After-Acquired Cause in Ontario: What Is It and How Does it Work?

When it comes to dismissing an employee, employers will typically have two options—dismissing the employee with or without cause. When an employee is dismissed with cause, they are not owed any notice or termination pay. However, just because an employee has been dismissed without cause, does not meant they cannot be dismissed with cause at a later time. An employer might find out about an employee’s misconduct after the without-cause dismissal, and may rely on the misconduct to dismiss the employee for cause—this is known as an after-acquired cause in Ontario.

This article discusses after-acquired cause dismissals and the potential liability an employer might face in implementing such dismissals.

When Can an Employer Rely on After-Acquired Cause in Ontario?

The decision of an employer to use after-acquired cause comes after the employer has already dismissed the employee without cause. When is it appropriate for the employer to rely on an employee’s misconduct to make the switch to a for-cause dismissal?

If an employer is seeking to rely on after-acquired cause, they must be able to demonstrate that: 1) they were not aware of the employee’s misconduct at the time of the without-cause dismissal (nor were they willfully blind to the misconduct); and 2) they did not condone the employee’s misconduct, expressly or implicitly.

However, misconduct that occurred while the employee was still bound by the employment agreement is treated differently than misconduct that occurred after the agreement was repudiated.

For example, in Aasgaard v Harlequin Enterprises Ltd, 1997 CanLII 1262, the Ontario Court of Appeal held that an employee who breached their fiduciary duties during the working notice period—when they were still bound by the employment agreement—gave rise to after-acquired cause.

Had the employee engaged in the misconduct after the working notice period, or more importantly, had the employer provided an inadequate working notice period, the agreement would have been considered repudiated and therefore, the employer would not have been able to rely on after-acquired cause.

Pleading After-Acquired Cause

Employers should be aware that there can be risks to pleading after-acquired cause in defence to a wrongful dismissal claim. Deliberately pleading after-acquired cause when none exists will open the employer up to further liability and cost consequences.

However, in Sankreacha v Cameron J and Beach Sales Ltd, 2018 ONSC 7216, the Ontario Superior Court of Justice found no liability where the employer initially pled after-acquired cause, but then abandoned this line of defence before trial. In this case, the defence of after-acquired cause was considered to be an opportunity to investigate the matter, prior to the defence being withdrawn.

A successful defence of after-acquired cause, when genuine, will protect an employer from owing the employee any termination entitlements. However, relying on cause or after-acquired cause is risky, as cause is difficult to prove. Consulting a legal professional who is versed in employment law will help employers to mitigate any risk and to avoid liability.

Contact Us for Help

If you are an employer or an employee and want to know your obligations and rights with respect to dismissals, our team of experienced workplace lawyers at Achkar Law can help.

Contact us by phone toll-free at 1 (800) 771-7882 or email us at [email protected] and we would be happy to assist.