What Counts as Employee Misconduct?

The decision in Chura v Batten Industries Inc., 2023 BCSC 1040, provides a good outline for both employers and employees of what kind of conduct gives rise to a with cause termination.

With Cause Termination

With cause termination disentitles the employee to any notice pay or severance to which they might otherwise be entitled.

Just cause or with cause termination is considered “capital punishment in employment law” per the BC Supreme Court (Payne v The Kimberley Academy, 2020 BCSC 506 at para. 28).  Accordingly, to justify it, the employee must have conducted themselves in a manner that is seriously incompatible with their duties and fundamentally undermines the employment relationship.  Because this is a high bar, terminations are usually found to be without cause, even if the employer asserts it is with cause.

In Chura, the employee was fired after the employer alleged, she had engaged in misconduct.  She denied any misconduct and alleged wrongful dismissal and breach of duty of good faith.

The employer brought a counterclaim for misuse of corporate accounts and reimbursement of business expenses that it asserted were not authorized and were unrelated to the employment, as well as for breach of fiduciary duty.

Improper Expenses

The Court found that the employee improperly took home a humidifier from the employer’s warehouse and kept a high-end laptop computer after she was terminated, after the employer specifically asked her to return these items.  She also used the employer’s shipping account to ship personal items from the United States and used corporate accounts to purchase items for her own use, including a laptop charger and printer cartridge.

The employee additionally submitted expenses for reimbursement that she did not personally incur, including a restaurant bill that was paid by a client.  Other expenses were simply improper, such as room service charges, bicycle rental for personal purposes, and charges relating to her daughter’s visit to Las Vegas while the employee attended a trade show there.

While each of these expenses were relatively small individually, they demonstrated that the employee was dishonest, and they collectively constituted misconduct.

Breach of Fiduciary Duty & Conflict of Interest

The employee arranged for the employer to contract twice with an outside digital marketing company without disclosing that her husband was paid for those two contracts.  The Court found that recommending the digital marketing company to her employer in those circumstances meant the employee received a secret commission that she was obligated to repay.

Importantly, the Court followed the reasoning in Procon Mining & Tunnelling Ltd. v McNeil, 2010 BCSC 487, to find that as an International Account Manager the employee held a fiduciary duty to the employer despite not being an officer or director.  At a minimum, the Court confirmed this was a conflict of interest between her employment duties to the employer and her own financial gain.

Key Considerations

Where an employee is alleged to have engaged in misconduct, the employer has a duty to investigate what actually happened before terminating the employee.  And where the employer has benefitted from the employee’s conduct, it is likely not misconduct.  The Court did not accept all of the misconduct allegations because some the employer could not prove, and because some were found actually to have been good for the business.  For example, trading products with sales representatives of other companies was within the scope of the employee’s authority and benefitted the employer’s marketing.  Charging her family’s entry fees to the Capilano Suspension Bridge on a visit with an important client was also found to be proper, because the employee was responsible for managing that client relationship and the client brought his own son.

Employees have a responsibility to be honest and to avoid conflicts of interest with their employer.  While it can be tempting to “comp” small personal expenses, it undermines the employer’s trust in the employee and can give rise to with cause termination.

Employers should have clear policies regarding repayment of common employee expenses, including cell phones and laptops used for business.  The reason the Court rejected the employer’s counterclaim relating to the employee seeking repayment of her portion of her family’s cell phone plan because there was no formal or written policy on cell phone reimbursement, for example.

Laptops paid for by the employer will typically belong to the employer.  In this case, the employee used her provided laptop for both personal and business matters, and instead of returning it wiped the hard-drive and kept it.  While the Court did not go so far as to call it theft, the employee’s decision to call it a gift and refuse to return it was contrary to her responsibilities as an employee.  Employers should quickly seek the return of laptops after terminating employees, because they contain valuable business information.

Conflicts of interest can arise where the benefit goes to the spouse or another family member of the employee, not just the employee themselves.  If an employee wants to recommend a service or business to their employer that will benefit them personally, they have an obligation to disclose that to the employer when making the recommendation.

Contact Us

As is clear from Chura, navigating legal issues in the workplace – such as termination of employment – can be incredibly difficult without the right legal advice. If you have questions regarding termination of employment or any other employment law issue, one of our experienced employment law lawyers would be more than happy to discuss them with you.

Kelsey Croft, Associate at Hamilton Duncan What Counts as Employee Misconduct

Kelsey Croft is an associate at Hamilton Duncan whose practice consists of employment, human rights, and workers compensation disputes.

This article is for general information purposes only and is not legal advice. Readers should not act based only on general information or neglect to seek legal advice because of it. Proper legal advice is highly dependent on the facts of each case, and the lawyers at Hamilton Duncan would be pleased to discuss your situation with you and to provide you with advice specific to it.

 

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