Mr. Smith was a sales manager for the defendant Diversity
Technologies Corporation ("Diversity"). He had a record
of being an exemplary employee. He had been employed by a company
called Drillwell for 16 years before it was sold to Diversity and
he worked at Diversity another four years until he was fired on
October 14, 2011.
Diversity alleged that Smith had been terminated for just cause
for insubordination. Smith had been the primary contact for a
particular client which, by September 2011, owed Diversity about
$100,000. At that point, Smith's immediate superior instructed
him to make sales to that customer in future only if they were paid
for immediately by cash or credit card. Subsequently, his superior
told him that no sales should be made to that customer at all
because Diversity was going to be suing the customer to recover the
Nevertheless, Mr. Smith did take an order from the customer of
just over $1,000 without telling his superior. He accepted a cheque
from the customer to pay for the order.
When this behavior was discovered by Diversity, Smith was
Smith had entered into an employment contract providing for
termination by the employer upon payment of one year's salary
which in this case was $100,000. In fact, Smith obtained comparable
employment within a matter of weeks and the Court found that he had
suffered no loss.
Not surprisingly, Smith put forward a different version of
events relating to his instructions concerning that customer. He
denied that he had willfully disobeyed his employer or that he had
been insubordinate in any way.
Smith made a claim for the $100,000 severance payment and moved
for summary judgment. Diversity insisted that Smith had been fired
for cause and at worst, it was entitled to a trial to decide the
The motions judge had no difficulty dealing with the matter
without requiring a trial. The judge considered that even though
the versions of the story told by both sides were different, he was
in an excellent position to rule on the matter even accepting
Diversity's version of the events, given the law relating to
termination for insubordination.
On the facts of cases in which insubordination was held to
constitute just cause for immediate termination, the Court noted
that employers have the right to determine how business is to be
conducted and employees are obliged to follow those instructions.
Where an employee fails to follow lawful orders of his employer, he
will be found to have disregarded an essential condition of his
employment and this constitutes cause for immediate
However, as this case demonstrates, the issue is not necessarily
quite so clear cut. In this case, the Court considered that prior
to the incident in question, Smith's conduct as an employee had
been beyond reproach. The amount in issue was trifling,
particularly in comparison to the amount of the customer's
outstanding account. Because it was paid for immediately, the
additional order did not increase the debt. Given Smith's
length of service and impeccable record, Diversity should have met
with Smith, pointed out that his actions were in violation of the
new company policy relating to this customer, and provided him with
a properly-documented written warning. In proper context, his
actions could not be considered as amounting to willful
disobedience or insubordination.
The Court concluded by indicating that even if Smith's
conduct could be described as insubordinate, "it was not of a
magnitude sufficient to justify termination." Had Smith
continued this behavior, Diversity would have had grounds for
termination but in this case, its actions in terminating
Smith's employment were not justified.
On the question of damages, it was clear that Smith had
mitigated his damages completely. However, given the terms of his
employment agreement, Diversity was ordered to pay Smith $100,000
representing the amount payable under the employment contract.
This case demonstrates that before an employer terminates an
employee without notice for insubordination, the employer must
consider the context of the insubordinate act. An employer cannot
simply seize on one instance of an act which might be considered
insubordinate in some technical way to justify terminating the
employment of an employee of long standing who has an otherwise
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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