When alleging cause becomes the costliest mistake

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeWorkWhen alleging cause becomes the costliest mistakeHoward Levitt and Lavan Narenthiran: The cost of getting cause wrong can be far greater than the savings from getting it rightLast updated 34 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.If the evidence is shaky, trying to turn a questionable case into a cause dismissal can backfire badly. Photo by Getty Images/iStockphotoMost wrongful dismissal cases follow a well worn path. But every so often, a decision comes along that reminds employers just how dangerous it is to overstate a case for cause. The Ontario Superior Court’s recent ruling in Wilsher v. Olympic Wholesale is one such case.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountWhether or not it survives appeal, the decision should make employers think twice before labelling misconduct as fraud, theft or just cause. Courts have long said that cause is an exceptionally high threshold. What is unusual here is how far the Court went in penalizing an employer that doggedly pursued it.The plaintiff was a 55-year-old night shift supervisor with 17 years of service. He was dismissed for cause when the employer discovered he had adjusted timesheets to “top up” the hours of unionized warehouse employees who had worked fewer than 40 hours in a week. The employer treated the conduct as fraud and time theft.FP Work touches on HR strategy, labour economics, office culture, technology and more.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Work will soon be in your inbox.We encountered an issue signing you up. Please try againThe Court did not see it that way.Justice S. Woodley found that the practice had been open and longstanding, that the plaintiff received no personal benefit and that the collective agreement guaranteed the employees a 40-hour workweek. In that context, the conduct did not amount to wilful misconduct and therefore did not justify dismissal for cause.That finding alone would have left the employer in a difficult position. But the way it handled the dismissal made matters worse.Rather than investigating whether the practice was systemic, the employer singled out the plaintiff. It subjected him to an intimidating interrogation without notice or representation (caution to employers who use outside investigators to do just that), accused him of fraud and theft in the termination letter, recorded his departure as a dismissal on his Record of Employment and refused to provide references after 17 years of service.The Court found that this conduct humiliated Wilsher and damaged both his prospects of finding new work and his ability to obtain employment insurance benefits.None of that is especially surprising. Courts regularly reject cause dismissals that fail to meet the very demanding legal standard of serious misconduct (usually after written warnings) and they often award additional damages where employers act in bad faith.What surprised employment lawyers in this case was the remedy.Since the Supreme Court of Canada’s 2008 decision in Honda Canada Inc. v. Keays, bad-faith conduct in the dismissal process has generally been compensated through aggravated or punitive damages, rather than the previous remedy of extending the employee’s notice period.Before Honda, courts often increased reasonable notice to reflect an employer’s unfair conduct. That was known as the “Wallace bump,” after the Supreme Court’s 1997 decision in Wallace v. United Grain Growers. For nearly 20 years, the Honda approach of not increasing the notice period has prevailed.Justice Woodley departed from it.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Instead of awarding aggravated damages, she increased the plaintiff’s reasonable notice period from 19 months to 33 months — an additional 14 months of compensation.That is what makes the decision striking.The Court found the employer had acted unfairly and in bad faith, but concluded that the conduct did not rise to the level of aggravated or punitive damages. Instead, it justified a longer notice period.In practical terms, that creates something close to a third category of damages: conduct serious enough to substantially increase notice, but not serious enough to attract aggravated or punitive damages.That may sound tidy in theory. In reality, it can be even more costly to employers.For senior employees or those with high compensation, an extra 14 months of salary and benefits can easily exceed the aggravated or punitive damages courts typically award. So while the Court may have avoided using the traditional labels, the financial result for the employer was severe — potentially much more costly than the egregious aggravated or punitive damages.The decision is under appeal, and the provincial appellate court may restore the framework established by the Supreme Court in Honda. But that offers little comfort to the employer in this case, which must now bear the cost and uncertainty of an appeal on top of the original award.The broader lesson is one companies ignore at their peril.Too many employers become fixated on proving cause because they want to avoid paying termination entitlements. Once they commit to that objective, they begin treating weak evidence as strong, overlooking facts that cut the other way, cutting procedural corners in the investigation and dismissal process or using outside investigators who generally trample all over the type of procedural fairness of the litigation system.If cause is real and supportable, employers should not hesitate to rely on it. But if the evidence is shaky, trying to turn a questionable case into a cause dismissal can backfire badly.A fair without-cause termination, with proper notice or pay in lieu, is often far cheaper than a failed cause allegation followed by litigation, aggravated damages and legal fees.As Wilsher shows, the cost of getting cause wrong can be far greater than the savings from getting it right.Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practises employment law in all provinces and is the author of six books, including the Law of Dismissal in Canada. Lavan Narenthiran is an associate at Levitt LLP.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.