BC Supreme Court Comments on After-Acquired Cause

In Canada, when an employer terminates an employee without cause, the employee will presumptively be entitled to notice or payment in lieu of notice – which we commonly refer to as severance. On the other hand, an employee terminated for cause will not be entitled to any notice or severance. But what happens if, after terminating without cause, the employer discovers something the employee did during their employment that might have justified a dismissal for cause?

That’s the premise of after-acquired cause—a legal argument that allows an employer to retroactively justify a dismissal without notice or severance by relying on misconduct discovered after the employee has already been let go. Employers often ask legal counsel about this possibility when new facts come to light post-termination and it can be an effective option. However, as a recent decision from the BC Supreme Court makes clear, it’s a tool that must be wielded with care.

The Case: Hoem v. Macquarie Energy Canada Ltd., 2025 BCSC 446

In Hoem v. Macquarie Energy Canada Ltd, the employer terminated a high-performing sales representative without cause, providing him with a 12 month severance package which was the amount required under his employment contract in the event of without-cause termination. The employee brought an action for wrongful dismissal, seeking greater damages.

After the termination was communicated, the employer discovered several alleged incidents of misconduct during employment—namely, that he had consumed cannabis gummies while on business, and that he was dishonest to the employer in the course of an investigation it was conducting. Based on these allegations, the employer changed course and asserted after-acquired cause in its response to the civil claim. In so doing, it sought to recover the severance amounts it had already paid.

The Court rejected the employer’s argument. It found that the cannabis consumption was not proven to have impaired performance nor did it clearly violate a clear company policy. Further, the dishonesty during the investigation was not connected closely enough to the core of the employment relationship such as could constitute cause for termination. The employee was deemed to have been terminated without cause and thereby entitled to the severance that had been already given. Additionally, due to an enforceability problem with his employment contract, he was awarded additional severance.

The Court also took issue with the way the employer handled the termination and litigation. It noted that the employer appeared to build its case for cause after the fact in an effort to avoid its severance obligations, rather than because it genuinely believed the misconduct justified dismissal at the time. As a result, the employee was also awarded aggravated damages for the manner of dismissal.

What Employers Should Know

1. After-Acquired Cause Is Real—but Risky.
   Yes, after-acquired cause is a recognized legal concept. But it’s not enough to simply allege it—you must prove that the misconduct discovered post-termination would have amounted to just cause had it been known at the time. Just cause is a very high standard to meet in any circumstances and alleging it post-termination adds a layer of complexity. The employer must prove not only that the impugned conduct constituted cause but also that the employer only learned of that conduct after the termination.
2. Poorly Made Allegations Can Backfire.
   In Hoem, the Court noted that some of the employer’s allegations lacked credibility and appeared strategic. This ultimately resulted in an aggravated damages award against the employer. Whether made at termination or afterward, a failed just cause argument—especially one made in bad faith—can significantly increase the employer’s liability.
3. Documentation Matters.
   The employer relied in part on vague policy language in its after-the-fact allegations. But without clear policies, performance concerns on record, or previous discipline, courts are unlikely to find just cause—after-acquired or otherwise. It’s also important that the employer’s documentation support its argument that it only discovered the problematic conduct after termination. If the documents show that the employer knew about the conduct before terminating (even if they didn’t do anything about it), this will likely be fatal to an after-acquired cause defence.
4. Be Strategic Before and After Termination.
   If you suspect misconduct but don’t yet have the full picture, it may be worth delaying termination until you’ve conducted a proper investigation (and depending on the nature of the misconduct, you may have an obligation to investigate in any case). Conversely, if you’ve already terminated without cause and later uncover concerning behaviour, seek legal advice immediately before asserting after-acquired cause in litigation.

The Bottom Line

After-acquired cause can be a valuable defence in the right circumstances, but it is not a silver bullet. Like any just cause allegation, it must be carefully assessed, supported by evidence, and made in good faith. Failing to meet this standard can expose employers to enhanced damages and reputational risks.

If you’re navigating a complex termination situation or considering a just cause defence, our Labour & Employment Group can help. Please contact Matthew E. McCarthy for advice tailored to your organization.