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After-acquired just cause means no notice or severance

If you are going to spend money to hire a lawyer to represent you after a termination, be sure to tell them the truth, the whole truth, and nothing but the truth. Otherwise, you’re wasting your time and theirs.
 
A man we will call Thomas worked for an equipment rental company in Alberta for 14 years. For the first ten years or so, it was owned by a gentleman we will call Harry. After Harry died, his daughter took over. Thomas was a trusted family retainer and he stayed on. The daughter discovered, about four years after she started running the company, that Thomas was not as trustworthy as she had thought.
 
Thomas had been given a company credit card for personal gas use but she found he was using it to fill his wife’s vehicle with gas.
 
In addition, Thomas had recently separated from his wife and was putting medical expense claims for her through the company benefits plan even though they were no longer co-habiting.
 
The daughter fired Thomas without notice or pay in lieu of notice and Thomas sued. The daughter’s new accountant looked further into the books and discovered that twice over the four-year period the daughter had been in charge, Thomas had given himself an advance against his salary without asking for permission. Although he had recorded the advance/loan and promptly repaid it, he did not ask the daughter if he could do it in the first place.
 
As financial controller, Thomas was in charge of inventory reconciliations every year. It turns out that Thomas would artificially inflate the real inventory of what the company had in its warehouses to more closely match what the computer had been telling the bank the company owned. Although Thomas wasn’t getting any personal benefit from this practice, he was lying to the banks on behalf of the company.
 
Once the employer discovered these issues, it amended its Statement of Defence to rely on these additional grounds to justify Thomas’ termination without pay in lieu of notice.
 
But how, you may ask, can the company rely on conduct to justify not giving Thomas his severance when it never even knew about that conduct when it said, “You’re fired”?
 
For several hundred years, the common law has held that the employer can rely what is called “after-acquired cause” to justify a termination without notice. Imagine that I terminate you on Tuesday from my retail shop as a result of a shortage of work but discover on Thursday, before I’ve paid you out your severance, that you have been stealing from me all along. Even though I didn’t know about it on Tuesday, I can tell you on Friday that you’re getting nothing since there was just cause for your termination even if I didn’t know it at the time.
 
The judge at trial found that the use of the gas card and claiming his separated wife on his benefits plan were not issues that would, on their own, have justified terminating Thomas without a severance package.  The employer had never defined what it meant by “personal use” with respect to the gas card and it was not clear that Thomas was wrong in continuing to put benefit claims for his still legally married spouse after their separation.
 
What was clear, however, was that as financial controller of the company, Thomas had an obligation to ask the daughter if he could give himself a loan.
 
At trial, Thomas tried to justify his fudging of the inventory number on the basis that Harry, the deceased owner, had always told him to do it that way to keep the banks happy. The judge found, however, that this was a serious matter and Thomas had an obligation to the daughter to let her know what was going on.
 
Thomas lost his case and had to pay his lawyer and that of the employer.
 
We will never know whether Thomas told his lawyer when he first arrived in his office about the salary advances or inventory fudging but if he had, he might not have wasted his money in the first place.


Ed Canning is a partner practicing in the Labour & Employment Group at Ross & McBride LLP.

As published in The Hamilton Spectator, March 10, 2014
 

Ed Canning
Ed Canning
P: 905.572.5809
ecanning@rossmcbride.com