Imagine this scenario: your company dismisses a long-standing employee without cause, who then sues the company claiming that her severance package was insufficient. Years later, the company discovers that prior to her dismissal, the employee had secretly copied 4,000 emails and documents belonging to the company, which contain sensitive client information including contact information, social insurance numbers and lists of assets. Can the company assert just cause for dismissal on these facts?
A similar fact pattern was considered by the Court in the recent decision of Ratz-Cheung v. BMO Nesbitt Burns Inc. Many may be surprised to learn that in this case, the Court found that the company had not established just cause for dismissal, and that the employee in question was entitled to reasonable notice of termination pursuant to common law.
Just Cause and After-Acquired Cause
Dismissing an employee for just cause is among the most serious punishments available in employment law. If the employer can prove dismissal for just cause, then they are is able to avoid making any severance payment to that are over and above the employee’s statutory entitlements. An employee is not even entitled to the statutory payments when they have been found guilty of:
- willful misconduct,
- disobedience, or
- willful neglect of duty that is not trivial and has not been condoned by the employer.
When assessing if there is just cause for dismissal, both the incident or misconduct in question and all relevant factors are considered. The test is to determine if the employment relationship has been irreparably harmed. Detailed information on the topic can be found in Stuart’s book, You’re Fired! Just Cause for Dismissal in Canada.
As we have written about previously , an employer can assert “after-acquired cause”, where they rely upon misconduct by the employee which occurred prior to the dismissal, but is not discovered by the employer until after the dismissal. The Ontario Court of Appeal and the Supreme Court of Canada have both held that an employer is entitled to rely on wrongdoing discovered after the dismissal as just cause for the dismissal, as long as the wrongdoing occurred before the termination.
The Ratz-Cheung Decision
A few weeks ago, the Ontario Superior Court of Justice released its decision in the case of Ratz-Cheung v. BMO Nesbitt Burns Inc. In examinations for discovery which took place 1.5 years after the employee’s dismissal, the employer BMO Nesbitt Burns Inc. (“NB”) learned for the first time that Ms. Ratz-Cheung had copied a significant amount of emails and documents containing sensitive client information. The Court stated:
In the fall of 2017, Ms. Ratz-Cheung accessed her NB Outlook e-mail account from home and asked her husband to copy the e-mails contained in three folders on a USB key. […] After the e-mails were copied, she kept the USB key in her home office. She did this as she felt that NB, and Mr. Fox in particular, were not treating her fairly with respect to the issues that she was having with her assistants, and she wanted to protect herself.
More than 4,000 e-mails and documents attached to e-mails were copied. The e-mails included e-mails from clients that Ms. Ratz-Cheung had forwarded to her assistants. Some of the e-mails and their attachments contained personal information of clients such as social insurance number, date of birth, description of assets, investment objectives, driver’s licence, etc. Some e-mails included communications with clients about particular trades.
Until her examination for discovery in this action, Ms. Ratz-Cheung had never told anyone at NB that she had copied these e-mails. During her examination for discovery held on November 26, 2019, NB became aware that Ms. Ratz-Cheung had the USB key at home. Ms. Ratz-Cheung returned the USB key to NB in January 2020. NB amended its Statement of Defence on June 16, 2022, to allege after-acquired cause.
The Court went on to find that Ms. Ratz-Cheung’s actions constituted:
- misconduct,
- a breach of the employer’s Code of Conduct, and
- put sensitive information at risk.
While NB was entitled to raise after-acquired cause as a defence to Ms. Ratz-Cheung’s claims, the Court ultimately found that Ms. Ratz-Cheung’s actions did not constitute just cause for dismissal. In making this finding, the Court relied on the following:
- Ms. Ratz-Cheung did not copy documents that she was not entitled to access during her employment;
- Ms. Ratz-Cheung did not disclose the documents or the information they contained to anyone, except for NB in the context of the litigation;
- There was only one instance of copying, and this was not repeated behaviour;
- The USB key containing the copied documents subsequently remained stored in Ms. Ratz-Cheung’s home office, unused and unaccessed, until the litigation;
- Ms. Ratz-Cheung had been an employee of NB for more than 23 years, and there was no evidence of any prior breaches of the Code of Conduct; and
- The Court found that the misconduct was a lapse in judgment on the part of Ms. Ratz-Cheung, in the context of a difficult year for her personally and in a situation where she thought that she was not being treated fairly.
In all the circumstances, the Court found that the employer had not established just cause for dismissal, and Ms. Ratz-Cheung was entitled to a notice period of 24 months.
Conclusion
This Court decision is a reminder that issues of just cause for dismissal are complex and are not always as straightforward as they may seem. A Court considering issues of just cause must determine the nature and extent of the misconduct, consider the surrounding circumstances, and decide whether dismissal is a proportional response.
If you are an employer that is considering dismissing an employee for just cause, we can help you determine the appropriate way forward. If you are an employee who was dismissed for cause, we can assist you with bringing a wrongful dismissal claim against your employer.
If you have any questions about your situation or if you would like to get legal advice, please feel free to contact us.
