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Is a “Consensual” Relationship Between a Manager and a Subordinate Cause for Dismissal?

There was an interesting wrongful dismissal case out of the Ontario Superior Court recently called Cavaliere v. Corvex Manufacturing.  The employee was dismissed for cause (without notice) for engaging in sexual relationships with two subordinates spanning a decade.   The employee argued that the relationships were consensual, and therefore the employer did not have cause.  It’s a sordid tale, because both the dismissed employee and both women were married, the husband of one of the women worked for the same employer, as did the employee’s daughter, and the activities took place in the workplace, parking lots, and various other compromising situations around a small town.

The Judge finds cause, relying on  line of cases ruling that managerial employees have an implied obligation in their employment contracts to ensure that the workplace does not become poisoned due to sexual harassment and to protect the employer from potential legal action for such harassment (including Simpson v. Consumers’ Association).  He rejects that argument that the relationships were consensual, because the employees were subordinates and therefore ‘vulnerable’.  This conclusion follows notwithstanding the Judge’s finding that  (and this is one of the great lines I’ve read in recent Canadian legal jurisprudence):

“The relationship was on its face consensual.  Her interest in the affair was based in lust; the basis of his interest may have been the same or otherwise”.

In addition, after the first incident, the employer had given the employee a warning to avoid any sort of relationship with female employees, a warning which the employee ignored by entering into a new affair almost immediately.

The Notice Issue

There’s a couple of other interesting legal points in the case.  Even though the judge finds cause (and therefore no notice is required), he goes on to consider what the notice would have been in case he was wrong about there being cause.  He finds notice would have been 18 months.  The employer argued that the notice amount is set out in the contract, which read: “it is agreed that the your employment may be terminated without just cause by providing you with appropriate notice as outlined in the ESA, plus one additional week’s pay in lieu of notice.”

The Judge ruled that that term was not applicable, because on its face, it only applied when the employer is not alleging cause.  Here, the employer did allege cause, and therefore the term does not apply.  At best, it is ambiguous as to whether the term applies to a dismissal for alleged cause, and we know from cases like Christensen v. Family Counselling Centre that an ambiguous notice term will not be enforced by the courts.  In addition, the Judge noted that even if the contract term was applicable, he would likely have refused to enforce because it was ‘unconscionable’–it had the effect of reducing the notice period from 18 months to 9 weeks notice.  That conclusion is questionable (see Lloyd v. Oracle for a discussion of the enforceability of a notice clause that complies with the ESA).  The 18 months notice would have been reduced to 6 months, though, because the employee spent twelve months renovating his cottage with his forgiving spouse, rather than looking for a job.

Costs

Finally, I mention the issue of costs, because it is a point I raise with my students about the economics of wrongful dismissal cases.  The decision includes a detailed discussion of the costs issue.  The employer wins this case, and asks for legal costs.  The Judge notes (on p. 17) that the employer’s lawyers billed the employer close to $200,000 to defend the lawsuit.  If the employee had won, the damages could have been in the range of $190,000, according to the judge.  In other words, the legal costs were slightly greater than the amount the employee was claiming.

The Judge rules that some of the costs  on the lawyer’s bill were excessive, including 90 hours of legal research by two articling students at $60 per hour.  The judge believes that the legal issues were no so complex that an employment law firm should have needed that much research done.   In the end, the Judge orders the plaintiff (the losing employee) to pay $37,000 (out of close to $200,000) towards the employer’s legal bill.  That would be on top of the money he had already paid his own lawyer.  The employer has to pay the difference between the legal bill (around $200,000) and the $37,000 the employee was ordered to pay.

So you can see the point I make in class:  that litigating a wrongful dismissal case is a costly, risky, and (often) economically irrational thing to do.

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