A Cautionary Note on Just Cause: Do Not Use this Shield as a Sword

By: Jessica Donen

An employer may terminate an employee for just cause if the employee’s misconduct is so severe that the relationship between the parties is irreparable. If an employer successfully proves that it had just cause, the employer is not required to provide the employee with reasonable or statutory notice and the employee loses his or her ability to collect employment insurance. It is a defence to paying notice. Since the impact of a termination for cause is significant, an employer should only terminate for cause in the most extreme cases and after conducting a thorough investigation.

Nevertheless, some employers terminate for cause impulsively and without merit. Often, the termination occurs without an investigation and is advanced to gain an upper hand. Simply put, it is used as a sword. If an employer terminates an employee for cause in bad faith and/or continues to maintain baseless accusations throughout litigation, a judge may award the employee additional damages for such conduct.  A recent decision of the British Columbia Supreme Court illustrates this.

The Case

In Hrynkiw v Central City Brewers & Distillers Ltd.,  the employer, Central City Brewers & Distillers Ltd. (“Central City”), terminated Mr. Hrynkiw’s employment for just cause alleging, among other things, that he had taken vacation and paid himself bonus shares without permission. At the time, Mr. Hrynkiw was 56 years old and had been working for Central City for just over 6 years. The termination occurred almost immediately after a disagreement broke out between Mr. Hrynkiw and Central City’s Chief Executive Officer and President, Mr. Frost. Central City did not conduct an investigation into the allegations against Mr. Hrynkiw before terminating his employment.

The manner of termination caused Mr. Hrynkiw anxiety, insomnia, and affected his motivation and his relationship with his family. The affect of the termination prevented him from conducting a job search for several months.

In response, Mr. Hrynkiw brought a claim for wrongful dismissal and sought damages for the mental distress he suffered. Central City brought a counterclaim for repayment of the share bonus.

At trial, not only was Central City unable to prove that it had cause to terminate Mr. Hrynkiw’s employment, but the trial judge also determined that the allegations against Mr. Hrynkiw were made impulsively and maintained without a legitimate basis. Mr. Hrynkiw was awarded 12 months in lieu of notice and an additional $35,000 for damages for mental distress after the trial judge found that Central City breached its duty of fair dealing and good faith in the manner of dismissal. Central City’s counterclaim was also dismissed.

The Takeaway

While the damages for mental distress may not appear significant, it is emblematic of a shift in the courts’ rulings over the last decade. Previously, it was exceptional for an employee to receive these types of damages. More and more frequently, courts are awarding aggravated and/or punitive damages for terminations made in bad faith. Though the damages awarded in Hrynkiw are not punitive in nature, and require proof of compensable damages to be awarded, they nevertheless help to (hopefully) deter employers from taking similar actions in the future. Hrynkiw ultimately serves as a cautionary note: do not use a shield as a sword.