It has become increasingly difficult for employers to prove that an employee’s misconduct is serious enough to warrant dismissal for cause. However, in the recent case of Mechalchuk v Galaxy Motors (1990) Ltd [Mechalchuk], the British Columbia Court of Appeal (“BCCA”) upheld the Supreme Court of British Columbia’s (“BCSC”) decision that a senior manager fraudulently expensing $250 in meals justified just cause dismissal. The BCCA found that the employer’s trust was breached within the specific context of the employment relationship.
Background
The employee, the company’s President of Operations, had two meals with his wife totalling approximately $250 during a business trip, which he submitted to the employer for reimbursement (the “Parksville Expense”). The employer’s policy required all claims for reimbursement to be accompanied by a receipt with names of the employees listed. While the employee was only accompanied by his wife for the meals, he wrote on the receipt the names of his colleagues who were not present.
Following the business trip, the employee improperly submitted a different expense for reimbursement, which led to the employer conducting a spot audit to identify other improper claims.
The employer confronted the employee about the Parksville Expense and accused him of fraudulent conduct for listing his colleagues’ names on the receipt. In response, the employee claimed the Chief Financial Officer instructed him to list their names because it was “simpler” and there were “too many receipts”. During the meeting, the employee failed to disclose that his wife was the only party present for the Parksville Expense meals.
The employer dismissed the employee for cause. In the termination letter, the employer noted the employee was “expected to exercise good judgment and uphold the trust inherent in [his] management and fiduciary position”, his misconduct breached his obligations, and the employer lost trust in him.
In response, the employee filed a wrongful dismissal claim.
BCSC Decision
The central issue before the BCSC was whether the employee’s dishonesty regarding the Parksville Expense reached the threshold for misconduct to justify just cause dismissal.
The Supreme Court of Canada in McKinley v BC Tel established the principle that an employee’s dishonesty does not automatically warrant dismissal for cause. When dishonesty is alleged as a ground for just cause, the appropriate test is “whether the employee’s dishonesty gave rise to a breakdown [within the context of the entire] employment relationship”.
In assessing whether the employee’s conduct justified dismissal for cause, the BCSC considered the following factors:
- the standard of conduct expected of the employee given the responsibilities and trust attached to their position;
- the essential conditions of integrity and honesty in the employment contract; and
- any deliberate actions by the employee to conceal their conduct.
The trial judge found that as President of Operations, the employee was a senior manager and his role commanded authority, responsibility, and trust. Further, the Parksville Expense and deception went to the root of the employment relationship despite being a relatively small cost. The trial judge also held that the employee breached the employer’s trust by being repeatedly dishonest instead of confessing to what he had done upon being given an opportunity to explain the Parksville Expense.
Based on those findings, the trial judge held that the employee’s conduct justified dismissal for cause. However, the employee appealed the decision to the BCCA.
BCCA Decision
The BCCA upheld the trial judge’s decision and emphasized that the employer justifiably lost trust and faith in the employee. Specifically, the BCCA focused on the employee’s position and level and responsibility, the severity of submitting a false reimbursement request, as well as the employee’s decision to be untruthful when confronted with the allegations of his fraudulent act. To reach its decision, the BCCA also relied on the employer’s policy, which expressly stated that falsifying records was a serious offence that would lead to dismissal.
Takeaways
While just cause remains a high threshold to meet, Mechalchuk demonstrates the type of misconduct that could be sufficiently serious to warrant dismissal for cause.
Employers should consider the following best practices when dealing with workplace misconduct:
- Implement clear policies: Proactively setting workplace expectations through policy can prevent employee misconduct.
- Investigate: Employers should thoroughly investigate allegations of workplace misconduct. While there may be significant evidence to prove an employee’s misconduct, employers should still give the employee an opportunity to respond to the allegations, to ensure fairness. Additionally, if employees are dishonest during the investigation, the employer can consider this dishonesty in determining the appropriate level of discipline.
- Contextual assessment: Employers must engage in a contextual assessment before dismissing an employee for cause. For example, a single instance of dishonesty regarding a small reimbursement claim was sufficient to dismiss the employee in Mechalchuk for cause. However, employers should approach these decisions on a case-by-case basis, considering key factors about the nature of the employment relationship to determine if the dishonest act truly undermines the trust necessary for maintaining a successful employment relationship.
- Appropriate termination pay: While Mechalchuk was decided under British Columbia’s legislation, Ontario employers should note that conduct justifying dismissal for cause does not automatically deprive an employee of their statutory entitlements under the Employment Standards Act, 2000 [ESA]. Unless the conduct falls within the definition of wilful misconduct or wilful neglect of duty, the employee will retain their minimum entitlements under the ESA, despite being dismissed for cause. While it is very likely that a circumstances such as this, where an employee intentionally submitted a fraudulent expense claim and then failed to admit to the conduct when asked, would be considered wilful misconduct, employers should not jump to conclusions, and would be well-advised to obtain legal advice when contemplating dismissal.
This blog is provided as an information service and summary of workplace legal issues.
This information is not intended as legal advice.
