Employer believed manager received kickbacks but instead he just failed to catch overbilling
A Quebec employer must pay a former employee more than $120,000 after it fired him following a fraud investigation that didn’t find any fraud but uncovered negligence in performing his job duties, the Quebec Superior Court has ruled.
Wally Lysecky was a mechanic for United Parcel Service and related companies in Quebec for 20 years, reaching the position of fleet manager for all of Quebec. His responsibility was to keep UPS vehicles in the province running and maintained. This was done in UPS repair shops with sub-contractors supplying specialized services and parts such as tires, motors, transmissions and paint jobs. Lysecky was often recognized for good work and received a number of awards and other recognition.
Lysecky and his assistant had hectic schedules, since whenever a truck needed repairs, they were responsible for getting it up and running as quickly as possible. They were essentially on duty 24 hours a day, seven days a week.
Whenever repairs required the help of a sub-contractor, Lysecky or his assistant would prepare a work order listing what needed to be done. When they received the invoice, they would compare it to the work order and reconcile any discrepancies according to UPS guidelines before sending payment. However, if discrepancies weren’t reconciled, they filed the invoices anyway.
Overpriced invoices raised suspicion of kickbacks
Eventually, UPS became aware of the discrepancies on the invoices due to an anonymous message left on the UPS Canada hotline. Suspicions raised, two representatives from the company’s Canadian head office met with Lysecky’s assistant on Dec. 12, 2005. The UPS representatives had several invoices and work orders that the assistant had submitted showing differences from the company guidelines and told the assistant they suspected Lysecky was receiving kickbacks from a sub-contractor company called L’Atelier du Prof in Sherbrooke, Que.
UPS asked Lysecky’s assistant to write a statement placing the responsibility for the discrepancies with Lysecky and warned he would lose his job if he didn’t. The assistant wrote a statement saying Lysecky didn’t train him properly and the reports all went through Lysecky. He also said Lysecky knew the owner of L’Atelier du Prof before working at UPS and he spent a lot of time during the business day drinking at a nearby bar.
The next day, Dec. 13, Lysecky met with UPS representatives who confronted him with a list of reports and invoices that showed questionable travel expenses and unexpectedly high repair costs from L’Atelier du Prof. They asked Lysecky if he was receiving kickbacks and he denied it. After the meeting, Lysecky was told to go home without returning to the office and was placed on suspension pending the completion of the company’s investigation.
In early January 2006, another UPS executive met with Lysecky and asked about gifts he may have received including cars, Cuban cigars and a fishing rod. Lysecky denied receiving any gifts. The executive also told him UPS had lost $800,000 because of his negligence, though the actual discrepancies between the L’Atelier du Prof invoices and UPS guidelines was closer to $80,000.
Investigation revealed no fraud, just a lack of invoice verification
Lysecky admitted some additional repairs were verbally authorized because there wasn’t time to properly document or verify them. He also said he could have done a better job of checking invoices but continued to deny and fraudulent activity.
UPS was unable to confirm if the extra repairs shown in the invoices were actually needed or not. L’Atelier du Prof couldn’t explain most of the overcharges when asked, but admitted the shop sometimes overcharged once it was discovered Lysecky wasn’t checking the invoices. However, despite the absence of any kickbacks to Lysecky, UPS continued its assumption of fraudulent conduct on his part.
Though its investigation showed Lysecky and his assistant weren’t guilty of the invoice discrepancies and didn’t benefit from them, UPS determined Lysecky was responsible for not catching the overbilling and as a result didn’t live up to his job duties. On Jan. 24, 2006, the company dismissed him for being “grossly negligent” and failing to “comply with the requirements of your duty of loyalty towards your employer in carrying out your job opportunities.” UPS claimed L’Atelier du Prof was overpaid by “hundreds of thousand dollars” and Lysecky “derived a benefit of one sort or another from such overpayment.” UPS also said it was investigating all invoices connected to him and would explore its options for recuperating any losses “including pursuing legal recourse” through the courts.
The court found Lysecky and his assistant acted in good faith from the beginning of the investigation, as evidenced by the fact they had submitted the invoices and work orders themselves. If they had been doing something intentionally shady with the documents, said the court, they wouldn’t have submitted them without trying to cover things up.
The court also found UPS should have been more reasonable in its investigation and realized the hectic environment at the Quebec fleet office could have contributed to the discrepancies, particularly with regards to last-minute changes to repairs on the work orders. The court also said the UPS head office had the same lack of control over invoices since it issued payment for Lysecky’s invoices without verifying them itself.
The court found Lysecky was partly responsible for the invoices and should have done more to verify them, but his failings were not intentional and he wasn’t aware of the overbilling by L’Atelier du Prof.
“Lysecky was not dishonest nor disloyal to his employer,” said the court. “He was perhaps not as efficient as he should have been in examining and double-checking the workers and invoices.”
The court found without dishonest conduct, the employer should investigate all possibilities to correct the employee’s faults before resorting to “the most severe sanction of termination.”
Given Lysecky’s years of service with a clean record with UPS, the court found termination was excessive and he should be given the chance to improve the poor judgment he showed over the invoices. UPS was ordered to pay Lysecky 11 months’ salary, which was the period he was unemployed before starting a new venture, totalling $107,316. UPS was also ordered to pay $20,000 in moral damages for treating him “like a criminal” in its investigation, not stopping rumours about kickbacks and not giving him a second chance with corrective measures rather than dismissal.
For more information see:
•Lysecky v. United Parcel Service of Canada Ltd., 2010 CarswellQue 11352 (Que. S.C.).