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Does a “Near Cause” Incident Reduce the Amount of Notice Pay Needed for Terminating an Employee?

Whitten and Lublin | Dec 18, 2017

The doctrine of ‘near cause’ has been settled for some time now. The near cause doctrine, in principle, allows an employer to reduce the amount of severance or ‘notice pay’ owed to an employee when dismissing for misconduct that did not quite warrant a dismissal. However, the courts have established that ‘near cause’ dismissal is in fact a wrongful dismissal, and the entirety of reasonable notice or pay in lieu is to be paid to the employee.

Dowling v. Halifax (City), [1998] is the case that settled the doctrine of ‘near cause’. In the case, Drowling was a Works Supervisor in charge of a drainage pumping station for the city. Drowling was also employed with Saccary Contracting Limited, which bid on contracts from the city for the particular department that Drowling supervised. The city obtained information from the Saccary’s directory, listing Drowling as an ‘officer and director’. This was a clear conflict of interest and it was assumed that this employee was disclosing the bids to Saccary in order for Saccary to have a competitive advantage. The city therefore dismissed Drowling for dishonesty. At the appeal, it was eventually learned that Saccary’s directory was incorrect. However, there was still evidence that the conduct of Drowling was meant to discourage other bidders in favour of Saccary winning a particular contract.

The trial judge ruled that the misconduct that was now revealed warranted the ‘moderated damages’ principle, whereby the employee was only owed six months (instead of twenty-four) of pay in lieu of notice. This meant that Drowling’s misconduct was not serious enough to justify a dismissal without payment, but was serious enough to lessen payment of damages owed by the employer.

This, however, was struck down by the Supreme Court. The Supreme Court ruling specifically stated, “we do not accept any argument relating to near cause.” In light of this, employers must know that misconduct which does not constitute a justification for dismissal (ie. ‘just cause’) cannot be used as an excuse lessen a severance package. In other words, when terminating an employee, an employer must have just caused or provide the employee reasonable notice of termination or payment equivalent to all earning for the duration of the notice period.