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2020-04-14T17:56:36-04:00 April 14, 2020|Employment Law|

Just Cause, Investigations and Exemplary Damages

The Provincial Court of British Columbia recently considered the issue of exemplary damages where the employer alleges just cause for termination, but fails to meet the onus upon it.  The case is Zaranski v. JR Canada Restaurant Group Ltd., 2020 BCPC 49. 

The plaintiff commenced employment with JR Canada on April 26, 2017 as the Financial Controller.  She signed an employment contract that included a severance provision allowing the employer to terminate her employment, without just cause, on three (3) months salary.  From May 1, 2017 through to June 27, 2017, the plaintiff worked for JR Canada out of her home office.  The plaintiff filed two expense reports in May and June 2017 in which she charged her employer for various expenses associated with her employment duties, including mileage at the CRA vehicle rate of 0.54 cents per kilometre.  The first report claimed mileage in the amount of $165.65.  The second claimed mileage of $770.41.

The CEO approved the claim but not before commenting to the plaintiff that the mileage charges seemed excessive. The plaintiff agreed but advised to the effect that she was not going to use her personal vehicle to do company work for free. The issue was subject to further discussion. A meeting, which was acrimonious, took place in early June to discuss the expense claim. The meeting ended in confusion.  According to the Court:

[The plaintiff] was left with the impression [the CEO] had told her to resign, though she testified she thought he would eventually cool off. [The CEO] testified he thought [the plaintiff] might have quit. Later that day, he sent her an email to confirm his thinking. [The CEO] testified he got no response. [The plaintiff] testified she responded in less than two hours indicating she had not quit. She produced an email to that effect in this trial.

The plaintiff and CEO exchanged email on June 26 and 27, 2020 with a view to scheduling a meeting.  On June 27, 2020, the plaintiff emailed indicating that she could meet on June 28, 2020 at a time convenient to the CEO.  However, having made up his mind to terminate the plaintiff’s employment, the CEO emailed her a termination letter at 6:16 p.m. on June 27, 2017.

There were two (2) reasons for the termination though, at trial, JR Canada resiled from at least one of the reasons. The employer argued that it terminated the plaintiff’s employment for dishonesty, insubordination and lack of response.

The court, notwithstanding the termination letter, determined that the issue before it was whether the employer had met its onus of proving that the plaintiff had been dismissed for just caused based on “dishonesty and/or insubordination, in which I would include the alleged lack of response”.

The company alleged that the plaintiff was untruthful when she told the CEO that she had spoken with an officer of the company during the negotiation of her contract of employment and that he had “approved” her mileage claims. The company also submitted that the plaintiff was insubordinate in the meeting with the CEO and made her employment untenable when she subsequently failed to respond to the CEO’s emails after the meeting until 3:27 p.m. on June 27, 2017.  As noted above, the plaintiff says she did respond and produced an email to that effect in this trial.  The defendant denied that this was sent.  There was considerable disagreement on the evidence, including about what happened at the meeting on at which insubordination is alleged to have occurred.

Dishonesty

The court relied on the seminal case of the Supreme Court of Canada in McKinley v. BC Tel, 2001 SCC 38 (CanLII) and the “contextual approach” to just cause.  Not every act of proven dishonesty will be sufficient to support a termination for just cause.  As the court in Zaranski put it:

… in deciding whether dismissal for dishonesty is justified, a court must consider first whether the evidence establishes the employee’s deceitful conduct on a balance of probabilities and secondly, if so, whether the nature and degree of the dishonesty warranted dismissal.

As noted, the employers bears the onus of proving on a balance of probabilities the conduct and that it amounts to just cause for the imposition of discipline.  The court considered the “degree” of proof required where the employer alleges dishonesty and relies on the following comment from Ram v. The Michael Lacombe Group Inc., 2017 BCSC 212:

59 Where criminal conduct or dishonesty is relied on as a ground for termination, the court must engage in a vigorous assessment of the evidence and will require “particularly cogent evidence” to conclude that it is more likely than not that the misconduct actually occurred: Price v. 481530 BC Ltd., 2016 BCSC 1940 at para. 180; Porta v. Weyerhaeuser Canada Ltd., 2001 BCSC 1480 at para. 10.

The court in Zaranski also considered cases where the employer investigation into the allegations of just cause was fatally flawed.  For example in Porta v. Weyerhaeuser Canada Ltd., 2001 BCSC 1480.  In the Zaranski case, the court considered the meeting and what was disclosed during the meeting about a discussion with an officer during the firing process and commented:

… the lack of any sort of follow up investigation in this case by [the employer] regarding [the plaintiff’s] alleged misrepresentation means there is insufficient evidence on which this court can conclude [the plaintiff] was dishonest to the point of justifying her dismissal. In the circumstances, once [the CEO] heard from [the company’s officer], [the plaintiff] ought to have been given the opportunity to clarify her comments. It may have cleared matters up; it may have led to justification for her dismissal.

In the end, the court concluded that “[the CEO’s] to terminate [the plaintiff’s] employment was precipitous. It was based on imperfect and hastily amassed information, some of which was erroneous, such as [the plaintiff’s] alleged breach of her Contract terms.”  There was no just cause for the termination.

Exemplary Damages

The plaintiff testified that she felt shocked, traumatized and emotionally devastated by the termination and, particularly devastated by the allegations of “dishonesty, and the further allegation in the termination notice that she had not performed the work in the Contract.”  Compounding this was that the employer “had refused to pay out her vacation entitlement and final pay, as well as to provide her with her Record of Employment (“ROE”).”  The reason for this is because the employer believed that the plaintiff “had in her possession company property” and, therefore, “it withheld [the plaintiffs] unpaid wages and vacation pay, as well as her ROE until the property was returned.” 

The plaintiff argued that this conduct and the manner of dismissal justified an award of aggravated damages.  These damages are compensatory and are recoverable if they were contemplated by the parties at the time they entered the contract.  Mental distress or hurt feelings caused by the dismissal aren’t recoverable.  As the Supreme Court of Canada noted in Keays v. Honda Canada 2008 SCC 39:

Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”

The court in Zaranski put it this way:

… in order to establish the claim to aggravated damages in this case, [the plaintiff] must show [the employer’s] conduct in dismissing her was unfair or in bad faith, in the sense it was untruthful, misleading or unduly insensitive. If so, [the plaintiff] must also show she suffered mental distress because of the way in which she was dismissed.

The plaintiff alleged that the employer was “both untruthful and misleading when it stated in its termination letter that it was dismissing her both for dishonesty and breach of her employment contract”. These allegations, it was suggested, were maintained through trial, only to be altered slightly during closing argument.  Further, the plaintiff relied on the fact that the employer withheld her unpaid wages, vacation pay and ROE.

In the circumstances, the court concluded that the employer had acted in an unduly insensitive manner in the termination.  For example, it commented that before terminating an employee (particularly one in a position of trust), the employer ought to “have been much more careful before making” allegations of dishonesty and including in the termination letter matters that were, according to the court. baseless where only a cursory investigation was undertaken. 

The court awarded the plaintiff $5000 in aggravated damages as a result of the manner of dismissal. 

The court dismissed the plaintiff’s claim for punitive damages after finding that the “award for aggravated damages compensates [the plaintiff] for [the employer’s] conduct in dismissing her”.  Further, the court found that there was “no conduct that rises to the level required to also warrant an award of punitive damages”.

In the end, the plaintiff was awarded compensation under the contract of employment in the amount of $20,000, aggravated damages totalling $5,000, her unpaid wages and vacation pay in the amount of $1,906.17 and her reasonable costs and expenses in the litigation plus court ordered interest.

Lessons

Just cause is the capital punishment of employment law.  The employer bears the onus of proving the conduct relied upon and that it rises to the level of just cause.  It is not every act of dishonesty, misconduct, incompetence etc… that will support a termination.  The contextual approach in McKinley must be applied in every case.

The Zaranski case is a reminder that employers should not allege just cause unless they are confident that they have “the goods”.  There is legal meaning behind the words “just cause” with a well developed definition and approach at all levels of court.  Even where the misconduct rises to the level of just cause, termination is not automatic.  

Before asserting just cause in support of a termination, it is critical that the employer undertake a thorough and focussed investigation into the allegations.  Acting precipitously and without a full and complete understanding of the evidence, including reconciling conflicting evidence, will open the door to a judge to overturn the termination and, potentially, open the employer up to an award of exemplary damages, in addition to the usual damages that flow from the dismissal.  Each case must, of course, be considered on its own facts.

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