Theft of merchandise by employees continues to be a recurring and costly problem for Canadian employers. The courts, however, do acknowledge the seriousness of the issue. Dismissal is often found to be an appropriate disciplinary response, regardless of the value of the items stolen or whether the theft is repeated - unless mitigating factors are present that would justify a lesser penalty.

In Croustilles Yum Yum enr. (division of Aliments Krispy Kernels inc.) v. Roy (PDF - available in French only), the Quebec Superior Court confirmed an employer's right to dismiss a long-serving employee as a result of a single incident of theft of merchandise—in this case, the theft of two bags of chips.

Facts

To combat rising numbers in theft of merchandise by employees, the employer, a manufacturer and distributor of potato chips and other snacks, implemented a number of policies governing the purchase of company products by employees. These policies clearly indicated that employees would be penalized if they left the plant with products for which they had no proof of purchase. More specifically, one policy stated that theft and fraud were completely forbidden and could result in immediate dismissal. All employees were made aware of the existence and content of the policies through signing a receipt for the polices and attending training sessions where the policies were reviewed.

One day before leaving work, an employee with 35 years' seniority put two bags of chips in his lunchbox without paying for them. A co-worker witnessed the incident and reported it to the employer. The employer responded immediately by asking the employee to open his lunchbox before leaving the plant. When the employer saw the two stolen bags of chips in the employee's lunchbox and the employee refused to admit what he had done, the employer suspended the employee temporarily in order to investigate. During that investigation, the employee exhibited behaviour that would lead to his downfall: he displayed a defiant, swaggering and incoherent attitude, he completely refused to cooperate with the investigation, he exhibited a faulty memory and showed a total lack of remorse. As a result of the employee's behaviour, the employer dismissed him as a result of the theft. The dismissal was then grieved by the union, and the arbitrator who considered the case substituted a six-month suspension for the dismissal, largely because of the isolated nature of the incident. The employer then applied for judicial review of the arbitration award, seeking to restore its decision to dismiss the employee.

Decision

The Quebec Superior Court set aside the arbitrator's decision and affirmed the dismissal of the employee. The Court was of the opinion that in order for the arbitrator to substitute a penalty for the one chosen by the employer, the arbitrator had to be dealing with exceptional circumstances leading to the conclusion that the theft had not irreparably damaged the relationship of trust essential to the viability of the employer-employee relationship.

The Court pointed out that theft is a serious offence that may properly be penalized by dismissal, depending on the particular circumstances of each case. It further commented that an employer is in a position to determine whether dismissal is an appropriate penalty having regard to the context of the misconduct - including whether the effect of the employee's dishonesty has irreparably damaged the relationship of trust.

In any event, the Court continued, the penalty chosen by an employer is presumed to be fair and reasonable, and accordingly it is important that a grievance arbitrator demonstrate great restraint before substituting a less severe penalty. The Court stressed that, in order to substitute a penalty, the arbitrator must establish circumstances through which it could be concluded that the relationship of trust had not been irreparably damaged. In this case, there was no such evidence at hand because of the Employee's behaviour during the administrative investigation carried out by the employer. In fact, the arbitrator had found that the only mitigating factor was the fact that this was a single occurrence, and on that basis had modified the penalty because, in his view, the isolated nature of the act meant that the dismissal was too harsh.

In the Court's opinion, this was where the arbitrator erred. The Court issued a reminder that it is settled in the case law that that a single incident of theft is a major problem that can properly result in dismissal. Obviously, a less severe penalty may be adequate in some cases, where there are mitigating circumstances to consider. In the case at hand, however, the employee's conduct during the administrative investigation, including his continuing denial and minimization of what he had done, was actually an aggravating circumstance. The arbitrator should therefore not have intervened to set aside the dismissal.

The Takeaway for Employers

Employers must continue to consider all the circumstances surrounding a theft of merchandise in the workplace by an employee before taking disciplinary action. However, this decision confirms that theft is a sufficiently serious offence to justify immediate dismissal of an employee. The fact that a theft is a single, isolated event is not a mitigating factor to be considered in determining the appropriate penalty, unless there is absence of fraudulent intent on the part of the employee or the employee confessed or cooperated in the investigation.