BCCA Relies On Employer Code Of Conduct When Assessing Whether Employer Had Cause To Summarily Dismiss Employee

The importance of applying the contextual approach when deciding whether an employer has cause to summarily dismiss an employee was recently reiterated by the British Columbia Court of Appeal (the “Court”). It allowed the appeal of the employer after the trial judge had found that the employer did not have cause to dismiss the plaintiff. The Court relied upon the well-established principle that senior managerial employees who hold positions of trust will be held to a higher standard than other employees. More significantly, the Court also relied upon the employer’s Code of Business Conduct and Ethics (the “Code of Conduct”) which stated that employees were “to act in an honest and ethical manner at all times” (emphasis the Court’s) when considering whether the summary dismissal was justified.

In Roe v. British Columbia Ferry Services Ltd., 2015 BCCA 1, the plaintiff had been employed for approximately 4.5 years when he was terminated for cause from his position as manager of a ferry terminal. An internal investigation had concluded that he had knowingly provided his daughter’s sports teams with complimentary food vouchers on at least two occasions without prior authorization. This was contrary to the employer’s policy. The plaintiff had also taken steps to conceal his misconduct.

The trial judge found that the plaintiff’s misconduct, when viewed objectively by a reasonable employer in all of the circumstances, was “bordering on trifling” and “relatively minor“. The plaintiff’s conduct, even though dishonest, did not fundamentally undermine the employment relationship. In particular, the trial judge was influenced by the fact that the financial loss suffered by the employer was minimal and his finding that the plaintiff did not benefit personally from his misconduct. In the trial judge’s view, the employer should have imposed a lesser of punishment on the plaintiff. As a result, the judge awarded the plaintiff with 11 months’ notice of dismissal but reduced the award by one month because the employer had found new employment.

On appeal, the Court allowed the appeal and remitted the matter to the trial court to schedule a new trial. The Court found that the judge had made two palpable and overriding errors: (i) he had failed to apply a contextual analysis when reviewing the employer’s allegations of cause; and (ii) he failed to make the necessary findings of fact to resolve the evidentiary disputes between the parties. Instead, the judge had assumed for the purpose of his analysis that the employer’s allegation were true. This failure to make several key findings of fact made a new trial a necessity (an issue that will not be reviewed in detail in this commentary).

The Court began its contextual analysis by reviewing the Supreme Court of Canada’s decision in McKinley v. BC Tel, 2001 SCC 38 [McKinley]. Justice Smith, writing for the Court, stated at paragraph 26 that McKinley:

…set out a two-part test for determining whether an employer is justified in dismissing an employee on the grounds of dishonesty. The court must determine: (i) whether the evidence establishes the employee’s deceitful (dishonest) conduct on a balance of probabilities; and (ii) if so, whether the nature and degree of the dishonesty warrant the employee’s dismissal. Both parts of the test involve factual inquiries (paras. 48-49). Absent palpable and overriding error, it is common ground that an appellate court may not interfere with a trial judge’s findings of fact.

The Court then considered the following assumed facts when applying the contextual analysis:

  • the plaintiff held a position of trust as a senior manager at the terminal site;
  • his responsibilities included the handling and reconciliation of large amounts of cash;
  • he acted as a role model and mentor to the other staff at the terminal;
  • the standards of integrity and honesty, included in the Code the “Code of Conduct”), were essential conditions of the plaintiff’s employment and had been clearly set out by the employer in the plaintiff’s employment contract;
  • the plaintiff knew that his conduct with respect to the vouchers was contrary to the employer’s policy and procedures;
  • the plaintiff knowingly did not seek authorization for his donations of the complimentary vouchers or notify anyone of his actions after the fact;
  • these acts of dishonesty and misappropriation of the employers’ property were premeditated and therefore constituted deceptive behaviour;
  • the plaintiff had engaged in similar acts on at least one prior occasion; and
  • the plaintiff’s actions were in breach of the Code, of the trust reposed in him as a senior employee in a management position, and were unethical.

In allowing the employer’s appeal, the Court wrote at para. 37:

…the judge does not appear to have applied the contextual approach, mandated by McKinley, in assessing whether [the plaintiff’s] misconduct irreconcilably undermined the good faith obligations inherent in the employment relationship (paras. 8-11 of his reasons). That approach, in my view, would have required consideration of: (i) the high standard of conduct expected of [the plaintiff] given the responsibilities and trust attached to his senior management position; (ii) the essential conditions (characterized as “core values”) of integrity and honesty in his employment contract, including the requirement in the Code “to act in an honest and ethical manner at all times” (emphasis added); and (iii) his deliberate concealment of his actions which he later acknowledged to have been wrong and unethical. It was in this context the judge had to consider whether [the plaintiff] assumed misconduct justified his dismissal. In my respectful view, it was the judge’s failure to apply this contextual approach that appears to have led him to commit a palpable and overriding error.

The Court’s emphasis on the plaintiff’s senior position of trust is consistent with the well-established principle that employees who have responsibility for money or are otherwise placed in a position of trust will be held to a much higher standard than other employees. An employee who occupies this type of position is much more likely to be found to have fundamentally breached the employment relationship if he or she acts dishonestly.

What is more interesting is the Court’s reliance on the employer’s Code of Conduct that required employees “to act in an honest and ethical manner at all times“. In McKinley the Supreme Court of Canada explicitly rejected a line of caselaw that had held that dishonesty, in and of itself, is automatically cause for dismissal (see paras 41 to 48).

The issue raised by employer codes of conduct is how much weight, if any, a court should place on a code of conduct when deciding whether an employer has cause to dismiss an employee. Put another way, should an employer be able to use its superior bargaining power to create a workplace code of conduct that allows it to terminate an employee for cause in situations that would not generally rise to the level of cause if the common law were applied?

In contrast to Roe there are decisions where the court has refused to consider an employer’s code of conduct when deciding whether an employer had cause to summarily dismiss an employee. For example, in Tomala v. Wal-Mart Canada Corp., 2005 CanLII 2819 (ONSC) Justice Charbonneau considered the case of a pharmacist who had been terminated for cause by Wal-Mart after a single incident of berating and swearing at other employees. Wal-Mart defended its decision to terminate the pharmacist for cause by arguing that his conduct had breached its code of conduct that required that employees not use any profanity, be respectful and not harass any other employee. Wal-Mart argued that its code of conduct were essential terms of the pharmacist’s employment contract. Justice Charbonneau rejected Wal-Mart’s arguments writing at paragraph 16:

I find that the plaintiff’s conduct that day does not constitute gross misconduct as defined by Wal-Mart standards. In any event, Wal-Mart is not entitled to decide that just any conduct will justify dismissal at law. If Wal-Mart wishes to specify that an employee will be terminated for conduct, which will not generally warrant dismissal at law, it is free to do so but it must then also comply with the reasonable notice provision of the law.

The significance of Roe is that it sends a message to employers that although there is no guarantee that a court will rely upon the provisions of an employer’s code of conduct, a well-drafted policy may be a factor that a court will consider when it applies the contextual approach and decides whether the employer had cause to dismiss an employee.