Given that employment is considered to be one of the most fundamental aspects of an individual’s life, it is no surprise that courts and tribunals have been reluctant to uphold an employer’s decision to terminate an employee for just cause. The implication of being dismissed for just cause is that the dismissed employee does not receive employment insurance benefits or reasonable notice or payment in lieu of termination and, as such, the employee loses the means of financial support.

The leading case in Canada on dismissal for cause is McKinley v. BC Tel¹. In this case, the Supreme Court held that just cause for dismissal exists where the employee’s misconduct gives rise to a breakdown in the employment relationship.² The Court went on to say that just cause exists where the misconduct violates an essential condition of the employment contract, breaches the faith inherent in the employment relationship, or is fundamentally inconsistent with the employee’s obligations to the employer.³ The Court also stated that an effective balance must be struck between the severity of the misconduct and the sanction imposed by the employer.⁴

In applying the test for just cause established in McKinley, courts have continually applied a very high threshold in determining whether the employment relationship continues to be viable (that is to say, courts apply a high threshold in determining whether just cause exists or not when terminating an employee). As a result, employers have in turn been reluctant to dismiss an employee for just cause because they are fearful that the court will overturn the termination and award the employee damages for reasonable notice. However, the recent decision by the Alberta Court of Appeal should serve as a ray of hope for employers who look to dismiss employees for conduct that constitutes a serious breach of employer policies.

In Poliquin v. Devon Canada Corp.,⁵ the employee, who worked as a senior production foreman and was responsible for supervising 20-25 employees, was terminated for just cause for (i) accepting free landscaping services at his personal residence from the employer’s suppliers in violation of the employer’s code of conduct; and (ii) using the employer’s computer equipment and Internet access to view and transmit pornographic and racist material in violation of the code of conduct. The employee had one prior warning for accessing pornographic material. The employee nevertheless sued for wrongful dismissal.

The trial judge found that the employee did commit the alleged breaches of the code of conduct, but dismissal was not proportional to the misconduct. The Judge based this decision on the fact that one of the suppliers who provided free services to the employee was a friend of the employee; that only two of the pornographic emails actually originated from the employee; and there was only one occurrence of forwarding a racist email.

The Court of Appeal however reversed the decision. With respect to the solicitation of services from the employer’s suppliers, the Court held that the misconduct had to be considered in light of the degree of responsibility attached to the employee’s position. He was a senior supervisor and his duties included issuing contracts for the employer and signing all invoices related to his areas of responsibility including those form the suppliers in question.⁶ Further, the Court considered the employer’s Code of Conduct. The employee’s conduct was a clear violation of the Code of Conduct, which constituted a violation of an essential term in his employment contract and was inconsistent with his obligations to the employer.⁷ Taking this together, the Court held that this misconduct was sufficient enough in and of itself to justify dismissal for cause.

With respect to the use of the computer to exchange pornographic and racist material, the Court found that the employee’s conduct was egregious and offensive to his obligation of honesty and good faith. As such, this misconduct warranted dismissal. Further, the Court found that this behaviour was especially serious given the employee’s role as a senior supervisor.⁸ The Court also made the following comment on the importance of the employer’s code of conduct in governing the workplace. The Court stated:

It is important to situate a document like the Code of Conduct in the larger workplace context. Employers have the right to set the ethical, professional and operational standards for their workplaces. Doing so not only falls within an employer’s management rights, it also constitutes an integral component of corporate good governance.⁹

Conclusion:

The Poliquin decision sends a strong message that breaches of employment policies should not be taken lightly. The Court supported the importance to employers of setting a high standard for ethical and professional behaviour in the workplace. Therefore, this decision should provide employers with hope that if an employee’s misconduct is egregious and breaches the employer’s policies, a court will find that the employer is justified in dismissing that employee for just cause. Well-drafted policies are therefore essential to assist in upholding discipline imposed by employers – especially when that discipline comes in the form of a just cause dismissal.

Written by:
Patrizia Piccolo – Labour and Employment Group Leader (ppiccolo@kmblaw.com); and Nav Bhandal (nbhandal@kmblaw.com).

Please do not hesitate to contact either one of us with any questions you may have relating to Human Resources law.

1. [2001] 2 S.C.R. 161 [“McKinley”].
2. Ibid. at para. 48.
3. Ibid.
4. Ibid. at para. 53.
5. (2009), 75 C.C.E.L. (3d) 1 (Alta. C.A.) [“Poliquin”].
6. Ibid. at para. 37.
7. Ibid. at para. 41.
8. Ibid. at para. 56.
9. Ibid. at para. 45.