Employer warned employee but didn't look into allegations of trying to move customers to competitor
A British Columbia employer must pay reasonable notice to a dependent contractor it terminated for suspected attempts to transfer customers to a competitor that it didn’t properly investigate, the B.C. Supreme Court has ruled.
Mohammed Khan was a courier truck driver for Ace Courier, a freight and parcel transporting company based in Burnaby, B.C. Ace Courier is a division of Calgary-based All-Can Express.
Khan, as is the case with most drivers for Ace, was an owner/operator who owned his own vehicle while working for Ace. He was assigned a route and had responsibility for providing courier service to customers on that route. As part of his contract, Khan was responsible for all costs associated with his vehicle and Ace paid him by the job. The contract specifically stated Khan was a self-employed contractor — he paid his own income taxes — and would not work for another courier company while working for Ace or for 12 months after he stopped working for Ace.
Khan also wore a company uniform and carried a company-issued telephone. He was paid according to rates Ace set and the Ace logo was on Khan’s truck, despite the fact Khan owned it.
Though Ace was generally pleased with the job Khan did since he started working for Ace in 2007, in early 2012 the company became concerned that he was involved in a competitor company trying to steal Ace customers. The manager met with Khan and advised him another driver had made a complaint and cautioned Khan about trying to transfer business. He had no proof and hadn’t followed up the complaint, so the manager left things at that. Khan denied any wrongdoing.
About two months later, the manager called another meeting with Khan. The manager said he had received information from one of the other drivers that Khan had handed out rate sheets for a competitor at pick-up locations of two customers. The other driver had said two customers had told him that Khan had given the sheets to them while Khan covered his route for him. Khan again denied it and there was no follow-up.
In September 2012, a long-time driver for Ace told the manager Khan offered him a bribe to switch a customer to the competitor. This happened on two occasions, the other driver claimed. The manager met with Khan again and terminated his contract.
The court found Khan owed a duty of fidelity to Ace and it made sense for Ace to be concerned when it received reports of efforts to steal customers. However, it had an obligation to conduct a reasonable investigation into the situation and provide Khan an opportunity to respond to the allegations, which it did not do on any of the occasions — the manager simply met with Khan, warned him the first two times, and fired him the third time.
The court also found the first complaint didn’t implicate Khan at all, but it was assumed it was him because the competitor in question was owned by Khan’s brother. The second complaint was hearsay, but Ace treated it as fact, and the third complaint was from a direct witness but wasn’t investigation, said the court.
The court found Ace had a progressive discipline process that allowed “three strikes” before termination. However, in Khan’s case, the company’s failure to investigate meant it improperly used the process.
“My concern is that, based upon the evidence available to this court, the ‘first strike’ almost certainly involved no misconduct; the ‘second strike’ was of dubious credence. “The ‘third strike’ seems to have had more substance, but by no means can it be said that the case against (Khan) was convincing or overwhelming,” said the court.
The court found Ace’s failure to investigate the allegations against Khan left it without just cause for dismissal. In addition, the court found the reality of the relationship was that Khan was a dependent contractor, and was therefore entitled to reasonable notice.
“I realize that the contract which (Khan) signed at the time of commencing his relationship with Ace clearly stipulates that he is an ‘independent contractor,’” said the court. “With respect, that is not necessarily determinative of the issue, if the consequence of (Khan) signing the document is to significantly circumscribe the rights available to him at law in the event of termination.”