Employer Condones 'Wilful Misconduct' by Failing to Take Effective Action

Under the Employment Standards Act, 2000 (the "ESA"), employees generally have an entitlement to notice of termination or payment in lieu of notice, unless they fall into one of a handful of exemptions.  One of the exceptions provided under the Regulations to the ESA covers "[a]n employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer."  Because the ESA provides a statutory minimum entitlement, adjudicators apply the exemption from termination notice or pay very strictly.  Employers will often focus on the seriousness of the offence, and struggle to establish the "intent" (i.e., the wilfulness) necessary to bring a "just cause" dismissal within the exemption.

However, as the recent decision in Cancore Building Services Ltd v. Merlos illustrates, employers also need to be aware of the dangers of having condoned an employee's bad behaviour.  In Cancore, the claimant was the supervisor of a window washing crew employed by the janitorial company.  He started with Cancore in 1989, and was promoted to a supervisory position after years of good performance.  However, as early as 1999 or 2000, the company began to have concerns about the claimant's performance as a supervisor, including misstating the hours that his crew worked on time sheets that he submitted.  He was cautioned about this issue at the time, and received repeated notes and warnings from the company regarding deficiencies in his supervision of staff, his work attitude, and his lack of responsiveness to pages.  In 2009, the employer again advised him to only record actual hours worked by his crew on time sheets, and that "padding" time sheets amounted to theft from the company.  Even more openly critical letters were written and given to the claimant in 2009 and 2010, which again highlighted the inaccurate reporting of employee working hours. The 2010 letter to the claimant purported to be a 'final warning' that he had to improve in all areas, but only three (3) weeks later, the employer issued yet another warning about improperly completed time sheets.  No disciplinary measures were ever taken to address his shortcomings.

In July 2012, a student employed on the claimant's crew told the company that he had been paid 8-hours' pay on a day when he did not work 8 hours.  Rather than investigate, by reviewing the time sheet in question or asking the claimant about the allegation, the employer summarily dismissed the supervisor.  In the termination letter, the employer accused the claimant of "time theft", among a number of other things, and stated that his behaviour constituted "willful misconduct" and cause for termination.  The employee filed a claim with the Employment Standards Branch, and an Employment Standards Officer found that he was entitled to termination pay.  The employer sought review of the Order to Pay at the Ontario Labour Relations Board.

The Board started by observing that where an employer tries to rely on an exemption from an entitlement under the ESA, the employer bears the onus of proving that the exemption applies.  The Board found that the employer tried over a period of several years to improve the claimant's performance as a supervisor by "writing him letter after letter on the finer points of supervision", warning him about 'padding' time sheets.  While time theft of the nature alleged was "presumptively" wilful misconduct under the ESA, in the opinion of the Board, the employer did not have any evidence that the claimant had intentionally attempted to obtain wages for himself or his crew for work that they had not performed.  When an opportunity arose for the employer to establish that this was in fact the case, when the student came forward, the employer failed to investigate and just assumed that the allegation was true.  Moreover, despite numerous warnings over a period spanning about 12 years, the employer never imposed any sanctions on the employee.  In the words of the Board:  "That, quite simply, is condonation within the meaning of the Act."  In the result, the application for review was dismissed and the Order to Pay termination pay was upheld.

The decision in Cancore is illustrative of a number of principles and best practices that employers need to embrace.

• Managers need to be prepared to have difficult conversations with employees, about their performance, but they also have to be equipped to take meaningful action to address shortcomings and misbehaviour.  A written 'scolding' on a periodic basis, if not backed with progressively harsher forms of corrective action, will not suffice.
• Whenever feasible, investigate concerns about employees when they first arise.  Often where there's smoke there's fire, and it's best to stamp it out before it  becomes a blaze.  Remind senior management that putting in time and effort now could save a lot of aggravation and money down the road.  The longer the employee is allowed to stick around, the greater the risk that it will amount to condonation and the larger his/her entitlement to termination pay (and severance pay, if it applies to the employer).
• Enact policies and procedures to address the areas of concern.  Ensure that the policy is written in plain language and clear on what is permitted and what is not.  Educate employees on the content of the policy, and that there will be consequences for breaking the rules.
• Consider whether your existing policies and employment contracts provide the ability to impose disciplinary sanctions on employees, such as suspensions of varying lengths.  If the employer does not have the authority to suspend, doing so could amount to constructive dismissal.  If in doubt, speak to a labour & employment lawyer for guidance.
• If you find out that an employee has been engaged in a practice that is contrary to policy for an extended period of time without being addressed, set the stage to confront the issue going forward.  Bring the issue to the employee's attention, including the fact that the employer is aware of past violations, and put the employee on notice that the behaviour will be subject to discipline if repeated.  Follow-up and document any repetitions. (Check out the decision in Leon's Furniture Limited for an example of how an employer successfully addressed a pattern of bad behaviour that had persisted for some time.)

Employers need to be aware that their actions (or inaction) can be the biggest impediment to removing unsatisfactory employees.  By ensuring that dismissals for "just cause" also consider the more stringent requirements under the ESA (i.e., serious, intentional misconduct or neglect that has not been tolerated ), employers can avoid issues under the Act as well as at common law.

Do you have questions about the difference between "just cause" and "wilful misconduct"?  Need advice or guidance on an issue related to dismissal?  Contact Lance Ceaser for expert assistance.