Dismissal Due to Dishonesty Must be Carefully Investigated Prior to Termination

14. October 2020 0

A recent decision from the British Columbia Provincial Court, Zaranski v JR Canada Restaurant Group Ltd, 2020 BCPC 49, illustrates that an employer must not dismiss an employee for dishonesty before thoroughly investigating the allegations.

FACTS

The claimant worked as a Financial Controller for the defendant from May 1, 2017 through to June 27, 2017. Part of her job required her to travel, following which the claimant would expense mileage at the Canada Revenue Agency (CRA) vehicle rate. The defendant’s CEO, LG, approved the claimant’s first expense report, totaling $165.65. He took issue with the second, indicating to the claimant that $770.41 seemed excessive.

On June 25, LG emailed the claimant to request a meeting the next morning. The claimant accepted the invite one hour before the meeting was to occur. The meeting itself was acrimonious. At trial, LG testified that the claimant said LH – an officer of the defendant – gave her approval to claim mileage expenses. The claimant testified that LH simply stated charging at the CRA mileage rate “sounded reasonable.” LH did not recall discussing mileage expenses with the claimant.

The claimant thought LG told her to resign, and LG believed the claimant might have quit. Later that day, LG sent the claimant an email to clarify her employment status. At trial, LG testified that he received no response. The claimant testified that she responded in fewer than two hours that she had not quit, and she produced the email at trial to corroborate her account.

LG then emailed the claimant around 9:00am on June 27 to request another meeting. Receiving no reply, he emailed again at around 10:30am. The claimant responded around 3:30pm, but by that point LG had already terminated her employment. The termination letter, which LG sent just after 6:00pm on June 27, indicated the claimant was dismissed for two reasons: First, that she failed to perform work under her employment contract. Second, that she was dishonest, insubordinate and failed to respond to LG. More specifically, the letter stated she “breached her ‘duty of honesty to the company by submitting expenses which were not previously approved, and falsely stating that (she) had received such approval from an officer of the company.’”

ISSUES

The main issue was whether the defendant had just cause to terminate the claimant’s employment based on her alleged dishonesty. The court also considered whether, in the event the dismissal was unjust, the defendant’s conduct merited an award for aggravated or punitive damages.

LEGAL TEST

Dishonesty

Whether dishonesty is grounds for dismissal is a highly contextual inquiry. The test involves considering whether (1) the employer has enough evidence to establish that the employee was, more likely than not, deceitful; and (2) the nature and degree of dishonesty justify dismissal. The defendant failed to establish that the claimant was dishonest about her mileage expenses conversation with LH or about her responses to LG’s emails following the June 26 meeting.

The court found that the claimant’s mileage claims were transparent. Further, the evidence relating to the mileage expenses discussion with LH was not cogent. The lack of follow up investigation by the defendant meant there was not enough evidence to prove the claimant was dishonest to the point of justifying her dismissal. In the circumstances, the claimant ought to have been given the opportunity to clarify her mileage expenses conversation with LH.

The defendant also failed to prove the claimant was dishonest about her responses to LG’s June 26 and June 27 emails. In relation to the June 27 email, the court found that even though the claimant likely saw it before 3:30pm, her dishonesty did not justify her dismissal. The claimant was simply reluctant to meet with LG given the acrimonious meeting on June 26 which led her to believe her employment was at risk.

Ultimately, the defendant’s decision to dismiss the claimant was not justified because it was based on imperfect and hastily amassed information.

Damages

The defendant agreed that the claimant was entitled to three months’ salary and unpaid wages and vacation pay per her contract. The court awarded a further $5,000 in aggravated damages.

To receive aggravated damages, a claimant must show that her employer’s conduct involved unfairness or bad faith, in the sense it was untruthful, misleading or unduly insensitive. She must also show her employer’s conduct caused mental distress. The court accepted the claimant’s account of feeling shocked, traumatized and emotionally devastated by the allegations of dishonesty, failure to perform work under the contract and subsequent dismissal. The defendant withheld the claimant’s unpaid wages and vacation pay. It then maintained allegations of failure to perform work all the way through trial, only to resile from them in the end. The claimant’s position of trust as financial controller meant the defendant should have been careful not to include baseless allegations in its termination letter.

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A punitive damages award is only available where an employer showed high-handed, malicious, arbitrary or highly reprehensible misconduct and where aggravated damages are not enough to compensate the claimant. In this case, the court declined to award punitive damages, finding that aggravated damages adequately compensated the claimant for the defendant’s undue insensitivity in dismissing her.

Takeaway

An employer has the right to dismiss employees for dishonesty. However, an employer must carefully investigate the alleged dishonesty before deciding to terminate; this involves giving employees an opportunity to explain themselves. If an employer acts too hastily, it may have to pay aggravated or punitive damages in addition to the termination pay owing to the employee.

This update was co-authored by Scott Marcinkow and articling student, Klara Danielson. Looking for more information regarding similar issues? Contact Scott at smarcinkow@harpergrey.com or anyone else listed on the authors page.