A frequent question that we deal with from employers in BC is "what is just cause to terminate an employee?" On a basic level, just cause means that the employer has a valid and serious reason to end the employment relationship without notice or pay in lieu of notice.

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In this update, we will review five recent BC employment law decisions where the employers were successful in defending against claims on the basis of just cause. Specifically, the cases involved employees who were terminated for just cause as a result of:

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1. False business expense claims, dishonesty and misconduct;

2. Secret recordings of workplace conversations; and

3. Time theft & side hustle during business hours.

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Termination for False Business Expenses

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In Mechalchuk v Galaxy Motors (1990) Ltd., 2023 BCSC 635, the employee was the president of a car dealership who was terminated as a result of submitting false business expense claims and then being dishonest when confronted about those expenses.

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In this case, the amount of the expenses falsely claimed was low (approximately $250) but the court held that there was just cause as a result of:

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1. The fact that the employee was the most senior employee of the company, and held a position of trust; and

2. The fact that the employee hid his dishonesty from the company and failed to come clean when confronted about the expenses by the CFO.

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Another example of a very recent decision issued on June 16, 2023, dealing with termination for just cause and misconduct is Chura v. Batten Industries Inc., 2023 BCSC 1040.

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Here, the employee was fired after engaging in various forms of dishonest conduct, such as making false expense claims, benefiting personally from trading company products, and misusing corporate accounts. The most significant allegation in this case was that the employee entered into a contract with a website company, without disclosing a conflict of interest, resulting in a kickback to her husband.

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The Court found the employer had just cause to dismiss her, dismissed her claim for damages against the employer, and held:

Taken together, however, the various forms of misconduct in which Ms. Chura engaged leave no doubt that she engaged in a long-standing pattern of dishonest and deceptive behaviour that meant that the employment relationship could no longer viably exist. Simply put, it would be impossible for Mr. Roberts to ever again trust Ms. Chura.

[319]    For these reasons, I dismiss Ms. Chura’s action for wrongful dismissal in its entirety. As a result, I need not consider her damage claims.

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Secret Workplace Recordings = Just Cause

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Shalagin v. Mercer Celgar Limited Partnership, 2022 BCSC 112 was a case involving an employee who worked for the company for over 10 years and was a certified professional accountant (CPA) at the time of his dismissal.

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Although the employer initially dismissed him without cause, it asserted after-acquired cause after discovering that the employee had been secretly recording conversations with his colleagues. In this case, the fact that there were over 135 recordings made by this employee over the course of several years likely played a significant role in the court's decision. Similarly, the court's decision likely hinged in part on the fact that: 1) the employee was a CPA, 2) acted contrary to the Employer's code of conduct, and 3) recorded private conversations with his coworkers despite subsequently acknowledging that he knew that this would make his coworkers uncomfortable.

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The takeaway, in other words, is that secret recordings by an employee, even discovered after the fact, can be just cause for dismissal. However, whether this will in fact be successful will depend on multiple factors including the volume, contents, and purpose of the recordings.

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Time Theft = Just Cause AND Compensation to the Employer?

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In Besse v. Reach CPA Inc, 2023 BCCRT 27, the Civil Resolution Tribunal found that the employee committed time theft and, notably, ordered that the employee pay damages to their employer for that time theft.

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In our view, this is likely an outlier case, as this is one of the first instances that we are aware of in which an employer was awarded damages for time theft (vs. simply being found to have just cause for the termination). Furthermore, as a Civil Resolution Tribunal decision (vs. a BC Supreme Court decision), this decision will not be binding on any of our courts, who may choose to simply ignore the decision.

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In this case, factors that likely assisted the employer significantly in the outcome were:

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1. The employee signed an employment agreement allowing her to work remotely; and

2. The employer in that case was able to prove the exact number of hours that the employee did and did not work, based on a time-tracking software that it had installed (Note: there are important legal and privacy considerations that should be discussed with us prior to implementing such software).

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Moonlighting During Business Hours

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In the recent wrongful dismissal case Dove v Destiny Media Technologies Inc., 2023 BCSC 1032, the boundaries of employees engaging in "side-hustles" during work hours came under scrutiny. The case involved an employee, Ms. Dove, who was terminated for engaging in moonlighting activities during business hours.

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Ms. Dove had a diverse work history in the food industry before joining Destiny Software Productions ("Destiny"), a technology company. During her employment, the she became involved in unpaid work for a café and general store owned by Destiny's CEO and another partner. Conflicting representations emerged regarding her status at the business, but she was referred to as an "owner" in various correspondences. Ms. Dove increasingly devoted time during work hours to tasks related to the side business, leading to concerns about her absenteeism and inability to fulfill important work obligations. She was eventually dismissed from her position at Destiny.

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The court ruled that Destiny had just cause for termination based on a combination of factors, including the volume of evidence showing significant side business work during company hours without approval, the broad reach of the side business work, its impact on Ms. Dove's ability to fulfill her duties at Destiny, and her neglect of a requested business plan she failed to deliver.

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The court emphasized that employees have a duty to provide full-time service to their employer, unless otherwise agreed upon. The ruling concluded that Destiny had just cause for termination and would not award Ms. Dove wrongful dismissal damages.

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In Summary:

This case highlighted the importance of employees' commitment to their employers during work hours and the potential consequences of unauthorized moonlighting. The court decision reaffirmed employers' rights to dismiss employees who engage in outside business activities without proper permission. It serves as a reminder for both employers and employees to understand and adhere to their contractual obligations and ethical responsibilities within the workplace.

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Conclusion

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Despite these cases, it is essential to remember that just cause remains difficult to establish and depends on the facts and circumstances of each case.

Therefore, we highly recommend seeking legal advice before deciding to terminate an employee for just cause, as we will be more likely to be able to assist in assessing and building a strong case for a just cause termination, if appropriate.

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Insights

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1. Dishonesty can be grounds for a just cause termination, especially for senior employees. Even an isolated incident of dishonesty can amount to just cause if it is sufficiently serious and damages the employment relationship beyond repair, especially if the employee fails to show remorse.
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2. Secret recordings of an employee's coworkers (at least, without very good reason) can support a finding of just cause.
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3. Time theft can not only form the basis for just cause, but, in extreme cases, it can even form the basis for a successful counterclaim against the employee. Engaging in unauthorized business activities during work hours can lead to dismissal.

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Note to Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter please contact one of our group members. We communicate all these updates to our clients and readers on our Employer Resources Portal and through monthly Newsletters.