'The key was that the misconduct was dishonest and deceptive, and repeated over a protracted period of time,' says lawyer
An employer had just cause to fire a worker for dishonest and deceitful misconduct and the worker must pay back more that $15,000 that the employer lost because of that misconduct, the British Columbia Supreme Court has ruled.
What made the worker’s dishonesty so serious was the fact that the worker held a fiduciary position requiring a higher standard of trust and responsibility, says James Kondopulos, partner at Roper Greyell in Vancouver.
“[The worker] had this relationship of several years, she moved into a position of trust, and she came to occupy a position of fiduciary responsibility,” says Kondopulos. “She had the primary relationship with some of the most important customers and she was in a position to have a marked impact on the economic interests of the employer - those are the sorts of things we look at when we're trying to determine fiduciary status.”
“It's a position where the employer is particularly vulnerable to the employee, that's essentially what a fiduciary is,” he adds.
Senior employee
Batten Industries sells and distributes consumer products, including its own signature line of laundry and cleaning products, out of North Vancouver, BC. Batten’s owner was a friend of the worker’s husband and he hired her to work as a receptionist in April 2008.
Over time, the worker’s role expanded to managing Batten’s signature brand of cleaning products, liaising with customers and suppliers, and attending trade shows.
Within a few years, the worker became a senior employee who could exercise discretion and autonomy regarding several aspects of Batten’s business. She was trusted to make decisions on behalf of Batten and to direct other employees, occasionally seeking approval from the owner when necessary and serving as his “right-hand person.”
Batten was a small business with five employees when the worker joined, growing to 10 within a few years. The work environment was informal without written employment contracts or policies.
By 2013, the worker and her husband started experiencing financial difficulties. Batten’s owner lent money to the worker multiple times.
The owner asked the worker to find a new web developer for the company in 2013, so the worker recommended one called WebStager. Unbenownst to Batten, her husband performed contract work for WebStager. When Batten signed a contract for WebStager’s services, the worker’s husband received a commission amount.
Another member of Batten’s sales staff began to have concerns about how the worker was dealing with her business expenses, so she started scrutinizing them after the worker submitted a receipt of a dinner with a client that she knew the client had paid for.
An Ontario court upheld the firing of a worker for theft based on video surveillance footage and the worker’s failure to explain his actions.
Investigation of business expenses
Batten started investigating the worker’s business expenses in December 2016 with the assistance of a charted professional accountant. The owner and the accountant met with the worker on Dec. 15 and advised her that they had concerns about her performance and certain expenses she had charged to the company. The worker was told not to return to work until the investigation was completed.
Batten’s controller and the other sales staff member reviewed the worker’s files and financial records, finding several instances of reimbursements of personal expenses.
On Jan. 11, 2017, Batten terminated the worker for just cause. The termination letter outlined eight types of misconduct, including:
- Knowingly submitting receipts for dinners, room service meals, and other expenses that were personal
- Charging Batten for her family’s cellphone data plan and personal phone upgrade
- Charging personal items to the company credit card and accounts
- Charging flights and hotel rooms for herself and her daughter to the company credit card
- Trading Batten products for products from other companies for personal use
- Removing products from the warehouse for her personal use, including a $200 humidifier
- Regularly working less than a 40-hour week, which affected her performance
- Retained an IT consultant (WebStager) who supplied a kickback for her personal benefit and to the detriment of the company – the owner became aware of the worker’s conflict of interest at the time of termination.
The worker sued for wrongful dismissal and alleged that Batten breached its duty of good faith through malicious and unfair conduct.
The court noted that Batten did not have a written policy governing business expenses and receipts were submitted for reimbursement on an honour system. However, the evidence pointed to the worker inappropriately submitting the client-paid dinner receipt for reimbursement and the worker’s reasoning lacked credibility, as there was no reason to pick up the receipt when she didn’t pay, said the court.
Several fraudulent benefit claims provided just cause to fire an Ontario worker, an arbitrator ruled.
‘Cavalier attitude’ about work expenses
The court found that the evidence on the other expenses the worker submitted for reimbursement was mixed, but some things, such as a hotel room for her daughter on a trip and her family’s cellphone plan, were clearly included in the receipts. The worker had a “cavalier attitude” about not separating receipts for business and personal items and “she left it to accounting, and was quite happy to receive reimbursement to which she was not entitled if it was not discovered by them,” the court said.
Outside of the WebStager issue, many of the instances of misconduct may not on their own have constituted grounds for dismissal, but their cumulative effect was serious, says Kondopulos.
“The misconduct in which [the worker] engaged leaves no doubt she engaged in a long-standing pattern of dishonest and deceptive behaviour that meant the employment relationship could no longer be viable,“ he says. “I think the key was that the misconduct was dishonest and deceptive, and repeated over a protracted period of time - that really turns the dial [to just cause],” he says.
As for the WebStager contract, the court found that the worker did not tell the owner about her connection to WebStager and her recommendation was a conflict of interest. The court also agreed that there was a presumption where an employee takes a “bribe or a secret commission,” the true price is likely less than what was paid. This meant that Batten was put at a disadvantage from not paying a competitive price, said the court.
The court also found that the worker had substantial autonomy in carrying out Batten’s sales operations, which gave her a fiduciary obligation to act in the company’s best interests while not putting her own interests before Batten’s, said the court.
A oil sands company had just cause to dismiss a worker who failed to report an incident with heavy equipment, the Alberta Labour Relations Board has ruled.
Heart of the employment relationship
The court determined that the worker’s misconduct in setting up WebStager on its own would be just cause to terminate her employment, as her dishonesty “went to the heart of the employment relationship.” The other instances of misconduct showed a “long-standing pattern of dishonesty and deceptive behaviour that meant the employment relationship could no longer viably exist,” said the court in dismissing the wrongful dismissal claim.
“[The worker] essentially put her personal interests and personal financial interests ahead of the interests of her employer, which is wrong in any scenario but it's particularly wrong in light of the fact she occupied a position with fiduciary responsibility,” says Kondopulos. “And that absolutely drives home just cause for termination of employment.”
The court also accepted a counterclaim from Batten for the losses the company experienced from the worker’s dishonesty. The worker was ordered to pay Batten more than $15,000 in WebStager commissions she and her husband received, plus more than $1,000 more for falsely-claimed expenses such as restaurant and hotel fees.
While Batten was able to recover much of its losses in its counterclaim damages, it’s a caution for small employers in particular who may have an informal workplace and rely too much on one person, says Kondopulos.
“Protective measures to have as an employer include proper enforceable written employment contracts in place with enforceable termination language,” he says. “And, of course, avoid relying so heavily on one individual with no checks and balances in the system – such as independence controls, audit procedures, double-signing protection.”
“There was a lot of trust placed squarely on the worker without any backup measures to protect the employer and, when you see the WebStager issue where she was able to provide for a kickback to Batten’s detriment and to her benefit, that's a clear example of a situation where there could have been some checks and balances in the system to guard against that kind of thing.”
