A Cautionary Termination Tale

Treat employees with dignity when they’re being terminated. Listen to their side of the story before asserting cause. Be careful about what you say in the media, especially in a small community. These are the lessons from a recent Ontario Superior Court of Justice decision, which provides a cautionary tale for employers.

Craig Johnston was the chief building official for the Municipality of Arran-Elderslie, a township in Bruce County, Ontario. Craig also ran a private home design business. After he clashed with the municipal clerk and a particular councillor, they began investigating his activities. Two separate audits cleared Craig of wrongdoing, but the councillor kept digging, and new evidence surfaced. As chief building official, Craig had inspected two homes without disclosing that his own private business had designed them – a clear conflict of interest. Craig was terminated for cause.

At trial, however, the court had several criticisms for how the municipality carried out Craig’s termination.

First, the court found there was no cause for the termination. There was a conflict of interest, but that alone was not enough. The municipality had historically excused this conflict of interest; it had allowed Craig to inspect buildings he designed several times in the past. The problem in this case was Craig’s failure to disclose that he had designed two particular homes before inspecting them, but the court found that this was an honest mistake, not an attempt to mislead. There is a big difference, the court reasoned, between a conflict of interest and fraud.

Second, the court awarded Craig $100,000 in aggravated damages and $200,000 in punitive damages because of how the municipality treated him during the termination. He was called into a meeting without prior warning. Police were present. He was interrogated about the conflict of interest. He was terminated immediately using an already-prepared termination letter, proving that the municipality had already decided to terminate Craig before he even answered their questions. Furthermore, the municipality put out a press release which falsely suggested that Craig had been banned from designing any buildings in the municipality. Not only did the media coverage make it nearly impossible for Craig to find new employment in his small community, but his private design business also collapsed.

Craig’s case is a cautionary tale to employers to be extremely careful in what is said publicly about an employee’s termination. Damaging an employee’s reputation can create extra liability, especially in small communities where reputational damage can be hard to overcome. As well, employers should investigate fully before terminating an employee for cause, and the termination meeting should happen a day or two after the employee is questioned, to avoid the perception that the employer’s mind was already made up before hearing the employee’s side of the story.

Johnston v. The Corporation of the Municipality of Arran-Elderslie, 2018 ONSC 7616