What Is Just Cause for Termination in Canada? 5 Common Employer Misconceptions

Senior HR Consultant

Terminating an employee is one of the most consequential decisions an employer can make. When misconduct or performance issues arise, it can be tempting to end the employment relationship immediately, particularly when a manager believes the employee has crossed a line.

However, Canadian employment law sets important limits on when an employer can dismiss someone for just cause without providing notice or pay in lieu. Getting that decision wrong can expose a business to wrongful dismissal claims, additional legal costs and reputational damage.

For Canadian employers, understanding what just cause means, documenting concerns and following a defensible process can make a significant difference. Below, we’ll define what just cause means under Canadian law and discuss five common misconceptions about just cause and how to avoid them.

What Does Just Cause Mean Under Canadian Law?

Just cause generally refers to serious employee misconduct or a fundamental breach of the employment relationship that justifies dismissal without common-law notice. Employers must be able to support their decision with evidence.

The Supreme Court of Canada addressed the issue of dishonesty and dismissal in McKinley v. BC Tel, 2001 SCC 38. The Court emphasized that misconduct must be assessed in context. Employers should consider the seriousness of the conduct and whether dismissal is a proportionate response, rather than assuming every instance of dishonesty automatically amounts to just cause.

Employers must also distinguish between common-law just cause and statutory employment standards exemptions.

In Ontario, section 2 of Regulation 288/01 provides an exemption from statutory termination notice or pay where an employee has engaged in wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer. A corresponding exemption applies to statutory severance pay under section 9 of the regulation.

These requirements are not identical to the common-law test. An employer may establish common-law just cause without necessarily qualifying for the Ontario statutory exemption. The details matter, and employers should assess both standards before withholding termination-related payments.

Federally regulated employers, including many businesses in banking, telecommunications and interprovincial transportation, are subject to the Canada Labour Code and its own termination and unjust dismissal provisions. The Government of Canada's termination guidance explains the applicable rules.

5 Common Employer Misconceptions About Just Cause

1. Poor Performance Automatically Equals Just Cause

Poor performance can be frustrating, particularly when an employee repeatedly misses targets or fails to meet reasonable expectations. However, an employee who struggles to perform a job is not automatically guilty of misconduct.

Before considering dismissal, employers should establish clear performance standards, explain where the employee is falling short, provide appropriate training and resources, and document feedback. Where appropriate, a performance improvement plan should identify specific expectations, timelines and the consequences of failing to improve.

Employees should be given a reasonable opportunity to address shortcomings. Repeated warnings may be important, particularly where the employer intends to rely on ongoing performance failures.

There is a difference between an employee who is unable to meet expectations despite genuine efforts and one who deliberately refuses to perform essential duties. Neither situation should be assessed without considering the facts, employment history and applicable legal standards.

Keep reading: Managing Difficult Employees: A Guide for New Managers

2. Our Employee Handbook Says the Behaviour Leads to Immediate Dismissal

A workplace policy can establish expectations and explain the consequences of misconduct, but it does not automatically determine whether just cause exists under Canadian law.

For example, an employer may have a policy stating that insubordination can result in termination. That does not mean every disagreement with a manager or refusal to follow an instruction justifies dismissal without notice.

The circumstances matter. Was the instruction lawful and reasonable? Did the employee understand what was expected? Was the conduct deliberate? Has similar behaviour previously been addressed through coaching or progressive discipline?

The same principle applies to other workplace rules. A policy violation may warrant corrective action without meeting the legal threshold for just cause.

3. We Do Not Need to Investigate if the Evidence Looks Strong

When an employer suspects theft, fraud, harassment or serious misconduct, there may be pressure to act immediately. However, making a decision before establishing the relevant facts can create avoidable risk.

A proportionate, impartial investigation can help employers determine what happened and whether the evidence supports the allegations. Depending on the circumstances, this may involve reviewing records, interviewing witnesses, preserving relevant documentation and allowing the employee to respond.

The process should be appropriate to the seriousness and complexity of the allegations. Employers should also consider confidentiality, consistency, workplace safety and any applicable legal or policy requirements.

Check this out: Employee Termination Checklist for Canadian Employers

4. Probationary Employees Have No Termination Rights

Probation can allow an employer to assess a new employee's suitability for a role. However, probation does not eliminate every legal obligation.

In Ontario, employees with less than three months of service are generally not entitled to statutory termination notice or pay under the Employment Standards Act, 2000. The applicable rules and exceptions should be checked against the Ontario government's termination of employment guide.

Common-law entitlements may also depend on the employment contract and the circumstances of the employment relationship. Employers should not assume that simply including a probationary period in an offer letter removes all potential liability.

Human rights obligations continue to matter. A termination decision must not contravene applicable human rights legislation, including protections related to disability, race, sex and other protected grounds.

Employers should establish clear probationary expectations, schedule regular check-ins and document performance concerns from the beginning. If a new employee is not meeting requirements, address the issue promptly and review the relevant contractual and statutory obligations before deciding how to proceed.

5. Past Misconduct Can Always Be Used as Grounds for Dismissal

Employers may keep records of recurring problems, but allowing known misconduct to continue without addressing it can undermine a later decision to rely on that same behaviour as grounds for dismissal.

This is known as condonation. Ontario's Employment Standards Act Policy and Interpretation Manual, Regulation 288/01 guidance explains that an employer who knows about behaviour but does not act may give the employee the impression that it is not serious enough to warrant termination.

For example, if a manager repeatedly overlooks a known policy violation, takes no corrective action and later relies on the same conduct to justify dismissal without notice, the employer may face difficulties defending its decision.

This does not mean employers lose the ability to respond to new misconduct or that every prior incident becomes irrelevant. The facts, the nature of the conduct and the employer's response all matter.

What Should Employers Do Before Terminating an Employee for Cause?

Before making a final decision, employers should take a structured approach:

Establish the facts: Gather relevant evidence and investigate serious allegations appropriately.

Review the employment agreement and policies: Confirm that expectations and any relevant contractual provisions are clear and applicable.

Consider context and proportionality: Assess the seriousness of the conduct, the employee's history, prior warnings and whether a less severe response may be appropriate.

Check statutory obligations: Determine which employment standards legislation applies and whether any exemption from notice, termination pay or severance is actually available.

Seek professional advice: Obtain HR or employment law guidance when the circumstances are complex or the financial and legal risks are significant.

In some cases, terminating without cause and providing the applicable notice or compensation may be a more practical option than attempting to establish just cause. Employers should assess their contractual, statutory and common-law obligations before deciding on a separation package.

How AugmentHR Can Help

Managing misconduct, performance concerns and employee terminations requires sound judgment, consistent processes and a clear understanding of employment obligations.

AugmentHR provides flexible HR consulting to help Canadian employers address sensitive workplace issues before they escalate. Our services include reviewing employment policies and procedures, supporting performance management, advising on disciplinary processes, and conducting workplace investigations where appropriate.

When an employment relationship must end, we can also help employers plan respectful employee transitions and provide outplacement support to assist departing employees with their next career move.

Whether you need help with a specific employee issue or want to strengthen your HR practices more broadly, AugmentHR can work alongside your team to help you make informed, defensible decisions.

Contact AugmentHR to discuss your HR needs and build a more consistent approach to employee performance, discipline and termination.

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