Most employers know that it is not easy to fire or discipline an employee for just cause, especially if the reasons are due to performance problems that continue over time. That is because the employer has to document the problems, provide warnings, and prove that the employee understood that his or her job was on the line if they did not improve. In a recent case, the BC Supreme Court decided that too much time had passed between the employer’s last warning to the employee and the firing and that the employer owed the employee damages for wrongful dismissal when it attempted to demote and then fire that employee. However, in a somewhat contradictory finding, the court also decided that the employee should have accepted the demoted position in order to reduce his wage loss from the termination.

In Haddock v. Thrifty Foods (2003) Limited, 2011 BCSC 922, the case referred to above, the Plaintiff had worked in various positions for the employer for approximately 16 years. At the time he was fired, he was a grocery store department manager. He had very good reviews and was a good employee until 2002, at which time personal issues began to affect his work performance and he started abusing alcohol. In July 2002, the Plaintiff was suspended for four days without pay for being late on four occasions and, commencing late 2002, several attempts were made by the employer to arrange counselling for the Plaintiff. Finally, in October 2003, the Plaintiff was given a warning letter, which stated in part: “your private life has been interfering with the effective performance of your duties, to the point where you are now seriously at risk of losing your job”. Clear and specific performance expectations were attached to the letter. The letter emphasized that the Plaintiff “must meet the required level of performance, or face the consequences, which may include demotion or dismissal“.

Unfortunately, things did not improve and in November 2003, the Plaintiff went on short-term disability and thereafter entered into an alcohol treatment program. Following another incident where the Plaintiff was intoxicated at a softball tournament in the summer of 2004, eight months after his last warning, the employer decided to demote the Plaintiff to a clerk position as a disciplinary measure. The Plaintiff agreed to accept the demotion provided that he was placed at one of two of the employer’s locations. This was not agreed to by the employer. During the ensuing period, the Plaintiff was off work on vacation and thereafter on short term disability. When the employer heard nothing from the Plaintiff after several attempts to contact him, the Plaintiff was fired.

The Plaintiff claimed that by demoting him to a clerk position, he had in effect been constructively dismissed, and was entitled to damages for wrongful dismissal. In its defence, the employer argued that based on the performance issues and prior warnings, it was entitled to demote the Plaintiff or fire him for just cause.

The issues considered by the court included the following:

• Was Mr. Haddock constructively dismissed by the employer’s decision to demote him?
• Did the employer adequately warn Mr. Haddock such that its decision to demote him was justified?
• If Mr. Haddock was constructively dismissed, should Mr. Haddock have accepted the clerk position offered to mitigate his loss in wages?

On the first issue, the court found that the demotion to the clerk position, which would have resulted in approximately a 16% decrease in Mr. Haddock’s hourly rate and a decrease in prestige, was clearly constructive dismissal. The court also noted that even though the Plaintiff did not initially protest or argue about the demotion, failure to protest at the time did not preclude him from later claiming damages for constructive dismissal.

On the second issue, the court said the Plaintiff had not been adequately warned. In coming to that conclusion, the court cited with approval the elements of the duty to warn as set out in Hennessy v. Excell Railing Systems Ltd., 2005 BCSC 734, para. 12. In that case, the court noted that an employer must show that:

• it has established a reasonable objective standard of performance,
• the employee failed to meet those standards,
• the employee had warnings that he/she has failed to meet those standards and that the employee’s position would be in jeopardy if the employee continued to fail to meet them, and
• the employee has been given a reasonable time to correct the situation.

In Mr. Haddock’s case, the court noted that the employer had established a reasonable objective standard of performance in its 2003 letter and that the warnings that were given to Mr. Haddock were sufficient, at the time they were given, to “bring home” to him that his job was in jeopardy. However, the court decided that the employer’s warnings were not current at the time of the Plaintiff’s dismissal, meaning that the warnings had lapsed with the passage of time and the employer should have renewed its warning to Mr. Haddock prior to dismissing him. In concluding that the warnings were not current, the court took into consideration the fact that the employer had not given any notice to Mr. Haddock about the issues after he returned from his rehabilitation program, and that this resulted in mixed and ambiguous signals being given to him about the importance of the standards that had previously been set.

However, the employer did win one of its arguments. On the third issue, the court agreed with the employer that the Plaintiff had failed to mitigate his loss by not accepting the offer of the clerk position at the Admirals store, despite the reduction in salary and prestige. As a result, the damages owed by the employer to the Plaintiff were reduced by what he could have earned in the clerk position.

Lessons to be Learned

1. Employers who seek to terminate employees for poor performance would do well to follow the four step process on warnings noted above.
2. Warnings must be “current” in order for an employer to be able to rely on the warning in order to terminate. Regular reviews and feedback are recommended.
3. Demoting an employee could result in constructive dismissal, exposing an employer to damages.
4. Depending on the facts, an employer may be able to mitigate its severance costs by offering another position even if that new position constitutes a demotion.