Written by: Fahad Malik Intro The central issue of the case is whether a without-cause dismissal can later be reclassified as a for cause dismissal when the material circumstances were known to the employer before the dismissal. J Lema found it cannot. The first half of the decision deals with the reclassification of a without-cause notice. The second half of the decision goes to determining a reasonable-notice period, and the presence of aggravated damages. The Plaintiff was entitled to 14 months as a reasonable notice period, and credited the Defendants for the payments they had already made to the Plaintiff. Nothing in the actual dismissal of the Plaintiff warranted aggravated damages. The focus for the remainder of this summary will be on the first half of the decision. J Lema found that the Defendant Board dismissed the Plaintiff without-cause and did not provide any reasons at the time of the dismissal. Because no reasons were provided, the Board had no basis to argue later that it had made a mistake. The Board did not come into any new information, post termination, bearing on the existence of cause at the time of termination and the Board did not explain why it would have a freestanding right to recharacterize in the present circumstances. Facts On March 16, 2018, the Defendant, The Council for the Advancement of African Canadians (“AC”), dismissed the Plaintiff, Mr. Tesfaye Ayalew, its executive director of 10 years, without-cause. The dismissal followed a two-month investigation into allegations that Mr. Ayalew had mistreated three different employees or former employees. The primary complainant was the AC’s former accountant who had resigned in late 2017. Two other employees came forward with similar allegations over the course of the investigation. The Defendants issued the Plaintiff a letter on March 16, 2018, outlining that the termination was without-cause, and stating that the Plaintiff would receive eight weeks’ severance in lieu of notice. The letter also offered a further one month’s salary if Mr. Ayalew agreed to release the Defendant from all claims relating to his dismissal. The Plaintiff did not sign the release and later sued for additional severance. The AC defended based on just cause. Overview of Defendant’s arguments The Defendant advanced two main arguments in favour of reclassifying the grounds for their dismissal of the Plaintiff, as well as a general legal rights argument. First, the Defendant argued that it relied on a report prepared by investigators it had hired, and that the report had mistakenly cleared the Plaintiff of wrong-doing. The Defendant only learned of this mistake after they had dismissed the Plaintiff without-cause. Second, the Defendant argued “that it acquired post-termination information reflecting just cause for dismissal.” This new evidence was alleged to have come to the attention of the Board following the revelation of the mistaken report. Finally, there was a general argument of the existence of a freestanding right for an employer to later recharacterize its grounds for dismissal if just-cause existed at the time of the termination. The Defendant argued that this right exists independent of a mistake or later discovered information. Each of the arguments were rejected. The first two for want of a factual foundation and the third for want of a legal foundation. The dismissal was on a without-cause basis The key hurdle for the Defendant to overcome was the clear evidence that the dismissal had initially been without-cause, and that it was only deemed to have been for cause in response to the legal action. J Lema relied on multiple evidentiary sources to come to this conclusion. He considered the minutes of the Defendant Board meeting ahead of the dismissal, the language of the termination letter, the lack of reasons given in the termination letter, the immediate effect of the termination, and the payment of 8 weeks severance in compliance with the Employment Standards Code (“ESC”). The meeting minutes reflected that the Board had intended to dismiss the Plaintiff on a without-cause basis, as they held a vote to that effect. The vote was explicitly for a without-cause termination. The letter to the Plaintiff clearly stated that the dismissal was without-cause. The letter did not provide any reasons for the termination, even though it was issued during an ongoing investigation into allegations against the Plaintiff. The letter stated that the termination was effective immediately and made no reference to any attempts to gather further information into the allegations against the Plaintiff. The most compelling evidence of a without-cause dismissal is the fact that the Defendant took steps to convey in its letter to the Plaintiff that it was in compliance with the ESC, by providing eight weeks severance in lieu of notice. The ESC clearly provides in s 55(2) that termination notice is not required where just-cause exists. Having established that the dismissal had in fact been without-cause, the Defendant bore the onus of showing that it could later assert a just-cause, essentially “chang[ing] horses.” The Court found that they had not met their burden. Mistaken classification defence invalid The central argument advanced by the AC was that they had mistakenly relied on the investigator’s all clear report when dismissing the Plaintiff and paying him his severance. The Board received an interim investigator’s report on March 15, 2018, and the final report on March 23, 2018. The Board was only able to draw from the interim report to make its decision to dismiss the Plaintiff. Both the final and interim reports were consistent, however, in that they found no evidence to corroborate the primary allegation against Mr. Ayalew, filed by the accountant. The reports concluded that Mr. Ayalew had not abused, harassed, or otherwise mistreated the former accountant. The Board Chair for AC, its sole witness, stated in cross examination that the board did not rely on either report when deciding to terminate the Plaintiff’s employment. The Board did not accept the conclusions that were reached in the reports. The Board’s decision not to rely on the report undercuts their defence of mistake as pled. The Board did not offer up any reason for its decision to terminate without-cause. Nothing in the Board minutes reflects the reasoning of the Board in coming to its decision, nor did the chairman offer such information up during trial. The Board failed to establish that it had mistakenly dismissed without-cause. In order to advance the position, it had the practical onus to provide evidence of the asserted mistake. It did not meet its burden. The AC relied on caselaw that did not support its position that it is able to disavow its without-cause approach. The Defendants relied on two cases to support its position that it should be allowed to recharacterize its decision for dismissal: Foerderer v Nova Chemicals Corporation, 2017 ABQB 349 (“Foerderer”), and Lake Ontario Portland Cement v Groner , [1961] SCR 553, 28 DLR (2d) 589 (“Lake Ontario”).[33] Neither case deals with “a without-cause decision later sought to be recharacterized as for cause, let alone on the basis of known-before-dismissal information and let alone accompanied by the payment of severance.” No after acquired information The Defendants failed to establish in fact that there was any after acquired information that led them to reclassify the dismissal as with cause. All the alleged misconduct by Mr. Ayalew testified to by the three complaining individuals was known to the Board at the time of dismissal. The Board had received all the particulars of the accountant’s allegations against Mr. Ayalew, as well as those of two other employees. No general legal right to recharacterize The Defendant argued that regardless of the existence of a mistake or after-discovered information, the only question is whether, at the time of the dismissal, just-cause grounds existed, even if known by the employer at the time and severance is paid. Foerderer and Lake Ontario Portland Cement were relied upon in support of this position. J Lema found that neither case supports such a legal conclusion, for the reasons already stated. The absence of supporting cases from the AC is not surprising, given the principle of condonation or waiver, which would appear to be engaged where an employer, with full knowledge of the circumstances, decides to terminate without-cause and pays severance in accordance with that decision and otherwise shows an intention to dismiss without-cause, which are the circumstances here. The facts of the case are such that it is clear that the initial dismissal was without-cause, and so the AC had to disavow that component of its argument. It failed to do so. Conclusion The Defendant dismissed the Plaintiff with cause. It offered no reasons for its decision to do so, and accordingly has no basis to argue that its decision was the result of a mistake. There was no new information following the dismissal that would have caused the Board to reclassify the nature of the dismissal. The Board could not point to any freestanding legal right that it had to recharacterize in the circumstances here. The decision does not completely foreclose the possibility of a mistaken classification, but there would have to be a factual basis for that argument to be made. No such factual basis was present here.