BC Supreme Court Issues Another Warning About Misuse of After-Acquired Cause

In our practice, we often encounter employers facing legal claims after terminating an employee without cause. Often, employers learn about misconduct by the terminated employee after they have been terminated. Employers may then be tempted to leverage that new knowledge in an effort to reduce their own liability by relying on the doctrine of after-acquired cause. As we discussed in our previous article, after-acquired cause can be a powerful but risky tool to rely on.

The decision in Brito v. Ecora Engineering & Environmental Ltd., 2025 BCSC 2047 (“Brito“) provides further insight on how the courts in British Columbia approach these situations, and highlights the practical risks for employers who attempt to advance an after-acquired cause in wrongful dismissal claims.

What is After-Acquired Cause?

After-acquired cause is a legal doctrine that allows an employer to justify a dismissal when serious employee misconduct is discovered after termination (but where that misconduct occurred prior to termination). The threshold for success is generally quite high, as it requires the employer to demonstrate that the misconduct was sufficiently serious that it would have justified termination for cause had it been known at the time of dismissal. The objective test to determine whether an employee’s actions amounted to misconduct was affirmed in Van den Boogaard v. Vancouver Pile Driving Ltd., 2014 BCCA 168 at para. 32, which asks the court to consider: (1) whether the conduct is something a reasonable employer could not be expected to overlook, having regard to the nature and circumstances of the employment; and (2) whether the employment relationship could have viably continued, had the employer known of the conduct.

Overview of Brito

The plaintiff employee in Brito was a professional engineer who had been terminated without cause and paid severance as a result. The employee did not dispute the severance issue but filed a claim for unpaid overtime and other allegedly unpaid wages. The employer denied these claims in its response.

Notably, the employer then filed a counterclaim of its own, alleging after-acquired cause and claiming for repayment of the severance it had already paid the employee. The basis for the alleged cause was a claim that the employee made inappropriate comments to clients. The “inappropriate comments” in question were song lyrics that the employee shared with clients.

The BC Supreme Court upheld the employee’s claim and found that the employer owed almost $45,000 in unpaid wages. The Court then dismissed the employer’s counterclaim for after-acquired cause.

Notably, the Court also awarded punitive damages against the employer, finding that the allegation of after-acquired cause was “meritless and made in bad faith.” The Court found that the song lyrics shared by the employee were “colourful” but “harmless fun” and did not reference the company.

The Court further noted that the claim for after-acquired cause was advanced to deter the plaintiff from pursuing her unpaid wage claims rather than out of a genuine belief that her actions had constituted just cause for termination. These allegations were baseless and threatened the employee’s professional reputation. Consequently, the Court ordered the employer to pay punitive damages.

Key Takeaways

The decision in Brito highlights three practical lessons for employers:

• Arguments Rely on Evidentiary Support – Employers must have credible evidence of serious misconduct before relying on after-acquired cause. Without such evidence, the argument is unlikely to succeed and increase exposure to liability.
• Always Proceed in Good Faith –Attempting to use after-acquired cause as a strategic tool to pressure or intimidate an employee into abandoning a claim of their own may result in the award of aggravated or punitive damages.
• Consider the Risk of Reputational Harm – The courts will consider the potential for reputational harm when evaluating an argument of after-acquired cause. Allegations that may damage an employee’s professional standing will increase the chances of additional damages being awarded.

Conclusion

The decision in Brito serves as a reminder that employers must exercise caution before raising after-acquired cause in litigation. Courts will carefully evaluate the evidence supporting any alleged misconduct, and arguments raised without credible proof or in bad faith can backfire, resulting not only in the rejection of the defence but also in heightened liability.

If your organization is 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 the circumstances.