the dismissal. These subsequent events may even bring the employer to impose a "second dismissal..."(translation)

In this case, the arbitrator refused to consider the grounds for the second dismissal, by considering that they were not communicated in a timely manner to both the employee and the union.

In the Van den Boogard case, the court permitted the employer to invoke a ground for dismissal based on employee's serious misconduct during his employment, but which the employer became aware of only after the termination of the employee's employment. The court noted, however, that the employer could not have invoked new grounds for dismissal if it had been informed of the misconduct at the time of the dismissal and showed some tolerance or leniency in deciding not to impose sanctions in a timely manner.

Ultimately, before taking measures for a dismissal with cause, the employer should conduct an investigation to identify as exhaustively as possible all misconduct that may have been committed by the employee in the course of his employment. Once the investigation is complete, the employer should provide the employee with all the grounds for his dismissal. If the employer becomes aware of new facts after the measures have been taken, these should promptly be communicated to the employee.

Finally, some collective agreements may limit the right of an employer to invoke grounds for dismissal not mentioned in the notice of dismissal. In certain circumstances, if the employer discovers new facts after measures for a first dismissal have been taken, it may be appropriate to take measures for a “second dismissal” based on these new grounds. Hence, if the court finds that the first dismissal was not based on serious grounds, the employer could then invoke the grounds for the second notice of dismissal.

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