Employers, and by extension human resources professionals, often have to make the tough decision of dismissing an employee with or without just cause. In some cases, employers may dismiss an employee without cause, only to discover new events afterwards which would warrant a with cause dismissal, otherwise known as after-acquired cause.

When an employer dismisses an employee without cause, the employer has an obligation to provide notice of the dismissal or pay in lieu of the notice. When an employer dismisses an employee with cause, the employer has no obligation to provide the employee any notice of the dismissal or pay in lieu of the notice. For this reason, just cause dismissal is often referred to as the “capital punishment” of employment law. In some cases, an employer may dismiss an employee without cause at first, only to later discover the employee was responsible for misconduct which would allow the employer to assert after-acquired cause.

After-acquired cause typically occurs when an employer dismisses an employee without knowledge of the employee’s misconduct at the time of dismissal, only to learn about the misconduct post dismissal. When an employer asserts after-acquired cause, the dismissal is treated as a with cause dismissal, and the employer accordingly has no obligation to provide the employee any termination entitlements.

The law

The roots of after-acquired cause trace back to the leading case of Lake Ontario Portland Cement Co. v. Groner [1961] S.C.R. 553, where the court found that the facts leading to a just cause dismissal could be acquired after the fact. In that case, the employee and employer reached a verbal employment agreed in or around September 1956, and in 1957 the employer provided the employee an undated written agreement which reflected the terms of the original verbal agreement. Unbeknownst to the employer, the employee unilaterally inserted a fictitious date of “October 15, 1956” as the start date of the written employment agreement, a fact the employer discovered only after terminating the employee’s employment.

In Craig v. CEO Global Network Inc., 2019 ONSC 3589, the Ontario Superior Court affirmed this notion and stated:

“a party whose conduct disentitles him or her from damages for termination ought not to be able to recover such damages by reason of the misconduct not having been discovered, or relied on, at the time of notice of termination”.

Accordingly, the courts have been consistent in explaining after-acquired cause and setting out the principles that define it.

Avoiding liability

If you are dealing with a potential after-acquired cause scenario, how do you make the right decision and limit your liability?

Based on the case law, there are certain key components that need to exist to be able to show after-acquired cause. First, the misconduct forming the subject of the after-acquired cause must not be known to the employer at the time of dismissal. If the misconduct is known to the employer prior to the dismissal, then the employer should assess whether a just cause dismissal is appropriate before terminating the employment relationship. The key reason for this is that if the employer knows about the misconduct but still dismisses an employee without cause, then there has been some level of condonation by the employer.

In addition, the subject matter of the after-acquired cause must relate to an event or events which occurred prior to dismissal. Therefore, an employer cannot rely on events which occurred after dismissal in order to establish after-acquired cause. This means that any events after the employee’s last day of work should not be used to claim after-acquired cause.

Next, the subject matter of the after-acquired cause must still be sufficient to justify a summary dismissal. When determining whether the misconduct in question justifies a with cause dismissal, it is relevant to consider the nature of the event, the degree of the misconduct, whether any mitigating factors or extenuating circumstances exist, and whether the employee has a prior history of misconduct. There is no one-size-fits-all approach to determining whether cause exists, and a holistic and contextual analysis of each incident is necessary. Some cases of cause will be more obvious and apparent while some will not. Failing to properly assess if cause exists or not can lead to potential litigation by the employee for wrongful dismissal, in addition to potential aggravated and punitive damages depending on other factors.  

Lastly, when faced with an after-acquired cause scenario, it is important to act quickly and immediately establish that there is after-acquired cause. Where an employer delays taking any sort of action, the delay can result in condonation by the employer, and reduce the probability that an after-acquired cause allegation can survive. The longer an employer waits, the more difficult it becomes to claim after-acquired cause.

Conclusion

Just cause dismissals are rarely straight-forward and should always be handled carefully by any employer. This is especially true for after-acquired cause, which can present employers with yet another challenge in terminating an employment relationship.

For these reasons, it is helpful to always seek advice when terminating an employee’s employment and when assessing any recent events of misconduct that may have happened.