Not Every Breach of Contract is Cause for Dismissal

contract breach dismissal

A British Columbia Court recently ruled that an employer did not have just cause to terminate an employee even though the employee was in breach of her employment contract. The Court confirmed that not every breach of an employment contract permits an employer to terminate the contract and dismiss the employee without notice. That is particularly true where the breach relates, effectively, to performance.

Avelin v. Aya Lasers Inc.

In the case of Avelin v. Aya Lasers Inc., the Plaintiff, Celeste Avelin (“Avelin”), was employed by the Defendant, Aya Lasers Inc. (“Aya”), as a sales representative for seven months. Avelin’s employment was subject to an employment contract which stated that her minimum sales per quarter were to be $250,000.00. Over the seven months of her employment, Avelin only achieved $75,00.00. As a result, on February 28, 2018, Aya terminated Avelin’s employment. She was paid one week’s pay in lieu of notice.

Avelin subsequently brought an action for wrongful dismissal. In its Defence, Aya alleged that it was entitled to terminate Avelin’s employment for cause because she breached her employment contract by failing to meet her sales requirement.

The Court agreed that Avelin was in breach of her employment contract but held that the breach did not constitute just cause as it did not go to the “heart of the employment relationship.”

The Court held that misconduct that did not go to the heart of the employment relationship can amount to just cause where the employer is able to establish that the employee was adequately warned about the misconduct and given an adequate opportunity to improve but nevertheless persisted with the unacceptable behaviour. The Court, however, concluded that there was no evidence that Avelin was ever warned that her employment may be terminated if her sales performance did not improve. The Court, therefore, rejected Aya’s argument that it had just cause to terminate her employment.

The Court also awarded Avelin moral damages for Aya’s bad faith conduct in the manner of her dismissal. In coming to that decision, the Court considered Aya’s motive in bringing a separate Ontario action, the insensitive way in which her employment was terminated and her economic vulnerability. The Court concluded that Aya failed to deal with Avelin “fairly and in good faith” and that it was foreseeable that she would suffer harm. The Court found that Avelin “suffered upset and distress that went beyond what is normally to be expected” of an employee whose employment has been terminated.

Takeaways

This case highlights that not every breach of contract will justify summary dismissal. In every case, a contextual approach must be adopted which consider the specific facts of the case in question. In this case, the Court held that the breach of contract did not go to the heart of the employment contract. This means that Aya should have warned Avelin that her employment may be terminated if she did not meet her sales target and then given her an adequate opportunity to improve.  

It is worth noting that the facts of this case could have been assessed in the context of dismissal for poor performance. Although it is unlikely that the Court’s decision would have been significantly different, it is surprising that the Court did not reference this at all. Previous case law has shown that to dismiss an employee for poor performance, the employer must show that:

  1. It set a clear and reasonable standard of performance;
  2. It communicated the standard of performance to the employee;
  3. It gave the employee suitable instructions and support to enable them to meet its standards;
  4. The employee was incapable of meeting those standards;
  5. The employee was warned that failure to meet those standards would result in the termination of their employment.

Avelin’s employment contract sets out the level of performance that was expected; however, as the issue of poor performance was not considered by the Court we do not know whether Aya provided Avelin with suitable instructions or support to enable her to perform her job to the required standard, or whether the standard was reasonable. Despite this, the outcome of the case most likely would have been the same because Aya did not warn Avelin that failure to meet her sales target would result in the termination of her employment.

For a more detailed discussion of just cause for dismissal and the need for progressive discipline, you can have a look at Stuart’s text, You’re Fired! Just Cause for Dismissal in Canada, which includes a detailed review of the law and a library of case summaries.