Friday, 16 January 2015

Failure to Prove Cause Leaves Employer Responsible for LTD Payments to Dismissed Employee

When an employee is terminated without cause, the employer is obligated to continue all benefits to which the employee is entitled for the entirety of the reasonable notice period (unless some lesser entitlement is clearly spelled out in the contract of employment).  In a recent decision, where a teacher was dismissed, purportedly for cause, but became totally disabled during the reasonable notice period, the employer was found to not have had cause for termination and was ordered to pay the employee disability benefits to age 65, along with 12 months' pay in lieu of reasonable notice.

In Fernandes v. Peel Educational, the plaintiff was a teacher who had been employed by the private school for over ten years.  Although he had generally received good or excellent reviews during his teaching career, some concerns were identified in his end-of-year review following the 2007-08 school year.  Despite these issues, he continued working for the school the next year.  However, in March 2009, matters came to a head when the plaintiff submitted incomplete and inaccurate marks that were to be included on students' interim report cards.  The plaintiff advised the school that he was awaiting some work from students and that he would correct calculation errors.  Over two weeks later, the issues had still not been resolved, and the school continued to coach the teacher on the importance of submitting accurate marks for his class.  A couple of days later, the teacher submitted the marks and report cards, but the administration was suspicious because of the sudden completeness of what was turned in.  After some investigation, the school determined that the teacher had in fact inputted marks on student assignments that had not yet been completed.  The teacher was asked to attend a series of meetings with administration, during which he did not provide an explanation. However, he did ultimately confess to fabricating marks for some students. He was dismissed for cause, on the basis of "academic fraud".  Shortly thereafter, he was diagnosed with a major depressive disorder, and was deemed totally disabled by his doctor and psychiatrist.  By then, his long-term disability coverage had already been terminated.

After a trial, the Judge reviewed the competing evidence.  Although he concluded that the teacher had not been forthright with the school, and had actually lied in his evidence before the court, the Judge decided that the school had not established that the plaintiff's dishonesty was cause for summary dismissal.  Applying the 'contextual approach' dictated by the Supreme Court of Canada's ruling in McKinley and BC Tel, the judge felt that the employer's claim of academic fraud was a "very dramatic way of describing a few students who were marked on presentations that they had not yet given", and did not amount to the kind of dishonesty which undermined the trust essential in the employment relationship.  Having found that the employer did not have cause for dismissal, the Judge went on to find that the teacher was entitled to 12 months' reasonable notice.  In addition, given that he would have been entitled to claim LTD benefits, due to a disability that arose during the notice period, his wrongful dismissal also made the employer liable for those LTD benefits that the teacher would have otherwise been eligible to receive.  Given the plaintiff's prognosis, the employer was responsible for all LTD payments he would have received until age 65 (when LTD coverage would cease under the terms of the plan). 

The decision in Fernandes may come as a surprise for a couple of reasons.  The Court's rejection of the employer's case for cause is concerning. If a teacher falsifying marks is not the kind of dishonest conduct that warrants dismissal, it is hard to imagine what behaviour would meet that standard.  That being said, the employer's investigation of the problem was found to be flawed, and the teacher had enjoyed a long, unblemished teaching career prior to the issue arising.  In that context, the decision is somewhat more understandable.  Even more concerning for employers, however, is the school's liability for LTD benefits for a period of approximately 9 years.  The decision is a reminder to employers of the dangers of alleging cause on the basis of a relatively slim record of misconduct (particularly in the case of a long-term employee), and the risks associated with not continuing benefits (or providing a cash equivalent) during the notice period.  Before doing so, it is sound practice to obtain legal advice.

Do you have questions about what amounts to cause for dismissal?  Need guidance on whether or not to continue benefits to a terminated employee?  Contact Lance Ceaser for expert assistance.



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