Termination for Cause: Employee Showing Preference During RFP

Terminations for cause must meet a high threshold to be effective. It is often easier, and sometimes cheaper, to dismiss an employee without cause and pay the accompanying severance rather than alleging cause and defending the allegation in court. In the case of Schultz v. Canada Lands Company CLC Limited, 2019 ONSC 2124, the employer alleged cause when an employee was found to have shared confidential information with certain proponents of a request for proposal. The court, however, having regard to the plaintiff’s motivations and to the inconsistent way the employer applied its policies, found that the dismissal for cause was not justified.

Background

The plaintiff (employee) was a director of real estate for Canada Lands Company CLC (“CLC”), hired July 2012 to help redevelop land that previously hosted the Canadian Forces Base Rockcliffe. In 2015 several contracts on the project ended and a new procurement process was required. The plaintiff was opposed to some of the consultants going through the procurement process; in his view it was better that they continue work on the project to meet deadlines because of their familiarity with its objectives. In 2016, due to “personality differences”, a human resource professional was sent to work out the problems. While on site she saw an email on the plaintiff’s desk suggesting that the plaintiff had shared information with one of the proponents during the procurement process. The company hired Ernst & Young (“EY”) to review the plaintiff’s actions and a consequent EY Report found that the employee had sent confidential information to certain proponents during the procurement process. In March 2016, the plaintiff was terminated for cause.

Analysis

Justice Parfett lays out the test for misconduct from McKinley v. BC Tel.: “whether the employee’s dishonesty gave rise to a breakdown in the employment relationship.” The Justice states that the test incorporates two essential questions: whether the deceitful conduct is established by evidence on a balance of probabilities and whether the “nature and degree of the dishonesty” warrants dismissal as the response. With respect to the second branch, the Justice cites Dowling v. Ontario (Workplace Safety & Insurance Board), which breaks down the test into three steps:

  1. Determine the nature and extent of the misconduct;
  2. Consider the surrounding circumstances; and
  3. Decide whether dismissal was the proportional response to the misconduct.

Application

It is common ground for the plaintiff and the employer that the behaviour gave rise to the breakdown in the employment relationship. The case before the court is whether the nature or degree of misconduct justified dismissal for cause. The case is broken down into two components: communications before the procurement process began and communications afterward. Regarding communications prior to the procurement process, the Justice found that the plaintiff was following industry norms of seeking input of incumbent contractors and therefore found no misconduct.

Communications during the procurement process are a different matter, according to Justice Parfett. The plaintiff admitted he had favoured one proponent by providing information to them concerning other proponents. Furthermore, the plaintiff sent a draft memo with team evaluations and specific prices of each proposal to one proponent and not to others. The employer alleged providing a competitor’s rates to a proponent was a breach of confidentiality. In addition, the plaintiff attended social outings with the preferred proponent during the procurement process. The plaintiff admitted that providing information to one proponent meant that he had exhibited favouritism during the procurement process. The plaintiff acknowledged the behaviour was “wrong and regretted his actions”.

Justice Parfett, however, considered several factors that pointed in the plaintiff’s favour. These included:

  • That the plaintiff was working under tight deadlines and motivated by best interest of the company;
  • That the employer applied their policies unevenly;
  • That a superior sometimes required contact with the proponents;
  • That not all team members signed the conflict of interest declarations;
  • That the EY Report found that there was another circumstance where a contract during procurement was awarded prior to a recommendation memo being drafted in breach of CLC policy;
  • That the plaintiff previously advised a contractor on their success before a formal decision was made and the employer took no action in that case nor did it warn the plaintiff; and
  • That the employer did not address the limitations of the EY report and made the decision without fulfilling its onus to have a full understanding of events.

Disposition

As a result, the court found that the plaintiff’s dismissal for cause was not proportionate; discipline or termination without cause would have been an appropriate response to the actual nature and seriousness of the misconduct. The court awarded the plaintiff reasonable notice of 12 months and a portion of the employee’s bonus under the employment contract. The court did not award moral or punitive damages.

Key Takeaways

  • Ensure that your policies are always up to date and complaint with relevant legislation and the ever-evolving common law.
  • Ensure that policies are applied consistently.
  • Professional, expert legal advice should always be sought prior to terminating an employee especially if contemplating a termination for cause.

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