While the bar to establish cause to terminate employment is often considered extremely high in employment law, the British Columbia Supreme Court recently upheld a termination for cause. When an employee is terminated for cause, the employer must prove that it had just cause for termination – for example, due to an employee’s misconduct. When an employee is terminated for cause and cause is found to exist, there may be no obligation for the employer to provide notice or pay in lieu of notice.*
In Mechalchuk v. Galaxy Motors (1990) Ltd, 2023 BCSC 635, the employee, Mr. Mechalchuk, was the President of Operations for Galaxy Motors (the “Company”) and also had signing authority for the Company. During Mr. Mechalchuk’s employment, there were some concerns raised regarding his expense claims. The owner of the Company investigated and found a number of expense claims that “stood out.” In particular, there was an expense claim for a dinner with two employees and another breakfast meeting with one employee. On his expense claims, Mr. Mechalchuk indicated the names of the employees with whom he allegedly met with. However, the Company believed he had falsely claimed expenses by stating that he was meeting with employees, when this was not the case.
As a result, the Company terminated the employee’s employment, stating:
We have become aware of numerous instances of fraudulent and improper conduct relating to expense claims made by you during your employment. When questioned about these irregularities, you were unable to provide a reasonable explanation. As President of Operations, you are expected to exercise good judgment and uphold the trust inherent in your management and fiduciary position. We consider your conduct to be a fundamental breach of your obligations to Galaxy Motors which has caused us to lose trust and faith in you.
In response, Mr. Mechalchuk brought a claim for wrongful dismissal. In Court, he admitted that the expense claims in question did not involve his colleagues, but rather, his wife. Mr. Mechalchuk argued he had paid for previous business dinners without expensing them to the Company and was advised to submit these expenses to “keep it simple.” The court ultimately found that Mr. Mechalchuk’s evidence regarding the expense claims was “vague,” “lacked genuineness,” and “defied credulity.” The Court considered the dishonesty in relation to the entire circumstances and determined that even though the expenses were small (i.e., $250), the context determined that termination for cause was appropriate. The Court stated:
His position commanded a high level of authority, responsibility, and trust. He breached that trust by submitting false expense receipts and thereafter being untruthful about them when given an opportunity to explain them on July 11, 2022. Moreover, he failed to “come clean” when he had a second opportunity to do so during the meeting on July 13, 2022. His conduct was such that the defendant’s loss of faith and trust in him was justified.
Takeaway
While this case comes out of British Colombia, it is still interesting for Ontario employers. This case shows that the entire context of an employee’s misconduct in relation to the nature of their role is relevant to determining whether cause exists. Terminations for cause can often be difficult to establish and the lawyers at Heeney Vokey LLP are happy to assist with any termination related needs.
*Note: notice may be required under applicable employment legislation.