The after-acquired cause principle holds that an employer can rely upon information learned after an employee’s dismissal to establish a just cause defence. As long as the after-acquired cause is sufficiently serious to warrant dismissal, an employer can rely on it as justification for dismissal after the fact and without having to provide the employee with any notice.
An employer seeking to invoke after-acquired cause to justify dismissal must demonstrate:
- that the employer did not have knowledge of the misconduct –or was not willfully blind to it—at the time the employee was dismissed; and,
- that the employer did not expressly or implicitly condone the misconduct by failing to take timely action.
An employer who is found to have been aware of or willfully blind to an employee’s misconduct at the time of dismissal, but fails to invoke it at the time, will generally be precluded from invoking it later on.
The courts also distinguish between an employee’s misconduct while employed and post-dismissal misconduct. An employer may rely on evidence of misconduct which occurred prior to dismissal but is discovered subsequently to establish after acquired cause. However, an employer cannot rely upon an employee’s post-dismissal conduct to establish cause for a prior dismissal. Based on the principle of repudiation, once a contract of employment has been terminated, the former employee’s subsequent conduct may not be relied on to justify the termination.
Therefore, whether or not the employer has in fact repudiated the employment contract is an important consideration. In determining whether or not repudiation has occurred, the court will examine the employer’s intention, the adequacy of the notice period, and any severance offer. For example, in Aasgaard v Harlequin Enterprises Ltd, an employee who was given reasonable notice of his termination and a reasonable severance offer started his own business during the notice period and transferred his employer’s inventory to his new business. The court found that the employer had not repudiated the employment contract and therefore it continued in effect during the notice period in which the employee engaged in the alleged misconduct. The court held that the employer could rely upon this conduct to show cause for summary dismissal. The court emphasized, however, that had the terms of notice not been adequate, the employer would not have been able to rely on after-acquired cause, as there would be an immediate repudiation.
Lessons for Employers
Employers who discover employee misconduct must act in a timely manner and take care not to condone the employee’s improper behaviour. Employers must also provide adequate notice when terminating employees. Failure to do so may constitute a repudiation of the employment agreement. Employers must have sufficient evidence to prove the after-acquired cause before making any allegations. Employers who allege after-acquired cause without basis may be subject to significant punitive as well as wrongful dismissal damages.
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