Question

Case Study 1

Business law question

1. Ahmed contracted Sami to build him a three story building in his hometown.  The contract called for 120000 SR as a first payment, and a final payment of 10000 SR. Ahmed had paid Sami the first payment. At completion, Ahmed did not like the quality of work and refused to make Sami the final payment.

• What can Ahmed and Sami do to solve the issue?
• What type of discharge they can do? Explain.

Answer 1

Sometimes, an employer will claim an employee’s poor performance is just cause for termination to avoid paying termination pay. It is generally difficult for an employer to prove that poor performance is just cause. If the employer does not have just cause, then the employee is entitled to termination pay.

In addition, claiming just cause when none exists can result in a judge ordering the employer to pay termination pay and aggravated damages in certain circumstances. This blog discusses a case where a judge did just that.

Facts

In Cottrill v Utopia Day Spas and Salons Ltd., Ms. Cottrill worked as a skincare therapist. When Ms. Cottrill’s supervisor left the company, the company reviewed Ms. Cottrill’s personnel file and discovered that Ms. Cottrill was underperforming. The employer asked Ms. Cottrill to attend a meeting where they pointed out her performance deficiencies and told her she had three months to improve or she would be terminated. Over the next 3 months, Ms. Cottrill significantly increased her sales revenue, retail sales and new client base. Despite this improvement, she was terminated for cause at the end of the 3-month period because she had not met all of the required performance standards and the employer felt she had a bad attitude.

Decision

The employer argued that Ms. Cottrill’s failure to meet the required performance standards, despite being given an opportunity to do so, which provided just cause to terminate her employment. Ms. Cottrill argued that she was set up to fail, and was not given a meaningful opportunity to improve.

The court commented that a failure to meet minimum performance standards does not necessarily justify dismissal with cause. The court then found that the employer had not established just cause to dismiss Ms. Cottrill:

● It was unreasonable to hold her to performance standards which it had not previously required of her.

● The employer failed to provide her with a fair and reasonable assessment of her performance.

● The employer could not rely on vague allegations that Ms. Cottrill had a bad attitude.

● The employer’s assertion that she was complacent and had a poor attitude was inconsistent with objective factors such as the fact that she met her performance criteria and increased her sales and services.

● Ms. Cottrill did not have a reasonable opportunity to respond to the conclusions reached by the employer before it dismissed her.

Given that the employer had no just cause, Ms. Cottrill was entitled to damages in lieu of notice and aggravated damages. The court found that the company was in breach of their duty of good faith in the manner they dismissed Ms. Cottrill. In not fairly considering her performance in the three month period, the employer breached its promise to Ms. Cottrill. The court also found that the events had a profound effect on Ms. Cottrill. The court awarded $15,000 in aggravated damages.

Lessons to be Learned

1. An employer cannot simply claim it has just cause to terminate an employee. The employer has the burden of proving just cause.

2. When the just cause termination is for inadequate performance, an employee has to be presented with an opportunity to improve.

3. Engaging in bad faith conduct while terminating an employee may lead to an award for aggravated damages in addition to damages for wrongful dismissal.

Now We can use same in case of Ahmed and Sami

If this helps please give a thumps up!