Appeal court decision shows distinction between common law, Employment Standards Act

In Render v. ThyssenKrupp Elevator (Canada) Limited (“Render”), the Ontario Court of Appeal clarified the distinction between just cause at common law and wilful misconduct under the Ontario Employment Standards Act, 2000 (the “ESA”). To disentitle a terminated employee from their minimum ESA entitlements, an employee must be guilty of deliberately doing something they know to be wrong. The misconduct must be wilful and premeditated, almost like what is required in criminal law. This is a far more demanding standard than what is needed to show just cause under common law. 

It should be noted that the standard of wilful misconduct is specific to the Ontario ESA and may not be applicable to legislation from other jurisdictions. 

In Render, the terminated employee’s actions, while intentional, were not preplanned. He retained his entitlement to the ESA minimums despite his termination being for cause. 

Employers should therefore note that while they may have just cause under common law to terminate an employee, they will nevertheless owe that employee their ESA entitlements unless the employee’s misconduct was deliberate and premeditated and the employee knew the actions to be wrong. ESA termination entitlements can be significant. The ESA provides for severance pay of up to 8 weeks and, if eligible, termination pay of up to 26 weeks, for a total maximum statutory severance of 34 weeks’ pay. 

The Employee’s Misconduct and Termination

The employee in this case had been working for the defendant for approximately 30-years, most recently in a management role. It was a very social work environment where inappropriate jokes and comments were accepted as the norm. One day, the employee’s jokes went too far. In a room full of male colleagues, the employee slapped a female colleague on the buttocks. The employee and his male colleagues later joked about the incident, with the employee saying, “for 10 bucks you can shake my hand.” It was clear the employee did not take the situation seriously. 

The victim was humiliated and reported the incident to Human Resources. In response to the complaint, the defendant terminated the employee for just cause, without severance, termination or vacation pay. 

Just Cause to Terminate the Employee

The trial judge found there was just cause to terminate the employee. The trial judge considered the sexual nature of the conduct, the employee’s lack of appreciation of the conduct’s severity, and the fact the employee was a manager and responsible for implementing the defendant’s Anti-Harassment and Anti-Discrimination Policy. Terminating the employee delivered an important message to the workplace: such serious conduct of a sexual nature could not and would not be condoned. 

The Ontario Court of Appeal could find no error in the trial judge’s approach or analysis. The dismissal for cause was upheld. 

The Court took one step further and commented specifically on the defendant’s workplace atmosphere. The Court confirmed that the kind of workplace atmosphere that existed here is “a workplace atmosphere that can no longer be tolerated.” Every workplace, they said, should be based on mutual respect. This is good advice for all employers to keep in mind. 

Disentitlement Under the ESA

The employee was not paid ESA severance, termination or vacation pay after his dismissal. It was the employer’s view that a dismissal for cause disentitled him to such payments. 

Sections 55 and 64(3) of the ESA provide that certain employees are not entitled to termination or severance pay. The disentitlement provisions are found in O. Reg. 288/01, “Termination and Severance of Employment”, a regulation under the ESA. 

The relevant portion of this regulation states, under s. 2 (1), that the following employee will not be entitled to notice of termination or termination pay: 

  1. An 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.

Consequently, for an employee to lose their termination entitlements under the ESA, they must be guilty of wilful misconduct. They must have done something deliberately, knowing it to be wrong. It should be remembered that this standard is applicable in Ontario and may not reflect the standard in other Canadian jurisdictions. 

The question in Render, then, was whether the employee’s misconduct and for cause termination met this standard such that he could lose his entitlements to ESA severance and termination pay. 

The Employee’s Misconduct Did Not Disentitle Him to ESA Benefits

The Court of Appeal concluded that while the employee’s misconduct certainly amounted to just cause, it did not amount to “wilful misconduct”. Careless or inadvertent conduct does not meet the standard set out in the ESA, which requires wilful misconduct. This is a higher standard than just cause. 

Furthermore, the Ontario Court of Appeal clarified that such conduct should not only be deliberate, but it should also be preplanned. In Render, the employee’s actions were determined to be in the “heat of the moment”. While not accidental, the conduct was also not premeditated. For that reason, the employee’s misconduct did not rise to the level required under the ESA, and therefore the employee could not be deprived of his ESA termination entitlements. As the Court of Appeal noted, “it was not the type of conduct […] that was intended by the legislature to deprive an employee of his statutory benefits.”

Key Takeaways

For employees and employers alike, it is important to remember that termination for just cause will not always absolve the employer of their obligation to provide terminated employees with their minimum ESA entitlements.

A dismissed employee should only be deprived of these entitlements where their misconduct was deliberate and preplanned, and where the employee understood the conduct to be wrong. 

This article was written by Shane Burton-Stoner and was originally published by The Lawyer’s Daily on August 26, 2022. Shane is an Employment Lawyer at Monkhouse Law and is licensed by the Law Society of Ontario.

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