Written by Daniel Standing, LL.B., Editor, First Reference
Dismissal for cause is frequently characterized as capital punishment in the employment realm. As a drastic solution, one would presume that an employer would only terminate a worker’s employment for good reason and with a firm sense of an employee’s wrongful conduct. A recent decision of the Manitoba Court of Appeal, McCallum v Saputo, 2021 MBCA 62 (CanLII), indicates that an employer’s position is not necessarily compromised if it fails to investigate suspected wrongdoing before dismissing an employee. The case stands for the principle that the employer does not have a free-standing obligation to investigate prior to dismissing for cause. However, as will be seen, employers run a big risk if they proceed directly to dismissal. The court was more eloquent.
Patrick McCallum worked in sales for Saputo Dairy Products. One of his tasks was to go to grocery stores and determine if the store should get credit for any Saputo cheese that had gone bad. If so, he would document it and then store employees would throw out the bad cheese. At least, that is how it was supposed to work. One day in August 2015, he went to a grocery store in Winnipeg and removed 14 packages of cheese from the shelves, claiming they were unfit to sell. When an assistant store manager and a loss prevention officer stopped him at his car with the cheese in a milk crate, he claimed the trash compactor was locked and he was going to dispose of the cheese himself behind his condo. Store management did not buy his story, and neither did his employer. They told Saputo what they knew about Mr. McCallum. Saputo fired him less than two weeks later.
At the time of the dismissal, Saputo did not know some key facts. For example, it had no idea how much cheese Mr. McCallum took, that some of it was still good, and that some of it was made by a competitor. It only found out afterward. The way the Court of Appeal dealt with this is highly advantageous to employers.
Mr. McCallum’s lawsuit for wrongful dismissal included a claim for damages for breach of contract, as well as bad-faith, punitive and aggravated damages.
At trial, a key issue was whether Mr. McCallum had acted dishonestly. He testified it was just an innocent mistake while he was tired and rushed. But that did not quite ring true in light of the evidence of his confession to a supervisor that he intended to donate the cheese to a “wedding social.” Concluding that Saputo had just cause to terminate Mr. McCallum’s employment, the trial judge also noted that Saputo made no effort to investigate the situation. The judge relied on a Manitoba Court of Appeal case from 2000 to the effect that an employer owes no duty of procedural fairness to an employee at termination unless there is an express term of the contract to that effect. Its only duty was to treat the employee fairly and honestly based on the information it has at the time.
The grounds of appeal
The Court of Appeal addressed two grounds of appeal. First, it examined whether the employer has a duty to investigate before terminating employment for dishonest conduct. Second, it considered whether Saputo could rely on information it got after the dismissal, to justify the disciplinary measure.
The court’s analysis
The court began with the duty to investigate. It cited from a line of cases from the top courts of the UK and Canada standing for the principle that an employer can summarily terminate a “master-servant relationship” without first hearing from the employee. It noted that specific wording of an employment contract or legislation may present exceptions to the general rule, but that the present case was not exceptional.
It went on, stating that when courts have commented on an obligation to investigate prior to dismissal, “it is in a practical, cautionary sense rather than as a free-standing legal duty.” A flawed or inadequate investigation can seriously hamper the employer’s ability to prove just cause at trial; but it doesn’t bar the employer from trying.
This is the key takeaway from this case:
the court started with the well-known premise that employers run a risk in alleging just cause at the time of termination if they are later unable to prove it. Then this: it said that sometimes an inadequate investigation can result in punitive damage awards against employers for the way the employee is dismissed. Regardless, the law in Manitoba remains constant-there is no duty to investigate prior to termination.
The dénouement of this case is the court’s treatment of the after-acquired cause. Under this doctrine, an employer can justify a summary dismissal by relying on facts that it learns after the dismissal. Mr. McCallum argued that the doctrine did not apply in a situation where the employer conducted absolutely no investigation before terminating someone’s employment for cause. The Court of Appeal disagreed; it dismissed this ground of appeal since the trial judge did not even rely on the after-acquired cause to dismiss Mr. McCallum’s claim. Regardless, it echoed the trial judge: the law in Manitoba permits employers to rely on the after-acquired cause.
This case is a clear win for employers, at least in Manitoba. Dismissing an employee is always a move that carries legal risk, and a thorough and impartial investigation of wrongdoing is commonly seen as a first step toward mitigating that risk. As this case confirms, when an employer receives information that would normally amount to just cause, it could choose to bypass an investigation and fire the employee without looking into the allegations at all. While that strategy worked out for the employer in this case, keep in mind that it can backfire in a big way. A faulty or lacking investigation could make the task of proving just cause difficult or impossible, or it could form the basis for a finding of bad faith conduct. Relying on after-acquired cause is allowed in Manitoba, but in other provinces like Ontario, the law may not be so accommodating. Consultation with legal counsel when analyzing the facts of similar situations is always a good idea