Court finds worker 'could impact bottom line'
A Manitoba worker is liable for more than $400,000 in stolen lottery tickets from her former employer, the Manitoba Court of King’s Bench has ruled.
It’s a win in court for the employer, but the company is unlikely to recover much of its losses from the worker, says Mark Alward, an employment lawyer at Taylor McCaffrey in Winnipeg.
“When it is a larger amount [stolen], the average rank-and-file employee is not going to have the means to be able to pay a judgment like this,” says Alward. “I think a lot of employers realize that even if you obtain a substantial judgment against an employee who's done significant wrong, collection is another is another aspect of it - there's the old saying that you can't get blood from a stone.”
Sportsman’s Stop Esso was a small gas station and convenience store in Dugald, Man. The store hired the worker in 2011 and she was later named assistant manager.
The worker’s job duties included scheduling other employees and placing orders for cigarettes, tobacco, and lottery tickets. She also held the keys to a strong box in which unactivated scratch-and-win lottery tickets were stored. She worked weekdays and was usually the only employee on duty.
Sportsman’s purchased the lottery tickets from the Manitoba Liquor and Lotteries Corporation (MLCC). Tickets could not be sold until they were activated at a lottery terminal in the store. The store was the only charged for the tickets once they were activated and unactivated tickets could be returned.
Lottery ticket losses
In early 2019, Sportsman’s accountant noticed that the store was losing money on lottery sales, one of its primary sources of revenue. Since that was technically impossible, the accountant believed that someone was stealing lottery tickets.
The owners set up a video camera to observe the worker on June 6. They also took inventory of the lottery tickets in the store before the worker’s shift.
The surveillance video showed the worker taking unactivated lottery tickets from behind the cashier’s counter without paying for them, activating them on a lottery terminal, and scratching them to reveal their bar codes. She then used a lottery terminal to scan the bar codes to check for winning tickets.
The worker did this several times during her shift and also took cash from the till. The owners determined that they lost $938 in lottery ticket revenue that day.
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Termination and investigation
The owners immediately terminated the worker’s employment and reported their loss to the Liquor, Gaming and Cannabis Authority of Manitoba (LGCA). The LGCA investigated and found that the worker had activated numerous scratch tickets and $365 was paid from Sportsman’s cash register for winning tickets.
Alward notes that the Manitoba Court of Appeal – in Middelkoop v. Canada Safeway Limited, 2000 MBCA 62 and McCallum v. Saputo, 2021 MBCA 62 - established that conducting an investigation is not always necessary to fire for cause, but the employer might regret it if there isn’t sufficient cause and the employee sues for wrongful dismissal.
“You may not have to investigate, but it sure is the best practice, because you really want to be sure before you take action such as terminating somebody's employment for cause,” he says.
The LGCA’s investigation also discovered the same pattern of ticket activations and checking whenever the worker was working, going back to the beginning of 2019. When the worker was not working, the pattern was normal.
Sportsman’s owners reported the matter to police. The worker initially denied any involvement in the theft, but when she was confronted with the video, she admitted that she had been stealing tickets for about three months. She was charged with one count of theft over $5,000 and pleaded guilty, but then withdrew it.
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More than $400,000 in losses
Sportsman’s accountant researched annual lottery sales from 2013 to June 2018. The store made a profit until September 2015, when its lottery ticket purchases exceeded its sales by a large margin. The accountant calculated Sportsman’s losses on lottery ticket sales since September 2015 to be $425,755.92.
The owners reviewed lottery ticket sales and cross-referenced them with the worker’s schedule. They found the same pattern – when the worker was on duty, ticket activations vastly exceeded sales and winning tickets were redeemed more frequently.
Sportsman’s filed a lawsuit against the worker seeking to recover damages for its loss of lottery ticket sales and a declaration that she committed the theft while acting in a fiduciary capacity. With the latter, the worker’s liability would not be released in the event of her bankruptcy.
The worker denied she stole lottery tickets and that her store clerk position had any fiduciary duties. She suggested that other employees or customers could have stolen tickets or the store’s losses were from unsold but activated tickets.
The worker also claimed that she had a gambling addiction and video depicted the extent of her addiction. She said that she had intended to leave an IOU for the tickets but had forgotten.
An employer was not entitled to hold back a worker’s final paycheque to cover his theft, the Nova Scotia Labour Board ruled.
No reasonable explanation
The court noted that the worker initially admitted to police that she had stolen lottery tickets and she didn’t provide any reasonable alternative explanations – there was no evidence anyone else stole any, and unsold tickets would have been returned to the MLCC unactivated.
The court also found that the worker’s gambling addiction helped explain her behaviour, and there was nothing indicating that she intended to pay for the tickets she took on the video.
The court determined that there was “no logical explanation” for the pattern of lottery ticket activations, checking, and redemptions other than the worker stealing them.
The court also accepted Sportsman’s calculation of its losses from the theft. The accountant acknowledged that the figure couldn’t be exact, but the extensive research of records and the LGCA’s investigation made it a reasonable estimation, the court said.
As for the worker’s fiduciary duties, the court said that the worker didn’t hold a position that normally gave rise to such duties and her responsibilities were consistent with a “mere employee.” However, her job involved handling valuable lottery tickets with no supervision, which gave her “discretionary power to affect Sportsman’s interests.” Since the worker was entrusted with that power, she was under a fiduciary obligation not to abuse it, said the court.
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Discretionary power
“This employee [was involved in] a number of the key aspects of the business such as ordering lottery tickets, and she was in a position where the employer was vulnerable to her doing something like this,” says Alward. “That discretionary power was from being entrusted with lottery tickets and [the worker] was under a fiduciary obligation not to abuse it by stealing them.”
“The majority of employees are not fiduciaries, but it was this particular relationship which put the employer in a vulnerable position where [the worker] could actually impact its bottom line - that's what put her in a fiduciary capacity here,” he adds.
The court found that the worker’s liability for the theft arose in a fiduciary capacity, but it disagreed that punitive damages were warranted, pointing out that the worker already faced “public opprobrium, crushing civil liability, and the possibility of criminal liability.”
The court determined that the worker was liable for $425,755.92 for her lottery ticket theft.
The case is a reminder for employers to review financial statements regularly and thoroughly, as well as employee’s performance, says Alward.
“When you are trusting an employee, you need to ensure that the employee is someone who’s worth trusting, and that means reviewing the work that they do on a fairly regular basis,” he says. “This is somebody who was given a lot of autonomy for a long period of time and was essentially never supervised.”
Such a proactive approach could save a lot of money, because it’s unlikely that Sportsman’s will be able to recover much of its losses, according to Alward.
“I don't think that there are any winners here - in a situation where an employee steals a lot from you, you're not going to [recover most of your money],” he says. “They're probably going to pursue this [worker] for the rest of her life in order to collect what they can, but I don't think that they're ever going to collect on the full amount.”
