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…

 

 

 

Wrongful Dismissal and Association Employees

Wrongful Dismissal and Associations

Can members of staff associations sue their empl0yers for wrongful dismissal?  According to the B.C. Court of Appeal, the answer is no if there is a valid employment agreement in place and a recognized association.

In the case of Ferrari v. University of British Columbia, the employee had been an Asset and Material Management Supervisor, working for the University of British Columbia.  At the time he was promoted to this supervisory position, he signed an employment agreement.  The agreement included a term that the employee must become a member of the AAPS (Association of Administrative and Professional Staff), which would be the bargaining agent for certain managerial level employees.  AAPS had grievance and arbitration agreements in place with UBC.

In 2010, Mr. Ferrari’s employment was terminated, allegedly for just cause as a result of “fraudulent use and sale of University vehicles.”  Mr. Ferrari denied these allegations and contacted AAPS to file a grievance.  AAPS decided that it would not proceed with a grievance or take the matter to arbitration.  AAPS felt that there was no reasonable prospect of success.  Mr. Ferrari was therefore left without a remedy.  So he filed a wrongful dismissal lawsuit against UBC in the B.C. Supreme Court.

B.C. Supreme Court Decision

UBC brought a motion to stay the proceedings, which would effectively terminate Mr. Ferrari’s lawsuit.  UBC was successful.  The B.C. court held that there was a valid arbitration agreement in place, and Mr. Ferrari was stuck with it even if the association (AAPS) did not take the matter through the process.  The court recognized that since the association was not actually a union, Mr. Ferrari could not complaint to the Labour Relations Board about unfair representation.  Nevertheless, the B.C. court stayed the action and noted that Mr. Ferrari would have the option of bringing a lawsuit against the association for failing in its duty to represent or for breach of fiduciary duty.  The court did not comment on the likelihood of success of either of these types of actions, which would probably be very slim.

B.C. Court of Appeal

Mr. Ferrari appealed to the B.C. Court of Appeal.  He argued that he should not have been treated as a “party” to an arbitration agreement since he had no control over the process and his case was never taken to arbitration.  He also argued that it would run counter to the interests of justice to deny him any kind of remedy.

The Court of Appeal dismissed the appeal for the following reasons:

1.  It held that Mr. Ferrari was a party to the arbitration agreement since his employment agreement incorporated the arbitration agreement by reference.  In other words, this was similar to the situation involving a collective agreement in a unionized context.  Mr. Ferrari had turned over all of his rights of representation to AAPS when he signed the employment agreement.  Ouch!.

2.  While the Court of Appeal speculated that there may be a deficiency int he AAPS by-laws, that would be a matter between Mr. Ferrari and AAPS and would not involve UBC.  In other words, Mr. Ferrari was stuck with the arbitration clause even though AAPS decided not to take the case to arbitration.  The B.C. Court of Appeal reviewed numerous cases in this area, primarily in the unionized context, and concluded that an employee who is represented by an exclusive bargaining unit in this type of situation is simply out of luck if the association will not proceed.  The only remedy is a claim for unfair representation against the association, where the employee must prove that the association has acted in a manner that is “arbitrary, discriminatory or in bad faith.”    Here is the court’s conclusion on this point:

“By accepting employment in an AAPS position, Mr. Ferrari agreed to appoint AAPS his exclusive bargaining agent with the power to decide whether to advance, settle or arbitrate grievances….”

and

“As between Mr. Ferrari and AAPS, it may well be that the Association’s bylaws are inadequate to ensure the necessary scrutiny of the decision not to proceed with his grievance.  However, that is not an issue that arises between Mr. Ferrari and UBC such that Mr. Ferrari should cease to be bound by the arbitration clause.”

Finally the court concluded that “it is well recognized in the history of labour relations that the model of exclusive representation of employees by their association or union carries with it a correlative transfer of authority over the grievance process subject only to the association’s duty of fair representation.”

Conclusion:

This case illustrates the problems with the “exclusive jurisdiction model” of labour relations in Canada in unionized workplaces.  When the union or association is supportive of the employee, the employee has a chance to be reinstated and is provided with representation at no charge.  This can be great and it can sometimes provide a much better remedy than an employee would have had under Canadian common law.

If, however, the union or association chooses not to proceed with a grievance, the employee is left without any real remedy.

The argument that an employee has the alternative of suing the association for “failure to represent” or for “breach of fiduciary duty” is quite unconvincing.  Employees have a very low rate of success in these types of cases, whether at common law or brought as “unfair representation” cases in labour boards across the country.  More often than not, these types of proceedings simply cause the dismissed employee to incur legal fees without getting anywhere.

A dismissed employee should have the right to file a wrongful dismissal lawsuit if the union or association will not proceed or if the employee would prefer this approach.  Given the huge significance of a person’s employment, people should have the right to fight a dismissal decision and to decide how far they wish to go in that fight.  There are many countries in the world in which unionization does not deprive employees of the right to advance their case, even without union backing.

Employers argue that this subjects them to the potential of a multiplicity of proceedings.  While that is true, the Canadian legal system has cost sanctions for lawsuits that are unsuccessful.  There is a balance here between the employer’s right to avoid inconvenience and the fact that employee is left without a remedy when dismissed from a long service position.

Unions and associations also oppose this approach, since they wish to have exclusive control over the bargaining process, relations with the employer and their own costs.  But if the union is not obligated to take the case forward and will not permit the employee to take it forward, this exclusive jurisdiction is useless to some employees, at a time when they most need this support and representation.

The B.C. Court of Appeal decision likely reflects the law as it exists in Canada today.  But maybe it is time for the Supreme Court to revisit this matter and look at other alternatives to “exclusive representation,” particularly in situations involving employees left without real remedies.

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.

 

 

 

Crown Employee Performing Indecent Acts: Ordered Back to Work

When is off-duty conduct considered “just cause” for termination of employment?  This was the question that an arbitrator of the Ontario Grievance Settlement Board recently answered.  The case, Ontario Public Service Employees Union (Richard) and The Crown in right of Ontario (Ministry of Transportation) (GSB#2010-2164), illustrates the high level of misconduct that unionized employers must demonstrate in order to uphold the dismissal of an employee.

In this case, a Transportation Enforcement Officer was convicted of two counts of Performing Indecent Acts.  The employee was dismissed for just cause.  The dismissed two-year employee was caught masturbating in public, on an outdoor trail in the Welland area, near a girls’ school.  Two young girls witnessed the incidents and were “traumatized.”  The grievor was not on duty at the time and was not in uniform…in fact, apparently, he was not actually wearing anything.

At the time of his arrest, and at the hearing of this matter, the grievor maintained that he harboured some animosity towards women and towards his ex-girlfriend in particular.  He was not able to provide any genuine reassurance that this conduct would not continue.  He admitted to ten previous incidents of performing indecent acts, but he had only be charged with four counts and was only convicted on two of these charges.  The grievor, of course, would be regularly required to work with women in his job, including co-employees, police officers and members of the public.  He argued that he should be reinstated and that the employer’s decision to fire for just cause should be overturned.

Arbitrator Loretta Mikus noted that the grievor chose an area that was near a girls’ school and would likely encounter young girls.  However, she found that there was no evidence that he actually assaulted anyone or that he was in possession of any kind of child pornography.  Apparently, he was acting alone at the time he was caught in the act, red-handed.  Moreover, neither the public, nor the employee’s co-workers knew about the case, which was not publicized widely.

At his criminal trial, the grievor was given a conditional discharge of his criminal convictions with a three year probation, including a condition that he stay off of any recreational waterway trails.  The arbitrator held that these acts were at the “lesser” end of acts attracting criminal sanction and that the probationary restrictions would not impede the grievor from being able to perform the duties of his job.

Ultimately, the arbitrator ordered that the grievor be returned to work without back pay.  The grievor had been first suspended in 2008 and had been on a paid leave of absence until the time of his criminal trial in 2010.  After pleading guilty, he was placed on a leave without pay by his employer for almost three years.  As a result of the arbitrator’s award, he has now been ordered back to work without any of the three years’ back pay.

Counsel for the Ministry argued that this kind of case might be quite distasteful for most members of the public who would have thought that this kind of off-duty conduct would be incompatible with the duties and responsibilities of an Enforcement Officer who is required to enforce and uphold the law.  However, the arbitrator felt that the grievor deserved a “second chance” even though he had only been with the Ministry for approximately two years.  This conduct was not “just cause.”

It remains to be seen whether the Ministry will seek judicial review of the decision.  To date, it is probably fortunate for the grievor that the case has not had nearly as much public exposure as his private parts.

 

 

 

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