'Diversion of resources… towards this unrelated business venture was a big problem'
A British Columbia Court has upheld the dismissal of a worker who was suspended for doing external work during business hours and then refused to co-operate with the employer’s investigation.
“The big piece was working for this other business during hours that the worker was expected to be performing work for the employer, and she was also asking other employees to perform [external] work,” says Mike Hamata, an employment and labour lawyer at Roper Greyell in Vancouver.
“That diversion of resources from the employer towards this unrelated business venture was a big problem.”
Hired as list manager
Destiny Software Productions was a developer of proprietary internet distribution tools based in Vancouver. In 2007, the worker started doing unpaid administrative work for Destiny in exchange for the use of Destiny’s office space for her crystal business.
The worker was close friends with Destiny’s CEO and had previously been in a romantic relationship with him. She lived at his properties and she registered with the provincial health insurer as the CEO’s common-law spouse, although she admitted that it wasn’t true.
On Aug. 4, 2009, Destiny formally hired the worker as a list manager. Her primary duties involved overseeing and managing a software-based list management platform and supervising one employee. She was no longer allowed to work on her crystal business in Destiny’s office.
There was no written employment contract, but Destiny had a code of conduct that required employees to act responsibly, morally, and ethically.
External business
In 2016, Destiny’s CEO purchased a café and general store with a business partner. The worker started doing work for the café and in communications to suppliers and contractors, the worker referred to herself as the CEO’s spouse to ensure they took her seriously.
Starting in January 2017, the worker spent time doing café work during Destiny’s regular office hours. According to the worker, she spent one-to-two hours a day on external work for the café by May. She also sent about 2,700 emails related to café work during business hours.
In April, the worker asked a Destiny employee to help her mock up an electronic logo for the café. She says that she asked him to do it outside of work hours, but there was no evidence to support this.
The worker continued to devote more attention to external café work and, on at least one occasion, stored goods intended for the café at Destiny’s office. The worker said that she felt entitled to do café work during office hours because she regularly worked excess hours for Destiny to manage relationships with Australian and New Zealand contacts.
Employers should be mindful that employees are dedicating their full-time hours to the business that they’re being paid to be engaged in, says a lawyer.
Frequent absences lead to suspension
The worker was also frequently absent from work due to personal and family health problems. She rarely sought managerial approval for time off, and the CFO started monitoring when she was in the office. She also fell behind in signing off her subordinate’s timesheet, providing vacation documentation, and responding to inquiries about corporate credit card receipts.
Destiny’s board of directors requested a business plan from the worker by May 19 to help prepare the company’s 2018 budget.
By June 22, the worker had not provided the business plan and was unable to provide anything when the CFO asked. The same day, Destiny placed the worker on administrative suspension and advised her and the CEO to report for an interview with an investigator on June 23. It was made clear that a failure to attend would be considered insubordinate conduct.
Their legal counsel sent a letter to Destiny stating that the company’s alteration of their positions was “unlawful and improper,” and they would report to work on June 26. If Destiny didn’t restore their access to company email accounts and activate their keycards, they would initiate legal proceedings.
Destiny responded that they were suspended and if they didn’t co-operate with the investigation, it would proceed without their input. The worker and the CEO didn’t respond.
An Ontario restaurant worker fired for buying a stake in bar was awarded 20 months’ pay for wrongful dismissal.
Administrative suspension not disciplinary
Despite the aggressive response from the worker’s counsel, the paid administrative suspension was Destiny’s right to issue as an employer, says Hamata.
“An administrative suspension can be an appropriate thing to do when an investigation is ongoing, and it's not disciplinary,” he says. “It's just to allow an employer to determine facts about what happened before making a decision that may be disciplinary.”
On June 28, the investigator submitted her report and Destiny dismissed the worker for: working on external work during business hours; not performing her responsibilities diligently; failing to provide information as requested by the board of directors; absenteeism without authorization; and failing to co-operate with the investigation.
The worker sued for wrongful dismissal, claiming damages for reasonable notice of 10 to 12 months.
The court had issues with the worker’s credibility, given that she often told people that she was the CEO’s spouse or an owner of the café, which showed “a willingness to misrepresent facts when it serves her interests.”
An Alberta company had just cause to fire a worker after a supervisor heard him over the phone visiting a customer of his private business during work hours.
Duty of service to employer
The court noted that employees had a duty to provide full-time service to their employer unless there was an agreement otherwise, and it had been established in jurisprudence that working for outside businesses during business hours without approval could be just cause.
The evidence, particularly the volume of café-related emails, showed that the worker was performing “substantial” work for the external business during Destiny’s work hours without approval. The worker also diverted Destiny resources for the outside business when she requested another employee help her – the employee would likely have interpreted this as an order since the worker had a close relationship with the CEO and would more likely have done it during work hours, the court said.
“The general expectation is that you devote your full working time during regular business hours to the work of the employer and not to another business, whether or not it's competing - the volume of work she was doing for the other business was pretty remarkable,” she says.
The evidence also showed that the worker did not fall behind on any work or communications before she started working for the café, so the outside work clearly affected her ability to respond to the business plan request, complete timesheet approvals, and send her vacation and credit card documentation on time, the court said.
The court also found that the worker overstated the extent of her excess work hours for Destiny, as the CFO discovered that she was actually in a negative position from taking excessive vacation days.
In addition, the worker did not do any work on the 2018 business plan as directed by the board of directors, which was a failure to keep up with her responsibilities, said the court.
Although there were no clear guidelines or policies related to external work, the court found that the worker should have known that it was prohibited during work hours when she was no longer permitted to work on her crystal business at the office once she became a full-time Destiny employee.
An Ontario arbitrator substituted a one-year suspension for dismissal of a worker fired for calling in sick to work another job.
Failure to co-operate damaged relationship
The court noted that the suspension was administrative, not disciplinary. The investigation would have given the worker a chance to explain her actions, but she refused to participate or admit to her misconduct. This further damaged an “already largely destroyed trust relationship,” said the court.
The court determined that there was no need for Destiny to provide further warnings and it had just cause for termination. The worker’s claim was dismissed with the exception of a nominal award of $1,000 related to the delayed delivery of share certificates from a share purchase plan.
Although it ended up not being an issue, Destiny’s lack of a specific policy addressing such circumstances could have been problematic, says Hamata.
“If the intention is to prevent employees from taking other employment simultaneously with their current employment, then that should be captured in an employment agreement or in a policy,” he says. “It's easy enough for employers to have a policy that says you're expected to devote your full working time to the interests of the employer.”
“If the worker had been paid hourly rather than by salary and didn't ask other employees to do outside work, I don't think that this would have been misconduct,” adds Hamata. “If doing other work during work hours was during time when she wasn't getting paid, you would need a specific policy to say that that is misconduct.”
