Generally, an employer cannot abruptly terminate an employee without notice (i.e., any severance) unless there is “just cause” to do so. If such cause is absent, reasonable notice, or pay in lieu of notice, is usually required by law. It is exceedingly difficult for Ontario employers to prove “just cause” in Ontario Courtrooms. Some critics may argue that Ontario Courts remain disproportionately sympathetic to terminated employees, perhaps justifiably so. In any event, to use and prove “just cause” successfully in Ontario law is usually very challenging and reserved to fairly limited circumstances, effectively those where the contract of employment is fundamentally breached by the terminated employee.

Performance issues, in particular, can be quite problematic, at least if they are raised and relied on as “just cause” for termination. Where the misconduct is very clear and identifiable, it becomes mildly less onerous, such as serious or wilful misconduct (e.g., fraud, theft, harassment, breach of fiduciary duty) – these may more readily create the opportunity to abruptly terminate for cause and justify it afterwards, if necessary. However, short of these clear, compelling reasons, the lines becomes far more blurry and uncertain, such as for incompetence, failure to perform satisfactorily, disobedience, or other less stark missteps by an employee.

To justify termination for cause in those cases, usually employers must prove proactive steps were taken to effectively manage the poorly performing employee before a finding a dismissal was justified for cause. What must be proved? Typically employers must prove that the employee consistently failed to meet and achieve objective, reasonable performance standards that are known to the employee. Subjective dissatisfaction by an employer is usually insufficient. The Court may also consider mitigating factors relating to the employee’s circumstances or workplace. Essentially, the employer must demonstrate that the employee’s shortcomings were entirely the reason for the termination, after progressive discipline was afforded to the employee, unsuccessfully. It cannot be other factors, or be perceived to potentially be other factors, such as economic downturn or the employer’s unwillingness to offer reasonable accommodation, that is the reason for the employee’s sub-standard performance.

Generally, the Court will require a fairly onerous progressive discipline process before it will allow the employer to terminate successfully for cause for performance-related issues. This usually involves prior warnings and an opportunity for improvement or rehabilitation. Unless the employee’s conduct reaches the high threshold of “gross” incompetence, particularly by endangering the lives of others, generally the employer is judicially expected to, at the very least: warn the employee that his or her job is at risk if performance does not improve within a specified period; and provide reasonable time and support for improvement; and demonstrate that, despite this, the employee’s sub-standard performance persisted.

Employers must also be cognizant of whether an employee’s incompetence may potentially relate to (or arguably relate to) any prohibited grounds of discrimination under Ontario's Human Rights Code. In that case, the duty to accommodate may arise, to the point of undue hardship, making it even more difficult to justify a termination for cause based on poor performance – and more risky to do so.

Employers in Ontario should:

  • Establish a clear policy and/or job description outlining performance standards;  
  • Regularly and consistently apply enterprise-wide performance standards;  
  • Consistently provide feedback to employees and avoid potentially “mixed messaging”;
  • Clearly define the expectations on an ongoing basis (ideally in writing);
  • Document carefully all steps taken to progressively discipline an employee, including by identifying the expectations the employee cannot, or will not, achieve or meet;
  • Warn the employee of the risks associated with poor performance;
  • Provide a reasonable amount of time to rectify the poor performance and comply with the reasonable expectations; and 
  • Be patient and methodical in the process, including by contemplating what must be proved, ultimately, if the employee sues for wrongful termination.
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