Post-dismissal Misconduct Grounds for Just Cause, The Lawyer’s Daily (February 4, 2021)

(this article originally appeared in the Lawyer’s Daily on February 4, 2021)

By Nikolay Y. Chsherbinin

A dismissal for just cause is a matter of substance, not form. The central question concerning just cause is whether an employee’s misconduct is sufficiently serious that it strikes at the heart of the employment relationship. The answer to this question requires a factual inquiry through a contextual examination of the nature and circumstances of the misconduct. These observations create an impression that the concept of just cause is concerned with a retrospective assessment of the employee’s pre-dismissal conduct. However, this is not always so. In limited circumstances, just cause can be asserted in relation to an employee’s post-dismissal conduct.

The concept of just cause dismissal based on the post-dismissal misconduct should not be confused or conflated with the concept of after-acquired cause, which allows an employer to assert just cause based on an employee’s misconduct that existed, but has not been discovered, at the time of dismissal. Like the two-headed god Janus, who is said was capable of simultaneously looking forward into the future and backward into the past, these concepts are looking in different directions. The former is looking to the future in the sense that it seeks to justify an employee’s dismissal for cause for committing a misconduct after his dismissal. The latter is looking to the past for evidence of misconduct that would have justified a dismissal for cause had it been discovered prior to the employee’s without cause dismissal.

In determining the proper application of the law to post-dismissal misconduct, one inevitably runs into the overriding principle of repudiation: once an employment contract has been terminated, subsequent conduct of the former employee may not be relied to justify his or her dismissal for cause. This proposition finds support in Walerius v McDiarmid Lumber Ltd., 2000 MBCA 18, where the Manitoba Court of Appeal aptly observed: “To justify dismissal without notice, an employer must prove a breach of the employment contract by the employee. … If such conduct occurs only after the dismissal, it cannot amount to a contractual breach as the contract is already over.”

However, it does not mean that the post-dismissal misconduct is irrelevant. Employers are entitled to rely on their former employees’ post-dismissal misconduct for the purpose of characterizing or explaining pre-dismissal conduct, which might otherwise have fallen short of justification for summary dismissal.

The leading case on this point is Lake Ontario Portland Cement Co. Ltd. v Groner, [1961] S.C.R. 553, where the Supreme Court of Canada considered the post-dismissal misconduct. There, the employee falsified the date on an agreement between himself and his employer after it had been signed by the company’s president and lied afterwards about his actions under oath. The Court of Appeal for Ontario was of view that the employee’s misconduct in falsifying the date “was not incompatible with the proper discharge of the duties for which he was employed” and, therefore, did not justify his just cause dismissal. The Supreme Court of Canada disagreed. Having focused on the employee’s post-dismissal misconduct in deliberately perjuring himself, when he testified as to the dating of the agreement, the top court explained: “… it is not so much the misconduct itself as the fact that he was capable of it which justifies the respondent’s dismissal.” In other words, “it is the revelation of character which justifies the dismissal” for cause.

Walerius provides a helpful illustration of how a finding of a character flaw can be relied upon to justify the employee’s dismissal for cause. In this case, the manager’s confrontational and abusive communication style caused him to be demoted from a managerial to salesman position. Following his demotion, the manager phoned his subordinate and falsely told him that he had been reinstated to his prior managerial role. The manager added that he was aware that he had complained about him to the management and directed him to come to his office on Monday to be fired.

At trial, the court found that the manager’s demotion constituted constructive dismissal but declined to award any damages. It also found that while the manager’s abusive style and his regular bullying and belittling of employees did not give rise to just cause dismissal, the act of phoning his subordinate in order to convey false information, which could only have been intended to cause anxiety, amounted not only to serious misconduct, but was also incompatible with the manager’s duty as a manager. The manager appealed. In upholding the trial decision, the Manitoba Court of Appeal agreed that the manager’s post-constructive-dismissal telephone communication cast a new light on his earlier misconduct enabling the trial judge to say that the earlier misconduct was incompatible with the proper discharge of his duties.

As can be seen, an employee’s character flaw can be used to piggyback post-dismissal misconduct upon pre-dismissal misconduct. The admissibility of subsequent event evidence requires that two circumstances in which evidence of post-dismissal conduct can be relied upon to establish grounds for dismissal: (1) when the post-dismissal conduct sheds light on the reasonableness of the dismissal for cause, at the time it was implemented (eg theft before and after dismissal); and (2) when the post‑dismissal conduct reveals an undesirable aspect of the employee’s character, such as deceitfulness, dishonesty or theft that would itself justify his or her dismissal.

The category of cases in which post‑dismissal conduct can be relied on is not without controversy. To add another layer, consider the following two scenarios. Suppose an employee had been given four weeks’ working notice during which he committed a serious misconduct (eg theft, deceit, disclosure of confidential information, etc.). Assuming that the working notice period is reasonable, there would be no repudiation of the employment contract and the employee’s misconduct could constitute grounds for just cause dismissal upon which the employer can rely. Suppose again that, instead of working notice, the employee received pay in lieu of notice equal to four weeks’ pay and during those four weeks committed misconduct. These scenarios beg the question: should employees who receive pay in lieu of notice be held to the same standard of conduct as employees who received working notice? At present, the answer is no, because a proper notice of termination is an implied term of the contract of employment, while payment in lieu of notice is not; rather it is seen as an attempt to compensate for the employer’s breach of the employment contract, not as an attempt to comply with an implied term of the contract.

A review of employment jurisprudence that considered post-dismissal conduct reveals that the relevant dividing line in examining misconduct is: the time of termination of the contract of employment, which occurs either immediately upon payment in lieu of notice or at the conclusion of a period of working notice. Consequently, misconduct before termination of the contract of employment and misconduct after termination are subject to different legal analyses in terms of relevance to the issue of grounds for dismissal.

In light of the above discussion, employers’ reliance on employees’ post-dismissal misconduct as justification for summary dismissal should be done cautiously and under scrupulous guidance of their employment counsel.