Firing worker for theft and fraud over false receipts issued to client in crisis for unpaid fees was too harsh: Ontario court
When faced with potential employee misconduct, employers must be careful they get all the facts before making a decision on discipline or dismissal. Workplace investigations are an essential tool to get the facts, but a faulty or unfair investigation can be just as bad as none at all.
A Toronto homeless shelter worker has won more than $170,000 in wrongful dismissal damages after he was fired for theft based on circumstantial evidence and no real proof the worker was involved with the missing money.
Mark Headley, 47, worked at Seaton House, a shelter for homeless men in Toronto run by the city, starting in 1998 as a client service worker and moving on to the position of counsellor and then shift leader. He was respected by both clients and staff and worked with some of the facility’s most difficult clients. Staff considered him “exceptionally client-centred” and management considered him to be “above-average” and able to work indpendently with minimal supervision.
Seaton House ran a long-term program (LTP) that provided accommodation, meals, counselling, medical care and other services to certain clients who had nowhere else to go, including some with mental illnesses.
Most of the clients in the LTP were more than 50 years old and any who had income such as Old Age Security and Ontario Disability Support Program payments were expected to contribute through the monthly payment of maintenance fees that covered rent, meals and services. For clients with regular income, maintenance fees ranged from $415 per month to $701 per month.
Seaton House conducted payout lines every month where clients endorsed their government cheques to the facility and staff gave them the balance after deducting maintenance fees. A few clients who had their own outside bank accounts made cash payments directly to the shift leaders in an office rather than using the payout lines. Official receipts were given for those who endorsed government cheques but not for those who paid cash — this was only done when the shift leaders delivered it to the administration office. Fees paid in cash were kept in envelopes with the clients’ names on them in a lockbox in the shift leader’s office until delivered to administration, which then deposited it into the electronic accounting system. The administration office was only open during regular office hours, so, sometimes, the money was left in the shift leader’s office for days at a time. In addition, informal receipt books were kept, but they were used inconsistently.
Seaton House staffed the LTP on three eight-hour shifts. Headley usually worked a day shift from 7 a.m. to 3 p.m., as the one shift leader on duty.
One particular client had his own bank account and paid $415 per month maintenance fees, but he was a difficult client — he was aggressive, had dementia, drank a lot and was frequently robbed outside of the facility. He didn’t get along with many of the Seaton House staff, but he trusted and liked Headley. Despite his issues, the client felt Seaton House was his home and didn’t want to leave. As a result, if he didn’t pay his maintenance fees in a particular month, he was allowed to stay.
Receipts issued but no record of payments
In late June 2012, the client paid his maintenance fees for July in a payout line. Another staff member was accepting the payments and gave the client a different receipt than Headley usually gave him. The client commented that he liked the “official-looking receipt” and asked if he could have similar receipts for his payments from previous months.
The staff member looked in the electronic accounting system but couldn’t find a record of payment for the months of January, February, April, May or June 2012. The client became upset and retrieved three handwritten receipts from Headley for March, May and June maintenance fees. The staff member brought her concerns over the missing payments to administration.
Headley soon learned of the issue and informed administration that he had written two receipts for the client in question for which there would be no record of money received. This was because the client hadn’t actually paid the maintenance fees as he had been robbed. According to Headley, the client was upset and worried that he might be evicted from Seaton House, so Headley gave him handwritten receipts on the spot to calm him down.
A short time later, the program supervisor assured Headley that “everything is OK” and he didn’t need to worry about it. However, management started looking into it, finding that the client hadn’t paid maintenance fees for five months in 2011 and four months in 2012. It also investigated the way clients’ money was kept, which staff members indicated was often sloppy and disorganized as there was no set procedure.
Headley took two weeks of vacation in early July 2012 to run a youth basketball program. On the last day, the Seaton House program supervisor left a message on his cellphone saying that he shouldn’t come back to the facility and “we don’t want you here anymore.” Headley tried to call back, but the supervisor didn’t answer his phone.
On July 19, Seaton House management held an investigation meeting with Headley, which addressed three receipts given to the client and another receipt for $410 to a different client — the latter which was recorded as in the desk at the end of the shift but never made it to administration. Headley explained again why he provided the receipts, saying the client was “in crisis” in each instance — once after being robbed and another time over potentially being evicted. Headley emphasized that he wasn’t trying to be fraudulent but wanted “to deal with the crisis.” As for the $410 from the different client, Headley said any money he received he put it in the desk in the shift leaders’ office because the safe didn’t work. In addition, management discussed an unidentified $415 paid to administration that could have been a missing payment from the client for May, but this wasn’t confirmed.
Before the end of the meeting, Headley suggested that there were no uniform procedures in place for the administration of maintenance fees and that there was wide access to the shift leaders’ office, which raised other possibilities of why money disappeared.
The week after the investigative meeting, the program supervisor requested that the safe in the shift leaders’ office be fixed and locked when not in use, with “all monies received and placed in the safe using daily safekeeping log” to replace the envelope-in-the-desk system.
A further investigation was conducted to see if other shift leaders in the LTP had issued receipts where there was no corresponding entry in the accounting system. Fifty out of 108 receipts on file from June 2010 and June 2012 were reviewed and none were found to have missing money. However, they found two receipts issued by Headley to another client for $701 each.
Employer searched for evidence of fraud
Seaton House management met with Headley again on Sept. 19 to discuss the additional two receipts for $1,402. Headley, who hadn’t been told what the meeting was about, was frightened by this time. He explained that “any receipts I wrote I would have put the money in the box and would have brought it [to administration]” and he wasn’t the “type of person who would steal from clients.” They asked him about a few other receipts he had issued, although it turned out the money wasn’t missing for most of them.
On Sept. 28, the city terminated Headley’s employment for violating the city’s conflict of interest policy and the Toronto fraud prevention policy. The termination letter stated that the city found 10 receipts he issued without money deposited — and no other shift leaders had any such issues — and that he failed to provide a reasonable explanation and didn’t show any remorse or responsibility for his actions.
The court determined that the city was unable to prove that it had just cause to dismiss Headley. There was no evidence clearly linking Headley to the missing money — the method of safekeeping cash paid by clients for maintenance fees wasn’t formal, the shift leaders’ office was accessible to all staff and the safe was broken. Headley noted these as explanations as for why money could go missing, and Seaton House eventually recognized this when it implemented a formal record-keeping system and fixed the safe, said the court.
The court found that, in its investigation into receipts issued by shift leaders, Seaton House reviewed less than 10 per cent of the total number of expected receipts issued by shift leaders in the two-year period —only 108 were on file, but there could have been up to 480 with about 20 clients with their own accounts paying cash, minus some months where some clients didn’t pay. Instead, the review focused on Headley’s receipts, not all of the shift leaders, making it incomplete. All of this added up to incomplete information with questionable reliability — not sufficient to base a termination decision on, said the court.
The court also noted that Seaton House management didn’t pay attention to other considerations, such as why Headley would issue receipts for cash he intended to steal or not discard them when there was no official receipt retention policy. In addition, there was no way to determine when the money went missing.
“In my view, the city’s failure to marshal sufficient relevant evidence to prove theft, fraud or dishonesty, was and is glaring,” the court said. “I have concluded that [Seaton House’s] investigation was based on false assumptions and inadequate.”
The court noted that it was agreed Headley issued two receipts to the troubled client for a total of $820 that the client didn’t actually pay and this was misconduct. However, he derived no personal benefit from the action and his motivation to do it was based on compassion for the client, who was in crisis. It was not misconduct deserving of dismissal, said the court.
The court found that Headley was entitled to 18 months’ pay in lieu of notice for his 15 years of good service and the high responsibility of his shift leader position. In addition, the city’s manner of dismissal could be reasonably seen to cause mental distress and make it difficult for Headley to find comparable alternative employment. As a result, Headley deserved $15,000 in damages for mental distress and $50,000 for “tangible financial loss cause by the unfair manner of his dismissal.”
The city was ordered to pay Headley $170,117.84 in total, plus interest, for wrongful dismissal.
For more information see:
• Headley v. City of Toronto, 2019 ONSC 4496 (Ont. S.C.J.).
About the Author
Jeffrey R. Smith is the editor of Canadian Employment Law Today. He can be reached at email@example.com, or visit www.employmentlawtoday.com for more information.