Theft and Just Cause: Better Prove It!

Is theft just cause for termination of employment in Canada?  It might be.  But employers looking to support a just cause case with allegations of theft must be able to prove that they have built a very solid, airtight case.  Otherwise, the dismissed employee may well succeed with a wrongful dismissal claim and win substantial damages.

The recent case of Dennis v. Ontario Lottery and Gaming Corporation (2014) ONSC 3882 demonstrates just how high the bar may be for Ontario employers.

The plaintiff, Brenda Dennis, was a security manager for the defendant, the OLG.  She had worked for the OLG for more than 13 years in a senior position, supervising some 55 employees.

Ms Dennis was dismissed on what was, initially, a without cause basis.  She was offered a severance package of just under one year’s pay.  She signed off on the package and waited for her settlement funds.

However, it came to light that Ms Dennis had been in charge of arranging Wonderland tickets for OLG employees, for the social committee.  This was not an official part of her job duties.  However, in performing this role, Ms Dennis apparently “borrowed” more than $1,000 from the social committee’s Wonderland ticket proceeds.  She needed the money to pay debt she had incurred after becoming the victim of a Nigerian scam.  She gave evidence that she had always intended to repay the money.

Before paying out Ms Dennis’ severance, OLG discovered that there was a shortfall of more than $1,000 from this Wonderland ticket arrangement.  It questioned Ms Dennis and decided to withhold the agreed upon severance pending a further investigation.

Ms Dennis was charged criminally with theft but the charges were ultimately dropped.  However, OLG continued to maintain that Ms Dennis had stolen the money and that this would constitute just cause.  It refused to pay out the agreed upon settlement.  Ms Dennis sued and argued that there was no evidence of theft as she had always intended to repay the money.  She sued for an order that OLG should be required to honour the settlement arrangements.

OLG took the position that this was “after acquired cause” and that it should not have to pay out the funds since it had discovered the “theft.”

After reviewing various just cause decisions, the court came to the conclusion that termination with “just cause” would be “totally disproportionate.”

Justice O’Marra relied on a number of points:

1.  Running the social committee’s Wonderland ticket program was something that was “voluntarily assumed” by the plaintiff was not “an essential condition of her employment contract with the OLG;”

2.  Ms Dennis might not have believed or understood that “borrowing” the money would be criminal;

3.  The victim was Canada’s Wonderland rather than Ms Dennis’ employer;

4.  The employer concluded that Ms Dennis had admitted to theft but she had only admitted to borrowing the money;

5.  The internal investigation was “inadequate and inaccurate;” and

6.  The employer had agree to pay the settlement funds and Ms Dennis had signed a release that OLG had prepared.

The court therefore concluded that OLG could not maintain just cause and that it was required to pay out the agreed upon severance amounts plus legal fees.

The end result is one that seems very charitable for Ms Dennis, the dismissed employee, using the analysis the court proposed.  Obviously, this was a compassionate judge who considered the human elements of the case, the impact on Ms Dennis of being denied severance after 13 years and the circumstances in which Ms Dennis had been the victim of a Nigerian scam.  There is certainly case law support for taking into account these types of considerations.

However, stepping back for a moment, the facts seem to show that Ms Dennis’ actions were quite serious.  She removed and used more than $1,000 from a social committee fund that did not belong to her and only repaid the money after being caught.  For many judges, this may well have met or exceeded the high standard required for an employer to prove just cause, particularly for an employee in a position of trust in a high level security role.

It remains to be seen whether this decision will be appealed and how the Ontario Court of Appeal would approach the case.

The court may well have come to the same result by focusing on the deal that the employee had reached with the employer.  Since Ms Dennis had already signed off on a signed release that the employer had prepared and had already agreed to a deal, it would probably have been fair for the court to say that it was too late for the employer to start making allegations of just cause after the deal was concluded.  Instead, the court delved into issues of just cause and theft.

If the decision is upheld, particularly the court’s analysis of the theft allegations, it will demonstrate quite clearly that wrongful dismissal law in Canada is heavily skewed in favour of employees.  While more often than not that is a good thing, this type of decision will leave some employers wondering whether the just cause bar can ever be reached.

Perhaps the real message that should have been taken from this case is that neither side can reopen a severance deal once the deal has been negotiated and the release has been signed unless there is clear evidence of misrepresentation by one side or the other, which was clearly not an issue in this case.



After-Acquired Cause – Employee Fired For Drug Transactions

What is “after-acquired cause?”  It is a legal doctrine that allows employers to prove just cause – even after they have fired employees on a “without cause” basis.

In other words – the employer decides to fire an employee “without cause” and offers to pay some severance.  The employee challenges the severance amount and goes after the employer for more compensation.  The employer then digs through the employee’s old expense accounts, cell phone transactions, computer files etc., looking for some evidence of wrongdoing.  If the employer finds evidence and it can prove serious wrongdoing, the employer can take the position that the employee had been dismissed for just cause – even if it did not allege this at the time the employee was first fired (because it didn’t know about the misconduct).  This is known as after-acquired cause.

This is exactly what happened in the recent B.C. Court of Appeal decision in Van den Boogaard v. Vancouver Pile Driving Ltd. (2014) BCCA 168.

The plaintiff was working as a project manager.  He was responsible for the safety of the job site in a high risk, heavily regulated industry.  He was also responsible for enforcing the company’s drug policy.  His employment was terminated after he had worked for the company for just over a year.

Initially, the plaintiff was let go without cause and paid four weeks’ pay.  He sued for wrongful dismissal.  After the plaintiff challenged the dismissal, the defendant employer went through the company cell phone that the plaintiff had returned.  It found a series of text messages, sent during work hours, in which the plaintiff was soliciting and procuring drugs from one of the employees he supervised.  The main drugs were Dexedrine and Clonazepam, though others were also mentioned.  All of the drugs were illegal or restricted substances.  The defendant concluded that it had just cause for letting the plaintiff go and relied on the legal doctrine of after-acquired cause.

I have to admit that I am sometimes amazed at the types of cases that make it to trial.  Given the plaintiff’s position, the activities in question, the fact that the conduct was all admitted or proven, the fact that it involved the plaintiff’s subordinate and numerous other factors, this would seem like a no-brainer, that is a virtually unwinnable case.

Yet the plaintiff took the case to trial, using a summary trial procedure in B.C.  Not surprisingly, he lost at trial.  The trial court judge held that the plaintiff’s conduct was seriously incompatible with his duties as a project manager.  The court held that there was just cause, even though it was after-acquired cause.  The court dismissed the case and ordered the plaintiff to pay legal costs to the defendant.

The plaintiff then appealed to the B.C. Court of Appeal.  The CA also had little difficulty upholding the trial court decision unanimously.  The Court concluded that the plaintiff had been involved in “criminal conduct with a person over whom he had supervisory authority…”  This misconduct went to the root of the employment relationship and warranted a dismissal for cause.

This case is a clear example of after-acquired cause.  It can be devastating for an employee, particularly one who was dismissed at first on a “without cause” basis and perhaps even offered severance.

Lessons for Employees and Employers

There are important lessons from this type of decision for both employees and employers.

For employees, this case reinforces the point that lawsuits are always risky.  Employees who challenge a severance package run the risk that employers will go through their expense accounts, computer files, cell phone records and other items with a fine tooth comb.  For most employees, this will not create any major problems.  But for employees who have a reason to be concerned, there is a possibility that a diligent employer will discover the misconduct and rely on it to deny any further severance, using the after acquired cause argument.   Employees should make sure to canvass any such concerns carefully with their legal counsel before deciding whether or not to challenge a severance package.

For employers, this case illustrates the fact that employers can investigate an employee’s conduct carefully, even after the employee has been dismissed on a without cause basis.  If the case has not yet been settled and the employer finds something significant, it can be used to save a substantial amount of money.  The employer must prove that it did not know about the misconduct at the time it dismissed the employee and that the misconduct is serious enough to warrant a cause dismissal.

For employees and employers, this case demonstrates the costs and risks of litigation.  While dismissed employees will often want their day in court, the aggressive pursuit of an ill considered lawsuit can be quite costly for an unemployed plaintiff.


Not My Pot: Wrongfully Dismissed Courier Wins…

A wrongfully dismissed courier has won a lawsuit at the Saskatchewan Court of Appeal.  In Hollander v. Tiger Courier Inc. (2014) SKCA 7, the courier was dismissed when a package of marijuana was delivered to the office addressed to him.  He claimed it was not his package and he had no knowledge of it.  The employer called the police but no charges were laid.  However, the employer terminated the courier and alleged that it had just cause.  It was not clear from the decision what happened to the pot, but presumably the police confiscated it.

The case had an unfortunate twist.  The courier had worked as an employee with the company for ten years.  But after that, he had become an “independent contractor” and worked in that capacity for three years before this incident occurred.  He had signed an independent contractor agreement that provided for thirty days’ notice of any dismissal (without cause).

When the courier was wrongfully dismissed, he sued for breach of contract but he did not sue for wrongful dismissal.  He did not claim that he was really an “employee,” nor did he directly challenge the independent contractor agreement, although he claimed other damages flowing from breach of contract.  If the courier had been able to challenge the contract and prove “wrongful dismissal,” he might have been awarded a year’s pay or more.

However, he only alleged “breach of contract.”  As a result, the courier put himself in a situation where if were to win his lawsuit, he would win thirty days’ pay, as required under his contract.  If he were to lose, he would get nothing.

At trial, the lower court judge held that the package of pot, that had been sent to the courier from his brother in Vancouver, was “clear evidence of illegal or criminal conduct” and this would justify termination, even though no criminal charges were ever laid.

The Court of Appeal disagreed.  It overturned this finding and ruled that there was no clear evidence that the courier himself had engaged in any criminal or other misconduct.  Just because a family member delivers a package of illegal drugs to a person’s workplace, this does not mean that the person has engaged in any improper activity..or at least there is no clear evidence of such misconduct.

However, the Court of Appeal went on to award damages of only thirty days’ compensation, which amounted to the grand total of $2,973.70.   This was really a pyrrhic victory for the plaintiff.  He lost his courier job and got only 30 days’ compensation after 13 years of work.  He also lost the pot, which may well have been worth close to the amount of the judgment.  And we haven’t even mentioned legal fees…




Just Cause: Employer Fails to Prove Allegations of Anti-Semitic Remarks

How difficult is it for employers to prove just cause for dismissal in Ontario?  The recent decision of the Ontario Superior Court in Ludchen v. Stelcrete Industries Ltd. demonstrates, yet again, that the bar is set very high.

Richard Ludchen was a plant superintendent working for the defendant Stelcrete Industries, which is a precast concrete company.  Ludchen had worked for the defendant for 11 years and was earning an annual income of $61,000 at the time of dismissal.  He had a clean disciplinary record.

In 2008, the company made a decision not to recognize Ontario “Family Day” as a day off but to pay employees for an extra day of holiday time in December instead.  In reaction to this announcement, the plaintiff allegedly made some very offensive anti-Semitic remarks about the owners of the company who were Jewish.  The company investigated, determined that the remarks had been made and fired Ludchen for cause.  Ludchen sued for wronful dismissal.

At trial, the judge accepted that, if the company could prove that the remarks had been made, this would have constituted just cause for dismissal.  The court also found that the credibility of the plaintiff was questionable and did not ring true.  However, the court was even more dismissive of the evidence presented by the primary company witness, which it rejected completely.  The company relied on the evidence of its investigator and did not call to the witness stand anyone who actually heard the offensive remarks being made.

Accordingly, the court concluded that the company had failed to prove that the remarks had actually been made.  The court held that Ludchen had been wrongfully dismissed and awarded him 12 months of wrongful dismissal damages, together with compensation for the loss of benefits and his average annual bonus.  The court rejected Ludchen’s request for any kind of additional punitive, aggravated or other damages.

The Ludchen v. Stelcrete Industries decision shows that the onus is squarely on the employers to prove all of the aspects of a just cause case.  Even if the alleged misconduct is very serious and the employee’s denial or explanation does not ring true, the employer must still prove its case clearly.

For dismissed employees, the case is further assurance to plaintiffs and their legal counsel that serious cause allegations do not always hold up in court, even where it appears likely that the misconduct may have occurred.




Wrongful Dismissal: B.C. Court awards $100,000 in Punitive Damages

A British Columbia Supreme Court judge has awarded punitive damages of $100,000 in a wrongful dismissal case.  In the case of Kelly v. Norsemont Mining Inc., released on January 31, 2013, the plaintiff sued for wrongful dismissal and claimed that he was fired because he had insisted on compliance with securities regulations.  The defendant employer alleged that Mr. Kelly was dismissed for cause for failing to perform his duties and for making defamatory statements about the defendant and its management.

One of the alleged grounds for dismissal was a refusal by the plaintiff to provide a complete list of all of the brokers that he knew from previous experience and their detailed personal information to his new employer.  The Court rejected the argument that the plaintiff’s failure to provide this information could justify a cause dismissal.

The plaintiff had also demanded a larger number of stock options than had been agreed upon and had tried to insist that the company pay him $30,000 that he claimed it had agreed to pay.  While the Court held that the company had not actually agreed to pay the $30,000 and did not award this amount at trial, it held that it was reasonable for the plaintiff to demand this sum because company officials had suggested (even if not clearly) that the defendant would pay this amount even if it had not committed to doing so.  The Court also rejected the argument that asking for more stock options was grounds for dismissal.

At trial, the defendant tried to prove that the plaintiff was “hopelessly inept” and “incompetent.”  However, it failed here as well, with the Court finding that the defendant only put forward “unreliable and meagre evidence” in this regard.  It wasn’t even a close call.  Justice Fenlon of the B.C. Supreme Court had little difficulty concluding that the plaintiff was wrongfully dismissed.

In assessing damages, the Court noted that the plaintiff had signed an employment contract with a 30 day termination clause.  Based on other Canadian legal precedents, this clause should not have been valid as it would have fallen below the minimum requirment of the B.C. Employment Standards Act at some point in the future.  Ontario and B.C. courts have ruled that this kind of clause is void and cannot be used to limit an employee’s notice on dismissal.  Nevertheless, the Court here applied the clause and awarded the plaintiff only one month’s pay – $5,000.  The plaintiff had only been employed for about 7 months but a reasonable notice period here, without the clause, probably would have been between three and six months in the circumstances.  The plaintiff was stuck with one month’s pay.  This aspect of the decision is probably easily appealable.  The plaintiff was self-represented and it is likely that he did not bring the appropriate cases to the attention of the Court.

In turning to punitive damages, the B.C. Supreme Court held that the employer did not meet its implied obligations of “good faith and fair dealing.”  Its conduct was “harsh, vindictive, reprehensible and malicious.”

The defendant did not even pay the plaintiff’s salary that was owing at the time of dismissal.  It tried to get the plaintiff to sign a release in exchange for this relatively small amount of back pay that it clearly owed him and when he refused to sign, it withheld the amounts.  It continued to refuse to pay the unpaid salary for more than seven years until the trial of this case.   It refused to return the plaintiff’s personal belongings when it fired him for at least some period of time.  It threatened to “bankrupt” the plaintiff if he sued the defendant.   In the context of the ligitation, the defendant alleged fraud and incompetence in its defence and these grounds were found to be without merit – and they made it difficult for the plaintiff to find work as an advisor.  The Court concluded than an award of $100,000 in punitive damages was appropriate.

The Court’s decision includes a detailed examination of the different grounds for awarding punitive damages, the purpose of awarding these damages and other issues relating to this type of situation.  It seems to me that the award may have been excessive, when compared to other Canadian punitive damages awards, even if there was some basis for an award of  punitive damages.  It may be that some of these damages should have been “general damages” for the breach of the duty of good faith and fair dealing rather than “punitive damages” though ultimately that might not really make a big difference.

What is clear from the decision is that there is a great deal of uncertainty when it comes to general and punitive damages.  This case will likely be appealed the B.C. Court of Appeal and it is difficult to predict what the Court of Appeal might do with this decision.  It seems likely that it would alter the notice award and change it from $5,000 to an amount closer to $20,000 to $30,000.  With respect to the punitive damages award, the Court of Appeal could rule that there was an insufficient basis for awarding these damages or it could uphold the award but reduce the amount to something closer to $20,000 or $25,000.

Ultimately, the case demonsrates that employers that take hard ball positions all the way to trial in wrongful dismissal cases can find themselves embroiled in years of litigation and can face suprisingly aggressive, unexpected punitive damages awards at trial.  For employees, the case does not clearly demonstrate that there is a pot of gold at the end of the rainbow.  This case has been going on for 7 years so far and will now probably take another year or two to make its way through the B.C. Court of Appeal.  The large award may or may not be upheld.  If Mr. Kelly is successful and actually receives his award of $100,000 in punitive damages, this type of case may well make many plaintiffs reluctant to settle their wrongful dismissal cases early on.  However, the outcome remains to be seen.

Fortunately, in the majority of cases, employers and employees try to resolve wrongful dismissal cases on a reasonable basis and manage to avoid facing years of protracted litigation with large scale punitive damages awards.  It would be a harsh world indeed if a very large number of dismissals in Canada were handled in this fashion.



Ontario Court of Appeal: Nasty Letter to Employer Can be Just Cause for Dismissal

A nasty complaint letter written to an employer can be just cause for dismissal, according to a recent ruling of the Ontario Court of Appeal.  Of course, it may take almost 9 years to get that final decision from the Ontario Court system.

The Ontario Court of Appeal released its decision on August 17, 2012 in the case of Bennett v. Cunningham, as the third (and maybe final) of a series of progressively higher Court judgments in this crazy dispute between two family lawyers.  In doing so, the Court of Appeal upheld a Superior Court decision from 2006 in which Ms Bennett’s wrongful dismissal law suit had been dismissed.  After such a long, protracted dispute over a relatively small amount, it appears that the lawyers for both sides are the big winners.

The plaintiff, Dawn Bennett, was a junior family lawyer with limited experience. She began working with the defendant, Karen Cunningham, as an associate lawyer in a small law firm in Mississauga in the summer of 2002.  The arrangement was a commission based arrangement where Ms Bennett would be paid a percentage of amounts that were billed and collected.  Ms Bennett would work regular hours, in an office provided by Ms Cunningham and would have minimal expenses to look after even though she would be treated as an independent contractor.

Shortly after joining the firm, Ms Bennett had a number of complaints about the way the office was run.  According to the Trial Court Judge, some of these issues were addressed.  However, Ms Bennett was not actually getting paid for fees that she was docketing and billing, which was causing her financial difficulties and she became quite concerned about this.

Ms Bennett decided to write a four page letter which she handed to Ms Cunningham on December 21, 2002, just as Ms Cunningham was leaving for a vacation.  She also sent a copy by registered mail, even though she knew that Ms Cunningham would be away.  The letter included a litany of complaints, including a suggestion that Ms Cunningham was “dishonest and negligent” in her docketing practices.

Ms Cunningham returned from vacation and fired Ms Bennett for “just cause.”  Ms Bennett sued for wrongful dismissal.

The parties could not resolve the dispute and conducted a six day trial.  They fought over whether or not Ms Bennett was an employee or an independent contractor.  The Trial Court had little difficulty concluding that the relationship was an employment relationship, or at least an “intermediate” relationship and that Ms Bennett would be entitled to reasonable notice if she was dismissed without cause.

They also fought over unpaid commissions owing, although Ms Cunningham eventually conceded that she owed Ms Bennett about $18,000 in billings that had not yet been paid to Ms Bennett.

Neither of these findings was disturbed by the higher Courts.

But the major issue in dispute was wrongful dismissal.  The Trial Court judge held that the relationship had been irreparably damaged by Ms Bennett’s “insolence” and that there was just cause for dismissal.  On appeal, the Ontario Divisional Court, in 2011, overturned that ruling and held that Ms Bennett’s conduct did not amount to just cause.  On further appeal, in the decision released in August 2012, the Ontario Court of Appeal restored the original Trial Court ruling.  It held that the decision of the Trial Court judge was mainly a finding of fact and that the judge was best situated to make that decision.   It held that the Trial Court judge had reviewed the evidence fully and was entitled to draw the conclusion that Ms Bennett’s conduct was sufficiently inappropriate to warrant a “just cause” finding.

It is noteworthy that even if Ms Bennett had won, she would have only been awarded about $17,000 in wrongful dismissal damages because she had found new employment within a few months.  This is what makes it even more bizarre that the parties spent so much time, energy and money fighting over this case.

So after 9 years of this heated dispute, Ms Bennett wound up with an award for about $18,000 in billings owing to her (plus interest on that amount) and some of her legal costs paid for the trial.  On the other hand, she lost her wrongful dismissal case and wound up owing legal costs to Ms Cunningham for the Appeal.  She also wound up with a harsh public decision about her conduct as an Associate lawyer.

The case is really an example of how parties can become involved in a legal dispute in which legal fees amount to far more than the value of what either side can achieve.

More importantly, the case is a very serious warning message to employees who are thinking of writing complaint letters to their employers.  Employees should be very careful not to use incendiary, harsh or accusatory language, especially if they cannot support the allegations they are making.  Employees should be particularly careful not to accuse their employers of “dishonesty,” “negligence” or other forms of inappropriate conduct unless they can really back up these accusations.  Even then, this type of letter should only be a last resort after other ways of addressing problems have been exhausted.

Perhaps, most importantly, employees should run this type of complaint letter by a lawyer first before sending out an ill conceived letter that could very well result in a just cause dismissal.

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