Dishonest employees raise trust issues

Employers often treat lying about misconduct more seriously than the misconduct itself

The resignation of British Lord John Browne, the head of BP Group, after he admitted he had been untruthful about the origins of a personal relationship demonstrated the prevalence of employees lying to their employers. Despite an internal investigation which concluded there had been no improper conduct relating to the company, Browne reportedly sacrificed $7.3 million in retirement benefits because he chose to be dishonest to his employer about it.

Recently, Paul Wolfowitz, head of the World Bank, resigned after an internal panel tasked with investigating the lucrative pay and promotion package he arranged for his girlfriend found him guilty of breaking bank rules. The committee also found Wolfowitz had tried to hide the package from top ethics and legal officials within the bank.

Such examples of dishonesty in business are not unique. In the Canadian case Zerr v. North Vancouver (District), Richard Zerr was a senior manager for the district for six years when his employment was terminated for issues arising out of his submission of vehicle mileage logs. As a result of changes to the treatment of car allowances by the Canada Customs and Revenue Agency, district employees in receipt of vehicle allowances were required to not only keep travel logs to support payment of their allowances, but also to prepare a separate form to this effect for audit purposes.

Zerr was asked by North Vancouver’s internal auditor to prepare a justification form for his 2003 vehicle allowance. He instructed his administrative assistant to review his daytimer, determine when he had travelled and calculate his mileage.

Zerr testified his assistant submitted his travel log before he had a chance to review it. Coincidentally, the log indicated Zerr had traveled the exact distance required to qualify for the allowance.

Zerr’s assistant testified she prepared the initial travel log as per his instructions and gave it to him, noting it did not add up to the amount required to justify his allowance. The next day, Zerr returned the log to her with his handwritten changes. She made the changes and submitted the log on his behalf.

The trial judge found that, during the course of an external investigation, Zerr told a KPMG auditor he had not been on the committee that reviewed the district’s mileage policy in light of the CCRA changes, when in fact he had. The judge found this suggested “an attempt to lessen his responsibility for having made claims that he knew were contrary to the district’s policy.” Zerr was fired and he sued the district for wrongful dismissal. The district alleged it had just cause to summarily dismiss him.

The judge found the assistant’s evidence to be “much more convincing” than Zerr’s. It was found to be “beyond coincidence” that Zerr’s “guesstimate” of travel would add up to the exact amount needed to justify his level of vehicle allowance. The judge also found it to be highly unlikely his assistant would have submitted a travel log that she had been asked to prepare from a daytimer without first having sought and obtained his approval.

Interestingly, Zerr was not fired for his travel log transgression. Instead, the district terminated the relationship because it felt he “had fundamentally violated his trust, such that he was no longer suitable to continue to manage his department.” The judge agreed and dismissed Zerr’s wrongful dismissal claim.

As the judge noted in Zerr, “zero tolerance for employee dishonesty is not the law. In some circumstances, a warning or other discipline would be the appropriate course.” However, in this case, Zerr knowingly submitted a false car allowance claim and then blamed his administrative assistant for his conduct. The judge held that, as a result, he could not reasonably expect to retain his position.

What makes these cases so interesting is that one is left wondering whether the employee would still be working if he had simply told the truth about his misconduct in the first place. Certainly, in these circumstances in the past, the answer more often than not is yes. The judge in Zerr suggests as much, noting towards the beginning of the decision Zerr had the option to be honest at the outset by advising his employer he had not kept the required travel log.

So why do employees lie about their behaviour when it seems clear such dishonesty poses a threat to their employment relationship? While it is impossible to say for certain, here are some theories:
• they lie instinctually, in an almost child-like belief their original transgression will not be detected;
• they mistakenly believe the employer will not be able to prove their misconduct and so they see the lie as inconsequential; or
• there is some mental or other psychological issue at play.

Whatever the reason, employers struggling to manage employee misconduct in the workplace must realize they may have one of the above issues to address. Here are some steps employers can take to minimize the impact of this issue:

Emphasize trust, honesty and integrity as important corporate values and communicate this to employees. Some employers even prepare statements which they require all employees to re-read and sign on an annual basis.

Establish clear behaviour policies. Clearly communicate employee behaviour expectations through well-written policies and ensure all employees are educated on these policies.

Thoroughly investigate allegations of employee misconduct and provide the employee with a full and meaningful opportunity to respond to the allegations against him. If the evidence appears to contradict the employee’s version of events, provide him with a further chance to “fess up” before making a final decision about his employment status.

While the above suggestions will not prevent employee dishonesty in the workplace, they might help minimize its occurrence. Taking these steps should help employers create an environment where employees feel they are respected and treated fairly, as well as save employers from some disciplinary headaches. In a tight labour market, these are things which make employers more attractive to prospective recruits.

For more information see:
Zerr v. North Vancouver (District), 2006 CarswellBC 3031 (B.C. S.C).
Christine M. Thomlinson is a ­founding partner of Rubin Thomlinson LLP, a Toronto employment law firm. She can be reached at (416) 847-1814 or

From the archives
Employers are taking an increasingly dim view of employees who lie and make it hard to trust them. Canadian Employment Law Today covered another case in 2004 in which an employee suspected of leaking company information was terminated for willfully lying to his boss about his wife’s job with a competitor.

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