By Heather Hettiarachchi, Lawyer.
Employers know that firing or disciplining an employee for just cause is not easy, particularly where the alleged cause is poor performance. This is because the employer has to document the problem or problems, provide warnings and prove that the employee clearly understood that his/her job was on the line if he/she did not improve.
Haddock v. Thrifty Foods
Haddock v. Thrifty Foods (2003) Limited, 2011 BCSC 922 (“Haddock”), a case from the British Columbia Supreme Court, highlights the issues that employers must be mindful of when terminating an employee for cause.
In Haddock, the Plaintiff had worked in various positions for the employer for approximately 16 years and at the time of firing, was a grocery store department manager. The Plaintiff had received very good reviews from the employer and was a good employee until 2002, at which time personal issues began to affect his work performance and he started abusing alcohol. In July 2002, the Plaintiff was suspended for four days without pay for being late on four occasions. Commencing late 2002, the employer made several attempts to arrange counselling for the Plaintiff as it became very concerned about his health and well-being. Finally, in October 2003, the Plaintiff was given a warning letter, which stated in part: “… your private life has been interfering with the effective performance of your duties, to the point where you are now seriously at risk of losing your job ”. The employer also attached clear and specific performance expectations to the letter. The letter emphasized that the Plaintiff “must meet the required level of performance, or face the consequences, which may include demotion or dismissal”.
Unfortunately, things did not improve and in November 2003, the Plaintiff went on short-term disability and thereafter entered into an alcohol treatment program. Following another incident where the Plaintiff was intoxicated at a softball tournament in the summer of 2004 (eight months after his last warning), the employer decided to demote the Plaintiff to a clerk position, as a disciplinary measure. The Plaintiff agreed to accept the demotion on the condition that he would be placed at one of two locations, out of a possible eight or nine. However, the employer was unable to accede to this request.
During the ensuing period, the Plaintiff was off work on vacation and thereafter on short term disability. The employer made several attempts to contact the Plaintiff, and when the Plaintiff failed to respond, fired him.
The Plaintiff claimed that he was entitled to damages for wrongful dismissal as the employer had constructively dismissed him by demoting him. In its defence, the employer argued that based on the performance issues and prior warnings issued to the Plaintiff, it was entitled to demote the Plaintiff or fire him for just cause.
The issues considered by the court included the following:
- Was Mr. Haddock constructively dismissed by the employer’s decision to demote him?
- Did the employer adequately warn Mr. Haddock such that its decision to demote him was justified?
- If Mr. Haddock was constructively dismissed, should Mr. Haddock have accepted the clerk position that was offered to him, in mitigation of his lost wages?
On the first issue, the court found that the demotion to the clerk position, which would have resulted in approximately a 16% decrease in Mr. Haddock’s hourly rate and a decrease in prestige, was clearly a constructive dismissal. The court also noted that even though the Plaintiff did not initially protest or argue about the demotion, failure to protest at the time did not preclude him from later claiming damages for constructive dismissal.
On the second issue, the court held that the employer had failed to adequately warn the Plaintiff. In coming to that conclusion, the court cited with approval the elements of the duty to warn as set out in Hennessy v. Excell Railing Systems Ltd., 2005 BCSC 734, para. 12. In that case, the court noted that an employer must show that:
- it established reasonable objective standards of performance;
- the employee failed to meet those standards;
- the employee was warned that (a) the employee failed to meet those standards; and (b) the employee’s position would be in jeopardy if the employee continued to fail to meet them; and
- the employee was given a reasonable time to correct the situation.
The court noted that in Mr. Haddock’s case, the employer had established a reasonable objective standard of performance in its 2003 letter and that the warnings that were given to Mr. Haddock were sufficient, at the time they were given, to “bring home” to him that his job was in jeopardy. However, the court held that the employer’s warnings were not current at the time of the Plaintiffs dismissal, i.e., the warnings had lapsed with the passage of time and the employer should have renewed its warning to Mr. Haddock prior to dismissing him.
In concluding that the warnings were not current, the court took into consideration the fact that the employer had not given any notice to Mr. Haddock about issues after he returned from his rehabilitation program, and that this resulted in mixed and ambiguous signals being given to him about the importance of the standards that had previously been set.
On the third issue, the court agreed with the employer (despite the reduction in salary and prestige) that the Plaintiff had failed to mitigate his loss by refusing to accept the offer of the clerk position at the employer’s Admirals store. Based on this failure to mitigate, the court reduced the damages owed by the employer to the Plaintiff by what he would have earned in the clerk position.
Lessons for Employers
1. Employers who seek to terminate employees for poor performance should follow the four step process on warnings noted above.
2. Warnings given to an employee must be “current” in order for an employer to rely on the warning in order to terminate.
3. Regular reviews and ongoing feedback during the process is critical.
4. Demoting an employee could result in constructive dismissal, thereby exposing an employer to damages.
5. Depending on the facts, an employer may be able to mitigate its severance costs by offering the employee another position even if, as in Haddock, the new position constitutes a demotion.