Written by: Nicole Cooper Employers often wonder in what circumstances they are justified in terminating an employee for cause. “Just cause” is a legal term of art and refers to situations where the employee’s conduct is sufficient to rupture the employment relationship. Whether just cause exists is case specific although generally, grounds giving rise to just cause can include insubordination, unexcused absenteeism, intoxication, sexual harassment, conflict of interest, breach of fiduciary duty, and other criminal, immoral, or improper conduct. What happens when the misconduct giving rise to termination is not actually known to the employer at the time when the employee is dismissed? In 1961, the Supreme Court of Canada endorsed the principle that an employer can establish just cause to terminate an employee even if the facts giving rise to cause for termination were not known to the employer at the time of dismissal. In Lake Ontario Portland Cement Co. v Groner, [1961] SCR 553 [Lake Ontario], the Court held that it was open to the employer to dismiss the employee even though the employer was not aware of the employee’s dishonest conduct at the time he was dismissed. The Court confirmed that justification for dismissal can be shown by proof of facts determined after the dismissal occurred. The Alberta Court of King’s Bench recently considered after-acquired cause in Kuipers v NEP Limited GP Inc, 2025 ABKB 278. The matter involved a complex dispute between the plaintiffs, Gregory Kuipers and his company Natural Energy Partners Limited, and the defendants, a series of companies involved in the purchase of a portion of the plaintiffs’ interests. While the case primarily related to a partnership dispute and business losses arising from a natural gas power plant in Ralston, Alberta, the parties also advanced cross-claims related to Mr. Kuipers’ employment. The defendants brought a counterclaim against Mr. Kuipers’ seeking to recover the severance payment made to him in the amount of $240,000.00. Mr. Kuipers was terminated without cause and signed a release in exchange for the severance payment. The defendants argued that after payment, they discovered Mr. Kuipers’ misconduct and breaches of fiduciary duty which occurred while he was president, prior to his termination. In particular, the defendants alleged that Mr. Kuipers misrepresented the condition of the power plant, failed to comply with the terms of various agreements, made financial commitments without authorization to do so, and misrepresented his status as an engineer, amongst other allegations. The Court stated that after-acquired cause has two requirements: At the time of the dismissal, the employer did not know of the earlier misconduct; and The misconduct, had it been known, would have warranted summary dismissal.[1] The Court affirmed the principles outlined in Lake Ontario, explaining that it is “immaterial” whether the grounds for dismissal were known to the employer at the time of termination so long as there were in fact “good grounds” for termination. However, a claim of after-acquired cause can be resisted if the employee can demonstrate that the employer had knowledge of the prior misconduct and did nothing to address the situation. The Court cited Doucet and Dauphinee v Spielo Manufacturing Incorporated and Manship, 2011 NBCA 44 as follows: When an employer becomes aware of the misconduct on the part of his servant, sufficient to justify dismissal, he may adopt either of two courses. He may dismiss, or he may overlook the fault. But he cannot retain the servant in his employment, and afterwards at any distance of time turn him away… If he retains the servant in his employment for any considerable time after discovering his fault, that is condonation, and he cannot afterwards dismiss for that fault without anything new.[2] Mr. Kuipers’ response to the counterclaim was that there was no evidence of just cause for dismissal and if there were issues related to his employment, the defendants ought to have issued appropriate warnings to him. In the result, the Court found that the defendants were in fact aware of the alleged misconduct and breaches at the time of Mr. Kuipers’ termination. The majority of the allegations, and the most significant of them, were discussed at a board meeting over a month prior to his termination. As such, the Court found that after-acquired cause was not made out as the defendants were aware of the misconduct and nevertheless chose to terminate Mr. Kuipers without cause. The case illustrates that while an employer may discover circumstances after termination which justify the dismissal, the employer ought to consider whether the facts giving rise to just cause are known to them at the time of termination. Condonation, where the employer elects to disregard or forgive an employee’s misconduct, can be a bar to later alleging after-acquired cause. If you have questions regarding termination of employment, please reach out to a member of our Labour & Employment practice group.