While in most cases the decision to terminate with or without cause must be made at the time of termination, if misconduct is discovered after an employee has already left, cause can come into play again.
This can arise in situations like the following:
- An employee isn’t a great performer, so the employer decides to terminate
- The employee’s poor performance does not rise to the level of cause, so the employer terminates without cause and provides the employee with notice of termination
- After the employee’s last day, the employer accesses their email and discovers the employee has forwarded large amounts of confidential information to their personal email address
Misappropriation of confidential information is common, as is discovery of time-theft – the employee hasn’t been working when they say they are, and falsification of expense reports. Courts have long recognized that employees should not benefit from serious misconduct simply because it was uncovered after their employment ended.
Cause for termination that is discovered after the employee has already been terminated without cause is called an after-acquired cause. When an employer is facing a wrongful dismissal suit, after-acquired cause can reduce or eliminate wrongful dismissal damages, or at least substantially increase the risk for the employee!
Not every policy violation or misdeed will justify cause. Courts will assess the nature and severity of the misconduct and whether it fundamentally damaged the employment relationship.
The Legal Test
To successfully rely on after-acquired cause, an employer must establish that:
- The misconduct actually occurred
- The misconduct was sufficiently serious to constitute just cause for dismissal, and
- Had the employer known of the misconduct at the time, it would have been justified in terminating the employee for cause
The analysis focuses on the misconduct itself rather than the employer’s original reasons for termination.
Employers Must Proceed Carefully
While after-acquired cause can be a valuable defence, employers should avoid assuming that any newly discovered misconduct will justify cause. Cause remains a high bar, and the analysis of whether the conduct would have constituted cause for termination remains rigorous. In determining whether conduct would amount to cause, courts will consider factors such as the employee’s role, length of service, disciplinary history, and the seriousness of the misconduct, and ultimately whether it fundamentally damaged the employment relationship, beyond repair.
While many instances of after-acquired cause are legitimate, courts do not look favourably on employers who attempt to manufacture cause in order to gain an edge in litigation.
Key Takeaways
After-acquired cause can be a useful tool for employers defending wrongful dismissal claims, when it is justified. Misconduct discovered after termination can, in appropriate circumstances, justify dismissal for cause and significantly reduce an employer’s exposure to damages.
However, success depends on the quality of the evidence, the seriousness of the misconduct, and the employer’s ability to demonstrate that the conduct would have warranted dismissal had it been known at the time.
If your organization has discovered employee misconduct after a termination or is defending a wrongful dismissal claim, get in touch. We can help assess whether an after-acquired cause defence may be available and how best to protect your organization’s interests.
