Can an Employer Ever Avoid Paying ESA Termination & Severance Pay? It's becoming increasingly uncertain...

A recent decision of the Ontario Court of Appeal raises concerning issues for employers as the Court concluded that an employee terminated for cause should still have been paid the statutory minimums, though he didn't claim them in his wrongful dismissal action.

In Render v. ThyssenKrupp Elevator (Canada) Limited, the appellant was a former employee who had been terminated for sexual harassment. An investigation conducted by the employer determined that he had slapped the buttock of a female co-worker and had made light of the incident afterward, in joking with male colleagues. At trial, the judge had found that the appellant had been terminated for cause and dismissed his wrongful dismissal claim.

On appeal, the appellant argued, among other things that the judge had erred in not awarding him his statutory termination and severance pay, even if he was terminated for cause because the standard for disentitlement under the Employment Standards Act, 2000 is "wilful misconduct", a higher threshold of misbehaviour. Although the Ontario Court of Appeal dismissed his main claim for reasonable notice (as he had, in fact, been dismissed for cause), the Court went on to consider whether the appellant should have received his ESA entitlements. Interestingly, the appellant did not claim ESA termination and severance monies in his pleadings, nor at trial, although his lawyer did make passing reference to the lack of statutory termination payout in his opening statement.

In a remarkable turn of events, the Court of Appeal went on to find that there was a valid claim made at trial ("at least indirectly", in the Court's view) that fell within the appellate jurisdiction of the Court, even though it was never argued at trial, the respondent had no opportunity to make legal argument on the standard of "wilful misconduct, and the issue was never considered by the trial judge. The Court then went on to observe that the standard of "wilful misconduct" under the statute comprises an element of intentionality, and that a finding of cause, therefore, does not necessarily equate with a finding that the employee is disentitled under sections 2(1)3. and 9(1)6. of Regulation 288/01. Although this finding is consistent with the recent spate of cases that have rendered for-cause termination provisions unenforceable (a la Waksdale v. Swegon North America Inc.) due to their inconsistency with the "wilful misconduct" standard under the Act, it is still difficult to understand how slapping a female employee on the buttock does not meet the higher standard imposed by the statute. Nonetheless, at para. 81, Feldman J.A. wrote:

In my view, the appellant’s conduct does not rise to the level of wilful misconduct required under the Regulation. While the trial judge found that the touching was not accidental, he made no finding that the conduct was preplanned. Indeed, his findings with respect to the circumstances of the touching are consistent with the fact that the appellant’s conduct was done in the heat of the moment in reaction to a slight. Although his conduct warranted dismissal for cause, it was not the type of conduct in the circumstances in which it occurred that was intended by the legislature to deprive an employee of his statutory benefits.?

Not only should the issue of statutory entitlements not been permitted to proceed on appeal where it had not been a live issue at trial (due to litigation decisions made by the appellant's lawyer), it is concerning that an appeal justice could find, in this day and age, that this senior male employee's actions did not carry sufficient "intention" or that 'provocation' (she called him "short") made the slap less intentional. Deliberate does not equate to premeditated, as the decision suggests. Moreover, there was evidence that the company had made recent efforts to educate employees on its expectations for workplace behaviour, indicating that the appellant should be presumed to have known better. Given the sexual nature of his actions, it is also arguable that the appellant's conduct was contrary to the prohibition on sexual harassment in the Human Rights Code. Yet, violating that quasi-constitutional legislation does not go far enough in the Court's view to justify withholding statutory termination and severance pay?

For employers, the decision is yet one more reminder of the unlevel playing field on which they find themselves - forever kicking the ball uphill. Tasked with protecting the health and safety of employees and providing a harassment-free workplace, when they remove an employee whose actions are squarely contrary to these protections (and who jokes about it with other men in the office), the law will not step in to protect the employer from claims from the offending party - even when that party does not raise those claims in the appropriate manner (i.e., at the trial of their wrongful dismissal action). The message appears to be that, despite any seriously inappropriate activity on the part of an employee, an employer ought to just pony up the termination and severance pay amounts required by the ESA. I respectfully disagree, and question whether the time has come for the legislature to intercede by reconciling the standards of employee misconduct that "deprive" an individual of both reasonable notice at common law and statutory entitlements under the ESA, so that employers are not constantly trying to hit a moving target, and consistently falling short.

Here endeth the rant...

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Operating as Ceaser Work Counsel since early 2014, Lance Ceaser is a 18+ year management-side labour and employment lawyer operating from London, Ontario, where he resides with his lovely spouse, a dog and 2 cats. Lance has provided timely, cost-effective advice to organizations of all sizes in virtually every sector of industry and the public sector throughout his career.