Tagg Industries v. Rieder serves as a useful reminder of the importance of proving (and communicating to employees) a termination for cause, as well as the high threshold that employers must meet in such circumstances.
In this case, the company sued a former employee (that it allegedly fired for cause) seeking repayment of a $40,000 loan that was outstanding. The former employee responded in kind – counter-suing for wrongful dismissal damages and forgiveness of the loan.
The employment relationship
Tagg hired Rieder in October 2014 pursuant to a written employment agreement. In October 2015, he signed a new employment agreement and Tagg gave him a $40,000 loan, for which he signed a promissory note. The parties agreed that Tagg would forgive the loan as of Jan. 5, 2016 (the day that Rieder would be deemed to earn a $40,000 bonus).
On Dec. 4, 2015, Rieder was fired. Tagg alleged that it dismissed Rieder for cause as a result of him: deleting proprietary information from, and storing pornography on, a company laptop; misrepresenting his previous work title, responsibilities and salary; and not performing work satisfactorily.
Tagg, however, neglected to inform Rieder that it was for these reasons that his employment was terminated. In fact, Rieder asserted that the company’s president told him during the termination meeting that he was being dismissed without cause. The termination letter that Rieder received also seemed to contradict the company’s cause position, stating that Rieder was entitled to receive one week’s notice pursuant to the Ontario Employment Standards Act, 2000.
The court dismissed the company’s claim and awarded the employee $14,583.33 in damages for wrongful dismissal and forgave the loan (finding that the reasonable notice period continued past Jan. 5, 2016, thus entitling him to damages in lieu of the agreed bonus).
This decision deals with a number of important issues, including the enforceability of contractual termination provisions and how to properly calculate the reasonable notice period. In this article, however, we focus on two deficiencies in the company’s termination for cause:
Employers must clearly communicate why an employee is fired for cause
The court found that the company failed to inform Rieder why he was being fired for cause. In fact, the purported reasons for termination were only set out for the first time by Tagg in its defence to Rieder’s counter-claim. The court took a dim view of this fact, noting that:
If Rieder had truly been fired for performance issues, it seems reasonable to expect that he would have been advised of such. An employee must not be left to guess as to the reason for summary dismissal.
In light of the company’s failure in this regard, it is important for employers to ensure that if they are going to dismiss an employee for cause:
The misconduct forming the basis for dismissal is of such a degree that it “irreparably damages the trust essential to the employment relationship”
The misconduct has been properly documented
They act promptly, and inform the employee of the reasons being relied upon to assert cause for dismissal.
Storing pornography on a work-issued laptop not necessarily cause for dismissal
In part, Tagg asserted cause for dismissal on the basis that an IT worker found that Rieder had a large amount of pornography on his work-issued laptop. The company, however, did not tender any evidence from the IT worker and instead relied on hearsay. As a result of this deficiency, the company lacked any admissible evidence to substantiate this allegation.
The court went on, however, to opine that even if with evidence to support this alleged misconduct, storing pornography on a work-issued laptop was not serious enough to warrant termination for cause. The court stated:
"Even if there was admissible evidence that Mr. Rieder had pornography on his laptop, however, in my view it would not amount to just cause. Mr. Dulong testified that at times he saw that Mr. Rieder was engaged in non-work-related activity on his laptop. Yet there is no suggestion that Mr. Rieder ever looked at or downloaded pornography while at the workplace. There is no suggestion that he created a hostile workplace for other employees. There is no suggestion that the material was illegal, such as child pornography."
It should be noted that storing pornography on a work laptop could, in the right circumstances, be cause for dismissal. For example, the nature of the work environment or industry could make a material difference, as could the presence of an employer policy clearly prohibiting personal use of company assets or time theft.
This case, however, is a useful reminder of the high threshold that must be met in order to substantiate an assertion of cause for dismissal.
Finally, employers should be mindful of their obligation to ensure a workplace that is free from harassment. It is easy to imagine a situation where an employee accesses pornography that is inadvertently seen by other staff causing discomfort and/or distress. In such, circumstances, even if not cause, the employer will be required to take positive steps and remedy the situation.
Paul J. Willetts is a founder of Vey Willetts LLP, an Ottawa-based employment and labour law boutique.He can be reached at 1-800-296-7989 or firstname.lastname@example.org.