'Once the trust is broken in an employment relationship, the court will place a significant amount of weight on that'
An employer had just cause to fire a worker who didn’t report a potential conflict of interest and misled the employer’s investigation into it, an Alberta court has ruled.
The decision gives hope to employers that just cause can still exist for one instance of serious misconduct, according to Jackie Laviolette, a labour and employment lawyer at Mathews Dinsdale in Calgary.
“It illustrates how contextual and fact-specific cause can be - maybe if something had been slightly different, [the employer] may have not been able to prove its case,” says Laviolette. “But overall, I think it's a great precedent in Alberta around breach of trust and conflicts of interest, so employers can take guidance from that.”
Brookfield Residential is an Edmonton-based company that develops planned communities, including the design and construction of houses. The worker was a community manager since 2010 for a company Brookfield acquired in 2015. By 2018, he managed the sales and marketing for a planned community in Calgary. He usually had one or two sales associates reporting to him.
When the worker started working for Brookfield, he signed an acknowledgement of the company’s code of conduct and ethics, along with an anti-bribery and corruption policy, following online training. Brookfield had a zero-tolerance approach to bribery, as it was involved in international industries and organizations, including foreign governments, and had to maintain its reputation.
Conflict of interest
The code of conduct required employees to “avoid situations in which your personal interests conflict, might conflict, or might appear to conflict with the interests of the company.” Employees were also required to identify potential conflicts when they arose and contact management if they were unsure if something could pose a conflict.
In March 2018, the worker was approached multiple times by a representative of California Closets, a company that sells shelving systems and products for home closets. In March, the representative discussed an incentive program related to California Closets products with the worker.
On April 14, Brookfield’s vice-president of business development attended an industry event where he learned of the discussions. He believed that California Closets was offering incentives to Brookfield’s sales staff to prompt them to recommend their products to Brookfield’s customers. As this could involve breaches of the code of conduct and anti-bribery policy, Brookfield launched an investigation.
The investigation involved a search of emails and other records, which revealed two requests by the worker to change orders for two customers, involving the removal of closets from their homes under construction and the substitution of California Closet products.
The company interviewed the worker and two other sales employees. The worker acknowledged that he had conversations with the California Closets representative, but he never felt that he was being offered an incentive to recommend the company’s products to customers.
The worker also acknowledged that he requested change orders that removed closets from two Brookfield projects and replaced them with California Closet shelving, but he said he was advocating for the customers by requesting the changes before work was performed.
Brookfield also contacted California Closets about which Brookfield sales representatives had been offered incentives, and the owner identified the worker.
Termination for cause
Brookfield determined that the worker had violated the code of conduct and anti-bribery policy, breaching its trust and permanently damaging the employment relationship. The company terminated his employment on April 24.
The worker sued for wrongful dismissal, denying that he participated in anything unethical, noting that he didn’t actually receive anything from California Closets. He also argued that, even if he did, it didn’t justify termination for cause.
The worker also sought payment for unpaid commissions plus punitive and aggravated damages. According to the terms of his employment agreement, commissions were earned and staggered over three stages – 50 per cent at “firm sale,” 25 per cent at “staking,” and 25 per cent at closing. The worker argued that he was entitled to commissions for sales he began before his termination but were completed after.
The California Closets representative claimed that he never offered any incentive to the worker, saying that they only discussed an incentive program for condominiums, which the worker didn’t sell.
The court preferred the California Closets owner’s statement to Brookfield over the representative’s claim that no incentives were discussed, noting that it wasn’t credible that incentives for condominiums only were discussed and it came up organically. This evidence indicated that the worker was offered an incentive by California Closets, and he acted on this offer by initiating change orders for customers to use California Closets’ products, the court said. In addition, the worker didn’t mention to Brookfield that he had any discussions about incentive programs, said the court, noting the “relative proximity” of the worker’s meeting with the California Closets representative and the change order requests for the company’s products.
Breach of policy
Even if the worker didn’t receive any benefits prior to his dismissal, his actions created at least the appearance of a conflict of interest of which he didn’t advise management, in breach of Brookfield’s code of conduct and anti-bribery policy, said the court, adding that the worker instead became “a proponent for California Closets thereby increasing the appearance of a conflict of interest.”
The court also found that the worker’s participation in such an incentive program warranted dismissal for cause, as it was a breach of trust between the worker and his employer, and it was incompatible with the employment relationship – particularly given the importance of Brookfield maintaining its reputation and the fact that he supervised sales associates and “controlled the culture” at the sales office.
Brookfield’s decision to terminate the worker’s employment was a proportionate response, the court said, noting that failing to act on the worker’s conduct would have put Brookfield in the position of condoning it, which would be contrary to the objectives of its policies.
“Having a zero-tolerance policy suggests a lack of discretion, which sometimes courts or arbitrators take issue with, but in this case the court put a lot of weight into the fact that [Brookfield] considered a breach very serious misconduct,” says Laviolette. “I think that's why the [anti-bribery] policy, drafted as it was, along with other evidence about how it was implemented in the workplace, illustrated that [Brookfield] was able to hold the worker to a really high standard.”
Laviolette notes that in many just-cause cases, the dispute over whether the penalty is too much, not what happened. But in this case the dispute was over whether the worker participated in a potential bribe, and the court placed a lot of weight on the need to avoid the situation altogether.
“The court found that once the worker was approached, there was an onus on him to bring it forward as a perceived conflict of interest,” she says. “That seemed to be a real issue for the court, separate and apart from what these people actually said or what they agreed to.”
Unpaid commissions
However, the court supported the worker’s claim for unpaid commissions. The employment agreement called for staggered payment of commissions, which were fully earned and payable at each stage, with no condition that the salesperson remain employed at the time of closing. The court determined that the worker was entitled to $80,687.29 in unpaid commissions from all stages of sales in which he was involved before his dismissal, plus vacation pay representing eight per cent of the commissions.
In the drafting of employment agreements, any ambiguity will be interpreted against the employer as the drafter, says Laviolette.
“Like most things in drafting, if an employer wants to put conditions on a payment, it better be very explicit about it, and in this particular case, there was no clause addressing what happened where the salesperson doesn't perform the work in each stage,” she says.
“They didn't have a condition that you had to be employed to receive commission and, based off that, the court essentially gave the benefit of the drafting to the employee and said he earned his commission as it was written.”
The court dismissed the worker’s claims for aggravated and punitive damages, finding no evidence of unfair or bad-faith conduct in the manner of dismissal, evidence of damage to the worker’s reputation or health, or any wrongful acts deserving of punitive damages.
The worker’s claim for wrongful dismissal was dismissed, but Brookfield was ordered to pay the worker for his unpaid commissions and vacation pay, along with interest.
“We know that once the trust is broken in an employment relationship, the court will place a significant amount of weight on that in establishing cause,” says Laviolette. “I feel there's an undertone to this entire decision, wherein the court found that that the worker wasn't trustworthy going forward - the events themselves, coupled with how the worker acted once he was faced with the situation and he didn't bring it forward, resulted in the trust being broken - and that's how they got all the way to just cause.”
