Skip to content

Termination for just cause: do employers need to investigate? McCallum v Saputo, 2021 MBCA 62

Kathleen Nash

In a recent decision, McCallum v Saputo,¹ the Manitoba Court of Appeal confirmed that an employer does not have a “free-standing, actionable duty” to investigate an employee’s conduct prior to dismissal.² The Court of Appeal held that an employer’s right to terminate for just cause is not necessarily compromised by a failure to investigate prior to dismissal; however, without conducting a thorough investigation, employers may struggle to justify termination for just cause and may attract an award of punitive damages for the manner of dismissal.

Background

The Plaintiff worked as a sales representative for Saputo Dairy Products. One of his tasks was to visit stores that sold Saputo cheese, identify what was unsaleable, determine whether the store would get a credit (depending on the reason it was unsaleable), document his findings and have them approved by a designated store employee. Once completed, the unsaleable cheese would be disposed of by store employees.

On August 21, 2015, Mr. McCallum visited a Superstore in Winnipeg, owned by Loblaws, and removed 14 packages of cheese that he claimed were unsaleable. Mr. McCallum then removed the cheese from the store and claimed that he would dispose of it himself due to complications with the store compactor. At his car, Mr. McCallum was stopped by store employees for removing product from the store without purchasing it.

On September 1, 2015, Saputo terminated Mr. McCallum’s employment for cause, in writing, without knowing the full details of his misconduct. At trial, it was determined that no effort was made by Saputo to interview Mr. McCallum or to get a statement from any of the Superstore employees present at the time of the incident prior to terminating him. Instead, Mr. McCallum was presented with a termination letter and was informed that Loblaws had provided a letter to Saputo banning him from all of their stores.
The trial judge upheld the dismissal, concluding that the circumstances known by Saputo on September 1, 2015 gave rise to a fundamental breakdown in the employment relationship and entitled Saputo to terminate Mr. McCallum’s employment without further investigation. The trial judge found that Saputo had a duty to treat the Plaintiff fairly and honestly based on the information that it had, but it did not owe him a duty to investigate.

The Court of Appeal’s decision

On appeal, Mr. McCallum argued that the case law established a duty to investigate before terminating an employee for dishonest conduct, relying on the Manitoba Court of Appeal’s previous decision in Middelkoop v Canada Safeway Limited.³

The Court of Appeal disagreed with Mr. McCallum’s interpretation of Middelkoop and confirmed that there is no duty on private sector employers to accord procedural fairness in deciding to terminate an employee nor a duty to entertain a request for reconsideration. Like most legal principles, this is subject to exceptions, including the terms of an employment contract or the relevant statutory framework.

The Court of Appeal continued by stating that where courts have commented on an obligation to investigate prior to dismissing an employee, “it is in a practical, cautionary sense rather than as a free-standing legal duty.” While flawed or inadequate investigations are sometimes the reason why an employer is unable to muster sufficient credible evidence to prove just cause at trial, this is a risk that employers are allowed to take.

Mr. McCallum further argued that Saputo’s reliance on information obtained after the termination, including that some of the cheese he removed from the store was from a competitor brand and that some was saleable, “set a dangerous precedent” by allowing an employer to rely on facts obtained during discovery to justify termination after the fact. The trial judge and Court of Appeal both disagreed, finding that an employer can rely on after-acquired cause to justify a dismissal, unless the employer both knew of the conduct and condoned it. The Court of Appeal upheld the trial judge’s finding that Saputo had sufficient information to justify the termination at the time of termination and that, even if the trial judge had made a finding of after-acquired cause, the Court of Appeal would not have disturbed this conclusion.

Ultimately, the Court of Appeal held that an employer can summarily terminate a “master-servant relationship” without first hearing from the employee or conducting a thorough interview regarding the incident. In this case, as none of the exceptions applied, the Court of Appeal confirmed that Saputo had the right to terminate Mr. McCallum without conducting a thorough investigation first. Mr. McCallum’s dishonest conduct, in taking cheese from the store without authorization, constituted just cause for dismissal and therefore the termination was upheld.

Key takeaways

The Court of Appeal’s decision in McCallum v Saputo clarifies that the common law does not require private sector employers to investigate an employee’s conduct if they believe they have sufficient evidence to support an employee’s termination. However, the burden remains with the employer to prove that just cause existed if the termination is challenged, so employers need to be certain that they can prove just cause existed if necessary. If an employer is unable to prove just cause based on allegations or insufficient findings, they are likely to be subject to damages for wrongful dismissal and can attract punitive damages or any other penalty the Court deems necessary.

While there is no “free-standing actionable duty to investigate” prior to termination, it is still best practice to do so for two main reasons:

  • An investigation may prevent an employer from mistakenly concluding that the conduct warrants dismissal and avoid a wrongful dismissal claim. For example, the employee may have a reasonable justification for their actions and lead to the conclusion that no discipline is warranted.
  • The employee’s conduct may make the employer’s case for cause even stronger. For example, if the employee is being investigated for theft or dishonesty, and they lie during the investigation, the employer may have an even stronger basis for arguing the employment relationship is irreparably harmed.

It is important to note that Mr. McCallum was not a unionized employee and therefore his employment was governed by the common law. Collective Agreements in unionized workplaces may impose stricter conditions on an employer prior to imposing discipline or discharging an employee for cause. Employers with unionized workforces need to carefully consider their applicable collective agreement to determine whether an investigation is required.

In the Atlantic provinces, as in Manitoba, there is no statutory duty to investigate an employee’s conduct prior to termination. However, this does not remove the employer’s obligation to prove just cause on a balance of probabilities in wrongful dismissal cases; if just cause cannot be proven at trial due to a lack of evidence, an employer may face significant consequences. While there is no free-standing duty to investigate misconduct, the employer has a duty to act fairly towards the employee when terminating for cause and, to avoid potential punitive damages for the manner of the dismissal, it is advisable for an employer to determine whether it has evidence of the misconduct prior to terminating the employee.

Further, in New Brunswick, employers are statutorily obligated to give reasons in writing when dismissing an employee for cause. The purpose of this provision is to ensure that employees have clear and full information regarding their termination. This statutory provision prevents an employer from relying on new grounds for dismissal after the employee has been terminated if the employer knew about the misconduct prior to termination. If the employer did not know of the prior misconduct, then this statutory obligation does not prevent the employer from relying on after-acquired cause.¹º Employers should therefore carefully draft termination letters, when the dismissal is for cause.

By contrast, there is no similar provision in Nova Scotia, Prince Edward Island, or Newfoundland and Labrador requiring the employer to set out the reasons for termination when dismissing an employee for cause. However, it is advisable to set out the reasons for termination so that the employee is aware of the reasons for his or her termination.

For federally-regulated employers, there is likewise no statutory duty to investigate prior to termination. However, the Canada Labour Code¹¹ protects federally regulated employees (excluding managers), who have completed at least 12 months of continuous employment with the same employer, from “unjust dismissal”.¹² An adjudicator under the Canada Labour Code has broad remedial powers, including the power to order reinstatement with compensation for lost wages, if an employee has been subject to an unjust dismissal. It is therefore imperative that federally-regulated employers are able to justify the dismissal of an employee or they may face significant consequences. An investigation into an employee’s conduct, even if just a basic inquiry, is therefore highly recommended for federally-regulated employers.

In short, though failing to investigate and give reasons may not be fatal to an employer during an action for wrongful dismissal, it may be far more difficult to prove that just cause existed at the time of termination. Therefore, it is best practice for employers to investigate matters, at least on a preliminary basis, prior to termination to ensure that sufficient reasons and evidence exist to justify terminating the employee for just cause. An investigation may also help an employer keep honest and valuable employees who justify their conduct or could help bolster an employer’s arguments for just cause.


This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Labour and Employment group.

 

Click here to subscribe to Stewart McKelvey Thought Leadership.


¹ McCallum v Saputo, 2021 MBCA 62. All paragraph references in this article refer to this decision unless otherwise stated.
² 
Para 1.
³ Middelkoop v Canada Safeway Limited, 
2000 MBCA 62.
⁴ 
Para 17-20.
⁵ 
Para 22.
 Para 16.
 
Para 35.
 Employment Standards Act, 
SNB 1982, c E-7.2. at s. 30(2).
 
Crouse v Parkway Fitness Inc. (Nubody’s Fitness Centre), 2009 CanLII 47486 (NB LEB).
¹º 
Doucet v Spielo Manufacturing Inc, 2011 NBCA 44 at paras 85 and 88.
¹¹ Canada Labour Code, RSC 1985, c L-2.
¹² 
Canada Labour Code, Part III, Division XIV – Unjust Dismissal.

SHARE

Archive

Search Archive


Search
Generic filters

 
 

Changes to job classifications and immigration impacts

November 23, 2022

By Brittany Trafford and Michiko Gartshore On November 16th, 2022 the Federal Government switched to the 2021 National Occupational Classification (NOC) structure from the prior 2016 version. The NOC is Canada’s national system used to…

Read More

Nova Scotia: Canada’s emerging immigration hub

November 17, 2022

As part our presenting sponsorship of the Halifax Chamber of Commerce’s Annual Fall Dinner, we are pleased to present a series of thought leadership articles highlighting the dinner’s themes of immigration, recruitment, and labour market…

Read More

Bill C-27 – Canada’s proposed Artificial Intelligence and Data Act

November 16, 2022

Kevin Landry, Charlotte Henderson, and James Pinchak The governance of Artificial Intelligence (AI) is entering a new era since the Canadian Government first announced a digital charter in 2019 as part of a larger-scale overhaul…

Read More

Discovery: Atlantic Education & the Law – Issue 11

November 14, 2022

We are pleased to present the eleventh issue of Discovery, our very own legal publication targeted to educational institutions in Atlantic Canada. With a new academic year well underway, the Atlantic Region is finally seeing…

Read More

The Winds of Change (Part 5): Atlantic Canada poised to benefit from clean energy tax credits

November 10, 2022

By Jim Cruikshank, Graham Haynes, and Dave Randell On November 3, 2022, the Honourable Chrystia Freeland delivered the Federal Government’s Fall Economic Statement (“FES”).  The FES included a number of tax related announcements, including further…

Read More

“Constructive Taking”: Consequences for municipalities from the Supreme Court of Canada decision in Annapolis Group Inc. v. Halifax Regional Municipality

November 10, 2022

By Stephen Penney, Joe Thorne, and Giles Ayers A new decision from the Supreme Court of Canada, Annapolis Group Inc. v. Halifax Regional Municipality, 2022 SCC 36 (“Annapolis”), has changed the law of constructive expropriation across the…

Read More

Attract & Retain: Nova Scotia taps foreign healthcare workers to fill labour shortages

November 10, 2022

As part our presenting sponsorship of the Halifax Chamber of Commerce’s Annual Fall Dinner, we are pleased to present a series of thought leadership articles highlighting the dinner’s themes of immigration, recruitment, and labour market…

Read More

The rise of remote work and Canadian immigration considerations

November 3, 2022

As part our presenting sponsorship of the Halifax Chamber of Commerce’s Annual Fall Dinner, we are pleased to present a series of thought leadership articles highlighting the dinner’s themes of immigration, recruitment, and labour market…

Read More

The future of express entry: Targeted draws to meet Canada’s economic needs

November 2, 2022

By Sara Espinal Henao Since its initial launch in January 2015, Express Entry has been a pillar of Canada’s immigration system. Recently passed amendments to the Immigration and Refugee Protection Act (IRPA) promise to drive…

Read More

Filling labour gaps with foreign workers: What Canadian employers need to know

October 28, 2022

By Brittany Trafford It is no secret that employers in Atlantic Canada are struggling to fill labour gaps. In June 2019 the Atlantic Canada Opportunities Agency (ACOA) published a report[1] indicating that the overall labour…

Read More

Search Archive


Search
Generic filters

Scroll To Top