A recent decision by the Ontario Superior Court provides a useful reminder regarding the difference between just cause at common law and wilful misconduct under employment standards legislation. This distinction is important for plan administrators who will be dealing with grow-in entitlements on and after July 1, 2012.

In Oosterbosch v. FAG Aerospace Inc., an 18-year employee of FAG Aerospace was dismissed pursuant to the employer’s progressive discipline policy. Under the policy, four written warnings within a 12 month period could result in dismissal. Oosterbosch received four written warnings between August 22, 2007 and March 20, 2008 for: (i) failure to notice a defect on the production line; (ii) returning approximately 15 minutes late from a 30 minute break; (iii) arriving late for his shift; and, (iv) further failure to notice a defect on the production line and falsification of a production report.

Oosterbosch filed a claim for wrongful dismissal. As part of its defence, the employer argued that Oosterbosch was guilty of “wilful misconduct, disobedience, or wilful neglect of duty”, and, therefore, pursuant to the regulations under the Employment Standards Act, 2000 (the ESA), he was not entitled to statutory termination or severance payments.

The Court found that, while Oosterbosch was dismissed for just cause and his conduct was casual and careless – it was not wilful:

He was undoubtedly careless and the persistence of that carelessness justified his dismissal. I would not, however, characterize his offending behaviour as “wilful misconduct, disobedience or wilful neglect of duty” that would disentitle him to receipt of termination and severance payments under the provisions of the Employment Standards Act, 2000.

Accordingly, the Court awarded Oosterbosch statutory termination pay and severance pay pursuant to the ESA.

The Oosterbosch decision may prove to have implications for employers who sponsor defined benefit pension plans.

As result of the changes to the Ontario Pension Benefits Act (the PBA), employees who are dismissed on or after July 1, 2012 for reasons other than “wilful misconduct, disobedience or wilful neglect of duty” or other prescribed circumstances (such circumstances have not yet been prescribed), will be entitled to grow-in benefits. The test in the PBA mirrors that in the ESA.

Based on the Oosterbosch decision, the fact that an employee who is eligible for “grow in” benefits (or will be eligible for “grow in” benefits within the applicable notice period) is dismissed for cause at common law will not necessarily disentitle him or her from receipt of “grow in” benefits. To avoid paying “grow in” benefits, the employer must establish that the employee’s conduct is “wilful” and not merely careless.