Is an investigation equal to warnings for just cause?

Employers and HR might want to take note of a recent decision out of B.C. that decided a workplace investigation was equivalent to warnings when it came to just cause.

In Dove v. Destiny Media Technologies Inc., the Supreme Court of British Columbia said an employer was allowed to dismiss an employee with cause, despite the fact that it didn’t provide formal warnings ahead of time.

“An employer’s decision to investigate is reasonably related to the provision of a warning,” said Justice Ward Branch.

Paid work leads to volunteer work

Zashean Dove started doing administrative work at Destiny Software Productions in 2007 (owned by Destiny Media Technologies). She was close friends with its CEO, and also used the office space for her crystal business.

In 2009, Dove was hired by the company as list manager, with the understanding that she would no longer work on her crystal business there. She worked full time for 40 hours per week, with some flexibility in hours but a requirement to be on-site.

However, starting in 2017, issues were raised about her performance after Dove started working for free at a commercial business in Lions Bay purchased by the CEO. The work included doing inventory, ordering supplies, communicating with employees and suppliers, attending trade shows and reviewing sales reports.

Dove said that she did up to an hour per day from January to June 2017 at the Lions Bay business, but said she was entitled to do so because she regularly worked excess hours at Destiny. However, Dove never sought managerial approval for this approach.

When the board of directors requested a report about Destiny’s business processes, Dove failed to provide the information. She was also regularly absent from work during the first six months of 2017, and fell behind on routine tasks.

On June 22, 2017, Dove and the CEO were placed on administrative suspension without pay, but they refused to participate in an investigation by an external investigator.

The investigator delivered her report on June 28, and that same day, Dove was terminated for cause. She filed a wrongful dismissal suit, but the court ultimately agreed with Destiny’s decision.

“Employees have a duty to provide full-time service to their employer unless otherwise agreed. Working for outside business during business hours without approval can be a basis for dismissal,” said Branch.

Dove was “doing substantial LB work during Destiny’s work hours without prior approval from management,” he said. In addition, the work was “broad-reaching” and “impacted her ability to stay current with her Destiny work.”

While there was a need for a warning, Dove “ought to have understood from the surrounding circumstances that her job was in jeopardy if her conduct continued,” said Branch.

“[The investigator] was acting in good faith with an intention to discover the true facts. Her investigation would presumably have given Destiny an opportunity to outline its concerns, and the plaintiff an opportunity to explain her actions.”

Investigation ‘opportunity to explain misconduct’

If someone is found to be working elsewhere and not doing their job well, that really is a performance issue, says Nazeer Mitha, counsel at the Mitha Law Group in Vancouver, who represented the plaintiff.

“When you have a performance issue, the law generally is that unless it's really, really bad, you have to give a warning before you terminate,” he says — but in this case, that didn’t happen.

“What [the judge] says is, ‘Look, the employer set up an investigation, the investigation was [Dove’s] opportunity to explain her misconduct or your concerns about her misconduct, and her failure to cooperate essentially absolves you of having to give a warning.’”

An employer can still prove it's just cause if an employee’s behaviour is egregious, says Mitha.

“But if you've got performance issues, you're wise as an employer — before you pull the trigger and call it cause — to at least give the employee some opportunity to respond, whether you do that by way of a warning, by saying, ‘Hey, stop doing this’ or whether you do that by way of an investigation saying, ‘Here, we're looking into this, what do you have to say?’ in effect.

“I think that's what [the judge] was saying in this case.”

In paragraphs 70 to 74, Branch does a good job of summarizing all the key cases where courts have discussed people working externally from their employment, he says.

“It's a nice, clear, precise guideline on what are the factors that you're going to have to prove in future cases to decide whether somebody’s external work constitutes just cause termination.”

Secondary job interfered with primary role

The rationale in this case seems to have been primarily driven by the fact that the person was provided with an opportunity to participate in the investigation and refused to cooperate, says Jenson Leung, a lawyer at KSW Lawyers in Vancouver.

“Basically, if there had been any sort of stepping back by the employee, or some form of indication that this was a problem that could be addressed with something less than termination, then it's much more likely that the employer wouldn't have been successful in proving just cause since just cause, of course, is something that is only available if the employment relationship is ‘unrepairable.’”

The main problem was the secondary work was interfering with the primary job, he says.

“This person essentially stopped performing key parts of their role with the employer… it would be different if there was a situation where they were moonlighting but there was zero overlap or interference with their primary job — especially when there isn't a specific provision in a contract that prevents that.

“Usually, the starting position is that if it doesn't interfere, then it's OK — in other words, if it doesn't compete, if it doesn't distract from their duties, then that would be much less of an issue.”

If there had been an arrangement with the employer, then that would mean that the employer would arguably have acquiesced to or condoned that behaviour, says Leung.

“Even if they were simply aware of it and didn't do anything about it for a long period of time, then that would likely be something that would significantly help her case.”

Best practice for an employer in that situation is to ensure that they are providing appropriate warning to the employee that this will not be tolerated if it continues to interfere with work, he says.

However, if they’re going to say it’s not permitted going forward, that's a slightly more complicated situation where they should certainly seek legal counsel, says Leung, “because depending on how long it's been going on, it is possible that the employee could argue that it became an implied term of their employment that they be allowed to moonlight.”

Laying out the rules: written contracts and policies

In this case, Dove did not have a written employment agreement with Destiny. But it’s always better for employers to have written contracts, says Mitha, “because if they had a reasonable severance provision, they could have terminated without cause without going through all of this.”

Any rules around moonlighting should be put into the employment contract, if that's going to be the intention, says Leung.

“First of all, having contracts at all would be very important; but, second of all, having a contract that actually covers the terms that essentially matter to both sides is also important to have, because for a lot of employment-related issues, they can be avoided with a clearly drafted contract, because a clearly drafted contract can anticipate and prevent a lot of problems such as moonlighting.”

In almost all circumstances, the expectation is that the employee be given an opportunity to correct their behaviour, he says.

“It definitely makes sense because it essentially adds another layer of protection for the employer, and also adds clarity for the employee, because there are a lot of scenarios where an employee would genuinely be unaware that that was not OK — especially if there wasn't interference between the two roles. So by having these types of conditions set out in a handbook, and preferably also in their employment contract, then that will prevent a lot of this type of misunderstanding.

“And it also gives the employer a much clearer defense when they can point specifically to a condition of their employment being that they not moonlight.”