Key Takeaways
- • McKinley v BC Telephone Company 2001 SCC 38: contextual and proportional approach — not a bright-line rule
- • Must ask: was the misconduct so fundamentally incompatible with the employment relationship that dismissal was the proportionate response?
- • ESA "wilful misconduct" standard for no-notice/no-severance is higher than common law just cause
- • Progressive discipline and documentation are critical — documented warnings show employee was on notice
- • Cumulative just cause: series of incidents together can justify dismissal even if each alone would not
- • Condonation (accepting the employee back / not disciplining promptly) can defeat a just cause claim
- • Employer has the burden of proof to establish just cause on a balance of probabilities
The McKinley Contextual Approach
The Supreme Court of Canada in McKinley v BC Telephone Company 2001 SCC 38 rejected a rigid categorical approach to just cause — the analysis is not simply "was there dishonesty?" or "was there insubordination?" — and adopted a contextual, proportional framework:
- Identify the nature and gravity of the misconduct — what exactly did the employee do, and how serious was the conduct?
- Consider the context and circumstances — the employee's length of service, seniority, disciplinary history, industry context, the nature of the employment relationship, and whether the employee showed remorse
- Assess proportionality — was summary dismissal (the most severe sanction) proportionate to the misconduct, or would a lesser sanction (warning, demotion, suspension) have been appropriate?
The question is whether the employee's conduct was incompatible with the continuation of the employment relationship, not whether the employee did something "bad" enough to be named in a particular category. Courts have found just cause for relatively minor dishonesty where trust was foundational to the role, and have denied just cause for serious misconduct by long-service employees without prior discipline.
Common Grounds for Just Cause in Ontario
| Ground | Key Considerations |
|---|---|
| Dishonesty / Fraud | Theft, falsification of records, falsifying time records, resume fraud. McKinley applied to dishonesty — gravity of dishonesty and position of trust are central. A single act of dishonesty directly relating to the employment may justify dismissal; minor dishonesty may not. Courts consider whether the employee held a position of trust, the value involved, and whether the dishonesty was isolated or systematic. |
| Insubordination | Wilful refusal to follow reasonable and lawful instructions of the employer. Must be a reasonable instruction, deliberately defied (not inability to comply). Repeated insubordination after warnings may justify dismissal. A single act of insubordination rarely justifies summary dismissal unless it was serious and in front of others or had significant consequences. |
| Chronic absenteeism / lateness | Pattern of excessive absences or lateness after repeated documented warnings and progressive discipline. The employer must show the employee was on notice that their job was at risk and was given a clear opportunity to improve. Innocent absenteeism (illness-related) requires different analysis — Ontario Human Rights Code accommodation duties apply. |
| Workplace harassment | Serious harassment, sexual harassment, bullying, or discriminatory conduct toward colleagues. Ontario Occupational Health and Safety Act (OHSA) imposes a duty on employers to maintain a harassment-free workplace. Single serious incidents of sexual harassment may justify summary dismissal. The employer must investigate properly before dismissing. |
| Conflict of interest | Competing directly with the employer, disclosure of confidential information to competitors, undisclosed financial interests in vendors or clients. The seriousness depends on the employee's seniority and the extent of the breach. |
| Incompetence / poor performance | Rarely justifies summary dismissal without prior progressive discipline and documented performance improvement plans. Employer must demonstrate: established performance standards, employee was clearly aware of them, given opportunity to improve, warned that job was at risk, and failed to improve after fair opportunity. |
Progressive Discipline: Why It Matters
Progressive discipline demonstrates that:
- The employee was aware their conduct was unacceptable
- The employee was given a clear opportunity to improve
- The employer gave the employee a chance before taking the most severe sanction
- The dismissal was proportionate — a considered last resort, not a first response
A typical progressive discipline sequence:
- Verbal warning (documented in HR file)
- Written warning (signed by employee)
- Final written warning explicitly stating continued employment is at risk
- Suspension (with or without pay)
- Termination for cause
Documentation is Critical
In just cause litigation, employers who cannot produce written warnings, performance improvement plans, and contemporaneous records of misconduct consistently lose. Courts are highly skeptical of a just cause dismissal where the only evidence of problems is the employer's testimony after the fact. Document every warning, every meeting, and every incident at the time it occurs.
Condonation: Losing the Right to Dismiss for Cause
Condonation occurs where the employer becomes aware of an employee's misconduct and either:
- Expressly forgives the misconduct (tells the employee the incident is forgiven and will not be held against them)
- Implicitly condones it by allowing the employee to continue working without discipline for an unreasonable period after learning of the misconduct
Where an employer condones misconduct, they lose the right to later use that incident as a basis for just cause. The employer who discovered theft but allowed the employee to continue working for three months before dismissing will find that the delay has condoned the misconduct. Act promptly on discovered misconduct or lose the right to rely on it.
ESA Wilful Misconduct Standard vs Common Law Just Cause
There are two distinct just cause standards in Ontario employment law that operate independently:
| Standard | Effect | Test |
|---|---|---|
| Common law just cause | No reasonable notice obligation; no common law reasonable notice pay | McKinley contextual proportional approach — misconduct fundamentally incompatible with employment |
| ESA wilful misconduct (s.2(1) O. Reg. 288/01) | No ESA minimum notice (1 week/year max 8 weeks) and no ESA severance (1 week/year for qualifying employees) required | Higher threshold: wilful misconduct, disobedience, or wilful neglect of duty that is not condoned by the employer — deliberate and intentional choice to disobey |
An employer may have common law just cause but still owe ESA minimum notice and severance if the conduct does not meet the higher "wilful misconduct" ESA standard. This is a common error — always assess both standards when advising on a just cause dismissal.
Employer's Burden of Proof
The employer has the burden of proving just cause on a balance of probabilities. This is not a criminal standard — but courts apply the civil standard with care given the seriousness of the allegation (particularly for dishonesty allegations — the more serious the allegation, the more cogent the evidence required to prove it on the civil standard).
The employer must prove both the underlying misconduct and that dismissal was the proportionate response. An employer who proves misconduct but cannot show proportionality (e.g., dismissed a 20-year employee for a single minor infraction without prior discipline) may still lose the just cause defence.
Frequently Asked Questions
Can an employer add new allegations of misconduct after dismissal to justify the termination?
Generally no — after-acquired cause. An employer who discovers additional misconduct after termination may rely on it to bolster a just cause defence (Manthey v Edmonton (City) [2002] 3 SCR 209), but only if: (a) the after-acquired cause itself was sufficiently serious to justify dismissal, and (b) the employer discovered it after the dismissal but before the wrongful dismissal trial. After-acquired cause cannot be used where the employer knew of the conduct before dismissal but chose not to rely on it.
Does just cause require a formal investigation before dismissal?
Best practice requires a proper investigation proportionate to the allegations — interview the accused employee, gather evidence, provide an opportunity to respond. Procedural fairness does not create just cause where none exists, but a failure to investigate may undermine just cause where the employer would have discovered exonerating information had they investigated properly. For serious allegations (theft, harassment), a documented investigation is essential.
What is the 'last straw' doctrine in Ontario?
The last straw doctrine applies in cumulative just cause cases — where an employee with a poor disciplinary history commits a further (possibly minor) incident that is the 'last straw' justifying summary dismissal. The doctrine requires: a documented history of prior misconduct and discipline; the employee was aware their job was at risk; and the final incident, viewed in context of the history, justifies the ultimate sanction. The last straw cannot be trivial — it must be genuinely related to the prior pattern.
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