Dhatt v. Kal Tire: Another (Difficult) Lesson in “Just Cause” for Employers

By Andres Barker, Lawyer.

dhatt1Within the field of employment law, the topic of “just cause” gets a lot of attention from legal bloggers. Our blog page alone offers several different posts on the subject.

Part of the reason for this is the significant hurdles employers face in proving they had just cause to fire an employee (and therefore avoid giving the employee any notice or severance), and the interesting judicial decisions that result when these employers have to defend their actions in court.

The decision in Dhatt v. Kal Tire Ltd., is a recent example of a just cause dismissal gone (horribly) wrong. The case provides a stern warning to employers about what can happen if they dismiss an employee for cause without a clear understanding of all the facts.

The Case of Dhatt v. Kal Tire

The plaintiff employee in Dhatt was an automotive mechanic who worked for the employer and its predecessor company for 23 years. In 2010, the employer moved to a nearby location and the employee participated in the move by relocating certain equipment.

During the move, the employee took and kept two items (a battery charger and a metal pole) that he believed the employer had discarded as garbage. When the employer learned what happened to these items, Mr. Dhatt was fired for taking them. Following his dismissal, Mr. Dhatt fell on hard times and became depressed, abused alcohol, and was hospitalized for threatening suicide. He later sued his ex-employer for wrongful dismissal, arguing that there had been no cause for his dismissal.

At trial, the employee testified that he was upfront at the time about his interest in taking the battery charger and metal pole for himself, and that no one objected to his doing so. The court accepted his evidence, finding that the employee did not act dishonestly when he removed the two items, and found that if he had intended to steal them, he would not have expressed interest in taking them, or been so forthright when questioned at the time. The court concluded that the employer did not have just cause to fire Mr. Dhatt and, accordingly, that he had been wrongfully dismissed.

The Damages Award

While, on the surface, this case seems like a routine disposition of a fairly weak just cause argument, its real interest lies in the damages awarded to the employee, which fell under three separate headings:

  • Notice period. First, in finding that Mr. Dhatt was wrongfully dismissed, the court awarded him damages equal to a notice period of 21 months, which is unusually high given the nature of his job. Typically, notice periods above the 18 month mark are awarded to people who hold senior management positions.
  • Disability benefits. The court also awarded Mr. Dhatt compensation for the loss of long term disability benefits, after finding that he became disabled during the 21 month notice period and, but for the fact that he was fired, he would have received these benefits.
  • Aggravated damages. Finally, the court awarded Mr. Dhatt an additional $25,000 in aggravated damages, finding that the manner in which he was dismissed caused him mental distress over and above the normal distress a person would experience upon losing his or her employment. The employer’s behavior that contributed to this finding included its failure to conduct an adequate investigation and provide Mr. Dhatt time to respond to the allegations; suspending him without considering any information provided during the investigation; and dismissing him to provide an example.

Implications for Employers

The Dhatt case offers several important lessons for employers:

      1. There is always a large risk in firing someone for cause where there is a

plausible explanation

      for the employee’s behavior. Even if you believe an employee was acting dishonestly, it’s crucial to consider how a court would view his or her evidence if the employee decided to challenge a “just cause” dismissal.

2. When you conduct a workplace investigation, make sure you do so with good intentions and an open mind, rather than viewing the final result as a foregone conclusion.

3. Finally, in many cases, an employer will dismiss an employee (i.e. whether or not there is cause) before finalizing the employee’s separation package. The fact that the employee will not have short or long term disability insurance coverage during the period between the firing and reaching a settlement is a risk to employers that is often ignored. If a settlement is not arrived at quickly, the employee could suffer an accident or illness in the interim that could force the employer to stand in the shoes of the insurer, resulting in potentially massive financial liability, over and above any liability for the dismissal itself.

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