Employees have duties to their employer, including acting in good faith, observing confidentiality requirements, and executing their work responsibilities as expected. When a worker violates their duties, employers have options as to how they can proceed. Commonly, employers will begin by having a conversation about their concerns, and if the issue persists, the employer will typically escalate the disciplinary practices. For example, they might put the employee on a performance improvement plan, setting out specific objectives and timelines. The employer can also opt to terminate the employee for cause, however, this option must generally be saved as a last resort due to the financial impact on the employee. When terminating for cause, an employer is not obligated to provide reasonable notice or pay in lieu, or severance pay.

If an employer takes this step too soon and without implementing progressive disciplinary measures first, they may face a claim for wrongful dismissal, as happened in a recent Ontario case. The Court was asked to determine whether a 75-year-old Executive Director had been fairly terminated for cause after the employer investigated various financial irregularities. The fact that the employee was found to be a fiduciary to her employer played a role in the court’s findings, as fiduciaries are held to a stricter standard of conduct.

Executive Director Terminated for Cause at 75

The employee was employed by a not-for-profit organization, a municipal Chamber of Commerce. She was employed for 17 years by the organization before being terminated with cause. For most of those years, she held the title of Executive Director, which was their most senior staff position. In this position, she was responsible for overseeing the everyday operations of the employer. Her other duties included attending board and committee meetings, managing the budget, and implementing the plans and programs set by the employer. She also promoted the employer and its activities, including attracting new members and retaining existing ones.

In 2013, the Chamber’s treasurer, who was an accountant, became increasingly concerned about a number of irregularities she identified in the employer’s finances. The treasurer became vocal about those irregularities at board and executive committee meetings. In 2014, the Executive Director was put paid administrative leave pending an investigation into these undefined “irregularities”. A few months later, the employee was terminated for cause. She received no compensation.

The employee brought an action for wrongful dismissal.

The Employee was Found to be a Fiduciary

The Ontario Superior Court of Justice found that the employee had stood in the position of a fiduciary to the employer. As a result of that finding, the employee was found to have owed the duties of loyalty, honesty, good faith and a strict avoidance of conflicts of interest. The court also found that there was an implied undertaking given by the employee to act in the best interests of the employer.

The Court concluded that the very existence of the employer was in the employee’s hands. She oversaw all aspects of its operations including memberships, fundraising, events, banking and promotion. She was its public face, and its one consistent feature in an ever-changing landscape of governance.

The Court Finds That There was Just Cause for Termination

The core issue was found to be whether the employer had just cause to terminate the employee’s employment without providing her with reasonable, or any, notice.

The Court found several issues that did establish just cause. For one, the employee did not permit the treasurer unfettered access to the employer’s books and records. The employee continued to demonstrate a reluctance to do so even after the intervention of the president, a vice-president and the employer’s auditor.

The Court also found that the employee had participated in two acts of misfeasance. First, she was found to have unilaterally altered a direction to the employer’s bank after it had been co-signed by Chamber’s President. The Court opined that it was patently improper to provide the bank with instructions that purported to be counter-signed but were in fact never signed at all. The second act was providing that falsified document to a major bank.

While the employee was not found to have personally benefitted from the change in direction, the Court opined that the significance of the misfeasance was the aspect of dishonesty.

Honesty, faith, and trust were integral components of the employee’s work. It was found that the employer was justified in reaching the conclusion that the employee had not acted with complete honesty in the discharge of her duties as Executive Director. The Court then concluded that this absence of integrity and the demonstrated exercise of poor judgment on significant issues justified her immediate termination.

All the issues that led to the termination of the employee reached a critical point at the same time period. They cumulatively amounted to a repudiation of the employment contract. The Court concluded that it was unnecessary, in the circumstances, for the employer to provide warnings or to implement a stepped approach to discipline.

The Court awarded no damages to the employee.

Contact Toronto Employment Lawyers Grosman Gale Fletcher Hopkins LLP for Assistance with Terminations

Employees have duties towards their employers and often, the higher a position that an employee holds, the more duties they will generally owe. When an employee is found to be a fiduciary in respect of their employer, they are hold to a higher standard of conduct. Violation of those expectations may result in a valid termination for cause.

For advice on wrongful dismissal disputes, termination packages and other employment or labour law matters, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416-364-9599 to schedule a consultation.