Canada: Discipline and Discharge

Last Updated: December 19 2014
Practice Guide by Blaney McMurtry LLP

Many companies, especially in unionized environments, have adopted progressive disciplinary policies. These policies have two functions. First, they are used to correct unsatisfactory performance in the early stages before it becomes a serious problem. Second, if necessary, it can be used to support the decision to terminate an employee for just cause.

The threshold for establishing grounds for just cause is very high. Most offences will not lead to automatic grounds for termination for just cause. In order to establish those grounds, an employer will need to show that it has taken steps to correct the behaviour prior to a culminating incident. In this regard, clearly establishing that an employee has been disciplined in the past; given an opportunity to remedy the offending conduct; and warned of the consequences of failing to remedy the conduct is essential in the ordinary course to justify a just cause termination.

Progressive discipline policies also have the advantage of setting the standards by which all employees are treated, and thus ensuring a level of consistency in the disciplinary process.

The standard progressive disciplinary policy has the following steps:

  1. Verbal warning;
  2. Written warning;
  3. Suspension* or final written warning;
  4. Termination

*Care must be used when making a decision to suspend an employee outside of a union environment. Unless the disciplinary process is expressly, or impliedly part of an employee’s employment contract, an employee who is suspended could claim to have been constructively dismissed, depending upon the circumstances.

In those situations where an employer cannot rely on the right to suspend an employee for misconduct, employers usually use a final written warning which clearly states that the next offence will lead to termination for cause. Alternatively, employers may use a performance improvement plan whereby employees are given a timeframe to improve with counselling and warned that failure to comply with the performance improvement plan will lead to termination for just cause.

A standard progressive disciplinary policy is attached.


Dismissal for just cause can only be established if there has been a fundamental breach of the terms of the employment contract.

In cases of termination for just cause, an employee may be dismissed without notice or pay in lieu of notice. However, whether an employee may be dismissed immediately for misconduct will depend on the nature of the conduct. In most instances, the misconduct must be objectively significant and not trifling and the employee will have to be warned (usually several times with progressive severity) of the consequences of future infractions before an employer may terminate the employee for just cause.

The threshold for establishing just cause is very high. For example, in McKinley v. B.C. Tel, [2001] 2 SCR 161,the Supreme Court of Canada held that the employer did not have just cause to terminate an employee for dishonesty in those particular circumstances. The Supreme Court of Canada noted that whether an employer has just cause to terminate an employee for dishonesty will depend on whether the employee’s dishonesty has given rise to a breakdown in the employment relationship.

It should also be noted that even though an employer may have just cause at common law to terminate an employee the employer may be obliged to pay the employee or give the employee notice, termination pay or severance pay under the applicable employment standards legislation. The employment standards legislation in some provinces only allows an employer to deny payment or notice to employees who are engaged in willful misconduct or wilful neglect of duty. It is therefore always prudent to check the applicable employment standards legislation before making the decision to terminate for just cause.

Some of the grounds for termination based on just cause are:

  1. Incompetence

Normally, an employer will have to warn an employee of their failure to meet acceptable standards, set out the standards that are expected and give an employee a reasonable time to improve. An employer will also have to provide the necessary support or training before terminating them for incompetence. If the failure to meet the standards is not the fault of the employee or there are mitigating circumstances (such as a disability), an employer will not be able to rely on incompetence as a basis for termination.

  1. Conduct outside normal working hours

Normally, an employee’s conduct outside of normal working hours will not constitute grounds to terminate the employee for just cause unless the employer can establish that the employee’s conduct is wholly incompatible with employee’s discharge of his duties for the employer or causes damage to the employer’s reputation.

  1. Harassment/Sexual Harassment

Most employers now have harassment policies which caution employees that a violation may result in the termination of their employment. As with other types of misconduct, a decision as to whether to terminate for just cause will depend on factors such as the nature of the misconduct, whether the employee shows remorse and the length of service of the employee and whether the employee has been disciplined for similar conduct in the past.

  1. Dishonesty

The Supreme Court of Canada has held that in determining whether just cause for termination on the basis of dishonesty exists the employer must have regard to the nature of the business, the level of seriousness of the dishonesty as well as its impact on the employer’s business.

  1. Disobedience/Insubordination

If an employee regularly uses language which is inconsistent with the employment relationship or refuses to respect the authority of management, the employer may have grounds to terminate for just cause. This is also a situation where progressive discipline should be used prior to termination. It is also recommended that you find out from the employee whether there is any other factor causing the defiant behaviour before making a decision to terminate.

One act of disobedience will not normally give rise to grounds for termination for cause. However, if there is a repeated failure to follow the employer’s direction, policies or procedures, grounds for termination for just cause may exist and employer’s should ensure that any directions given to the employees are clear and unequivocal.

  1. Revelation of Character

If an employee has engaged in behaviour which shows that he is an untrustworthy character, an employer may have grounds to terminate for just case, especially in situations where an employee is in a position of trust.

  1. Lateness and Absenteeism

Employers must be able to satisfy a court that the employee’s level of absenteeism far exceeds that of the average employee and that there is no reasonable expectation that the level of attendance will improve in the future.

Absenteeism because of a disability will not normally be grounds for termination for cause. However, even when employees are absent because of a disability, employers are entitled to a reasonable amount of information confirming that the employee is unable to attend work because of illness or accident, that they are undergoing treatment and whether they are likely to return in the future.

When calculating the level of absenteeism it is important not to include leaves of absence permitted by statute, such as, maternity leave, family medical emergencies and jury duty.

Employers are cautioned to seek legal advice before terminating anyone based on a frustration of contract because of absenteeism.

  1. Alcohol or Drug Use

Alcohol or drug use during working hours is certainly grounds for discipline and may be grounds for termination for just cause depending on the impact upon the employer’s business. However, addiction to drugs or alcohol is considered a disability, and thus an employer has an obligation to accommodate these disabilities by at minimum, giving employees a leave of absence to seek treatment.

  1. Conflict of Interest

Employees have an obligation to avoid actual or potential conflicts of interest in the course of their employment. Some conflicts are so serious as to justify immediate dismissal for cause. For example, if an employee were to carry on and divert business in direct competition with their employer a fundamental breach of contract would likely be established.

  1. Disciplinary Demotion

In a non-union situation, an employer has no right to discipline by demoting the employee, unless it is a term of the employee’s contract that he/she is subject to demotion for misconduct.

  1. Condonation

One of the biggest impediments to arguing a successful case for just cause is the doctrine of condonation. If an employer has allowed an employee to engage in misconduct repeatedly without taking any steps to address and remedy the misconduct, it can be argued that the employer has condoned the misconduct. In this event, an employer will have to re-establish the standards of behaviour, clearly communicate them to the employee and give the employee an opportunity to mend his/her ways before termination.

A draft termination letter for just cause is attached.

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

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