When terminating workers, employers have an obligation of good faith and fair dealing. In Wallace v. United Grain Growers Ltd., the Supreme Court of Canada aptly outlined that this obligation demands employers be candid, reasonable, honest, and forthright with their employees. Additionally, this demand also precludes employers from engaging in any conduct that is unfair or in bad faith, including conduct that is untruthful, misleading, or unduly insensitive. With this breakthrough, workers could receive extended damages through aggravated, moral, and punitive damage awards for employer misconduct in the manner of dismissal. Nevertheless, the generalized rule as outlined in Wallace requires a case-by-case articulation to determine what sort of conduct actually breaches the established rules.

Actual Breaches of the Obligation of Good Faith and Fair Dealing in the Manner of Dismissal

In a recent Ontario Superior Court Case, Koshman v. Controlex Corporation, Mr. Koshman himself was terminated by Controlex Corporation at age 69, after working for 18-and-a-half years, as a Vice President of the company, making $228,000 per annum. Mr. Koshman was on track to retire at 75 yet was terminated without cause. The court conducted a focused analysis of Mr. Koshman’s common law reasonable notice period and ruled that he was entitled to 24 months’ notice. On top of this robust notice period, Mr. Koshman was also awarded both aggravated and punitive damages. The court ruled that Mr. Koshman was entitled to $50,000 in aggravated damages for Controlex’s misconduct in the manner of dismissal. The misconduct outlined in this case constitutes a veritable litany of breaches of the obligation of good faith and fair dealing in the manner of dismissal. When Controlex acquired a new principal, Mrs. Dent, she carved a warpath against Mr. Koshman. She:

• Advised Mr. Koshman that he would no longer wield signing authority, which was a key component of his job;
• Personally visited Mr. Koshman’s customers, advising them not to deal with him, and criticized his character and honesty, telling some of them that he had been terminated prior to his termination;
• Offered Mr. Koshman’s job to a subordinate prior to his termination;
• Failed to meet with Mr. Koshman to discuss any concerns she may have had;
• Ostracized him from management duties;
• Provided only 2 weeks’ notice;
• Refused to pay Mr. Koshman’s accrued vacation pay;
• Terminated him by way of letter sent by courier;
• Further insinuated to clients that her husband, Mr. Dent, the former principal of Controlex Corporation, had been murdered and that Mr. Koshman was involved;
• Made defamatory comments about Mr. Koshman being dishonest; and,
• Baselessly alleged in court that Mr. Koshman had breached fiduciary duties.

Each of these acts of misconduct could satisfy the test for aggravated damages. Based on the entirety of the above, the court ruled that Mrs. Dent took significant steps to destroy Mr. Koshman’s reputation, and thus warranted an award of $50,000 in aggravated damages. But the court did not conclude the award of damages after the veritable litany of misconduct perpetrated against Mr. Koshman. In addition to the aggravated damages award, Mr. Koshman was also awarded a separate $50,000 as punitive damages. The court outlined that punitive damages are to be awarded only for the purpose of punishing defendants for misconduct, and only after all further damages have been awarded. Mrs. Dent embarked on a malicious, scorched earth campaign against Mr. Koshman, undermining the plaintiff’s ability to perform his job functions, attempting to destroy his reputation with customers and clients, making defamatory statements about him, and accusing him of criminal conduct and dishonesty. As if the laundry list of misconduct discussed regarding aggravated damages was not enough, during trial, Mrs. Dent:

• Pursued a baseless counterclaim against Mr. Koshman alleging termination for cause and seeking repayment of the eight weeks of severance paid out to Mr. Koshman since termination;
• Caused Controlex to default on a court order to appoint new counsel;
• Caused Controlex to abandon its defence of the proceeding;
• Chose not to attend the trial; and,
• Refused to communicate with the court or Mr. Koshman’s counsel.

It is well established that misconduct during the course of litigation can justify an award of extended damages, as held in the case of Galea v. Walmart Canada Corp. The court in Koshman carries this ruling even further, extending such misconduct beyond engaging in attrition to include refusals to participate in the hearing and stonewalling. At every stage of the manner of dismissal, the employer engaged in malicious misconduct against Mr. Koshman, whether before termination, during termination, and after termination. The aggravated and punitive damages awarded to Mr. Koshman indicate the obligation of good faith and fair dealing in the manner of dismissal are not trifling aspects of Ontario’s employment law.

Time Theft in Arbitral Jurisprudence

The phrase “time theft” itself is particularly loaded to paint the alleged misconduct of a worker as exceptionally severe and associate their alleged misconduct with criminality. However, this sort of language framing has been targeted by arbitral jurisprudence on the matter. In Grand & Toy Ltd. v. United Steelworkers of America, Local 9197 (Natal Grievance), Arbitrator Paul Craven stated that the phrase “time theft” presumes the time belongs to the employer and is being misappropriated by the worker. Instead, Arbitrator Craven stated that the time actually “belongs” to the worker, along with the worker’s strength, intelligence, skills, and innate capacities. In the employment context, the worker undertakes to accept the employer’s direction for the duration of employment in exchange for wages and subject to the terms of employment. The time still belongs to the worker, but the worker agrees to use that time under the employer’s direction. In this context, Arbitrator Craven indicates that “time theft” is more closely related to the industrial offence of insubordination rather than theft. Furthermore, Arbitrator Craven held the company’s particular rule against “time-theft” in this case was inconsistent with just cause provisions in the contract, as it prescribed termination for any instance of “participating in activities on company time that do not constitute company business”. Ultimately, Arbitrator Craven upheld the long-established standard of progressive discipline rather than immediate termination in response to violations of the “time-theft” policy.

Arbitrator Craven’s account was adopted by the Ontario Labour Relations Board in International Union of Elevator Constructors, Local 50 v. Otis Canada. In this respect, “time theft” may not necessarily involve an outright refusal to obey a direct order from an employer, but rather is a form of “culpable inefficiency” in the face of well-understood performance expectations. Indeed, there are similarities between such behaviour and the long-standing practice among workers referred to as soldiering. In a unionized context, collective soldiering, or deliberate reduction of productive output, can be considered an unfair labour practice under Ontario’s Labour Relations Act unless it is done while workers are in a legal strike position. It is very important how time theft is categorized and understood, lest the language be used to imply that a worker’s time, and hence their life, is owned by their employer throughout the duration of their employment. This simply is not the case. Characterizing time theft as theft rather than as insubordination results in a misapprehension of the offence and an overly severe response to the misconduct.

Insubordination and Dismissal

While “time theft” may be more akin to insubordination, both Ontario law and Canadian law more broadly consider insubordination misconduct justifying discipline by employers. It is well established that workers can be subject to discipline for insubordination in an employment context. However, it is also well established that the discipline must be a proportionate response to the worker’s misconduct. If an employer attempts to terminate a worker for cause because of “time theft”, the degree of discipline may be too severe to warrant termination for cause based on the circumstances. As outlined by the Supreme Court of Canada in McKinley v. BC Tel, dismissal for cause is only warranted in the most severe circumstances. Instead, employers are expected to utilize progressive discipline to temper and manage worker misconduct prior to termination, unless the misconduct is so aggravating and severe as to warrant immediate termination. If the employer fails to apply progressive discipline, the termination for cause may be unduly severe. If the worker after being subject to progressive discipline continues to engage in the misconduct, in this case, insubordination, the employer may be able to justify for-cause termination.

In the case of “time theft” insubordination, a minor instance of this occurring may be too meagre to warrant termination for cause. However, several repeated instances may cumulatively justify termination without notice, as outlined by the Ontario Superior Court in Daniels v. Canadian Gift and Tableware Assn. While minor and individual instances of such insubordination may not warrant termination for cause, repeated and cumulative instances can justify such termination.

Discussions of “time theft” have become more prominent in the wake of the COVID pandemic and remote work. Employers in Ontario are legally permitted to monitor workers remotely via electronic monitoring systems. Ontario’s Employment Standards Act entitles most workers to have their employer provide a written policy on electronic monitoring and make such a policy available and known to them. The policy must also outline how and in what circumstances the employer can monitor the worker, and the purposes for which information obtained via electronic monitoring is used. Nevertheless, employers are not prohibited from electronically monitoring remote workers, and may use such monitoring information to construct accounts of “time theft”. However, workers and employers alike should be aware of the limitations of algorithmically constructed accounts of “time theft”, which may result in inaccurate accounts of time spent on tasks due to algorithmic modelling issues.