Breaking Up is Hard to Do: Court Awards More Than $112K to an Employee Terminated For Breach of Trust

By: Matthew Larsen, Associate; and William Deneault-Rouillard, Student; at Fasken
The BC Supreme Court’s decision offers valuable guidance to employers who are unsure how to proceed when faced with an employee’s misconduct.

Overview

How should an employer respond when they discover an employee’s misconduct? When is misconduct enough for just cause? These are questions that many employers wrestle with. The BC Supreme Court’s decision in Kerr v. Arpac Storage Systems Corporation, 2018 BCSC 704 serves as a cautionary tale for employers who, when faced with misconduct, are inclined to respond to misconduct by summarily terminating the employee and asking questions later.

Facts

In March 2017, Arpac Storage Systems Corporation (“Arpac”) notified Terrance Kerr that his employment was being eliminated and his employment would be terminated effective March 2018.

Mr. Kerr was 70 years of age and held the position of Occupational Health and Safety Manager at the time when he was given notice of the termination of his employment. He had approximately 23 years of discipline free, faithful service with Arpac. However, the relationship had deteriorated between Mr. Kerr and his supervisor and the Court found that Mr. Kerr’s manager no longer saw him as an asset to the company.

Mr. Kerr was shocked and shaken by the notice of termination of his employment. He was diagnosed with reactive depression. His physician provided him a note telling Arpac that Mr. Kerr was not fit to attend work. Over the course of five days while he was not fit to attend work, Mr. Kerr manipulated the data in a spreadsheet to render it inaccurate and deleted hundreds of business and personal emails from his workplace e-mail account.

When confronted by the company, Mr. Kerr apologized through his legal counsel. He explained that his motivation in relation to the deletion of the e-mails was to clear his computer of personal data. He offered to repair the damage upon his return to work or to provide instructions on how the damage could be repaired immediately.

Upon learning of Mr. Kerr’s misconduct, his employer did not conduct an investigation or assess the extent of damage done by Mr. Kerr’s misconduct. Rather, the employer took the position that his conduct was a breach of trust, and on this basis terminated Mr. Kerr’s employment.

Decision

The BC Supreme Court found that Mr. Kerr’s actions warranted discipline but that the company had failed to establish just cause for termination.

The Court noted that just cause is the most serious form of discipline and that each case must be considered on its own facts to determine the appropriate level discipline. The Court found that Mr. Kerr’s employer was predisposed to terminate his employment and failed to take in to account mitigating factors or to consider a lesser form of discipline. Chief among these mitigating factors were:

a) the lack of harm caused by Mr. Kerr’s conduct;
b) the failure to properly consider Mr. Kerr’s medical condition;
c) the failure to properly consider Mr. Kerr’s long record of good service; and
d) the failure to conduct a proper investigation.

Lessons for Employers

  • Just cause is known as the ‘capital punishment’ of employment law. Misconduct, even serious misconduct, does not automatically provide just cause. As the Court in Arpac put it, “Breach of trust cannot be used as a magic incantation which employers can say to negate their legal responsibilities.” An employer faced with an allegation of serious misconduct is not permitted to immediately jump to termination of employment. The employer has a duty to investigate the misconduct and to consider the suitability of lesser discipline.
  • Employers have an obligation to investigate misconduct. An investigation requires that you interview those involved in the alleged incident and those who may have information relevant to the incident. You must interview the employee suspected of misconduct and provide the employee an opportunity to respond to the allegations. A failure to conduct a proper investigation is likely to result in the Court finding in favour of the employee and may also give rise to aggravated and punitive damages.
  • When considering the appropriate level of discipline, it is essential that an employer consider mitigating and aggravating factors. Some factors (this is a non-exhaustive list) are:
    • Does the employee have a past history of misconduct or is the misconduct out of character?
    • Did the misconduct involve dishonesty?
    • Did the employee apologize?
    • What harm, if any, resulted from the misconduct?
    • Is there an external factor, such as a medical condition, which may help explain the conduct?
    • Was the misconduct a spur of the moment or deliberate, prolonged intentional wrongdoing?
  • Just cause is an all or nothing proposition. There is no such thing as “near cause”. Courts will not reduce damages for an employee who engaged in conduct that falls short of just cause.

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