Common sense is not so common


Adjudicator John McNamee recently upheld an employer’s decision to terminate an employee because:

  • the employee failed to report to his employer that he was carrying on, or had an interest in, different outside businesses; and he provided a business favour for a friend. 
  • It’s important to note that the employer was a bank.  However, the decision also addresses issues that employers in other sectors will want to know more about.

What happened?

In Lodovico Cavan and Royal Bank of Canada, Mr. Cavan, a financial planner, was terminated after approximately 26 years’ service.  Until June 2011, the bank had no performance issues with Mr. Cavan.  On June 8, 2011 it received a letter from counsel at a hospital enclosing an order and a copy of a statement of claim.  The order required the bank to freeze Mr. Cavan’s personal accounts and his business accoutns (he was a sole proprietor of three businesses).  The order also required the bank to freeze the accounts of several other clients including Mr. Cavan’s wife. 

The statement of claim alleged that Mr. Cavan was carrying on businesses outside his employment with the bank and that these businesses had obtained funds fraudulently.  This triggered an investigation of Mr. Cavan’s conduct by the bank in which it concluded that Mr. Cavan should be terminated.  The bank did not terminate Mr. Cavan on the basis of the unproven allegations contained in the statement of claim, but terminated him for violating several workplace policies and for failing to demonstrate remorse for his actions during and after the investigation.  Chief among these were the (1) Code of Conduct and (2) Conflict of Interest policies.  Mr. Cavan claimed unjust dismissal under the Canada Labour Code saying he was “duped” by a Mr. Burella, another of the individuals named in the fraud allegations, and that he was simply a “gullible (or gulled) innocent” and should be excused for failing to comply with bank policies. 

What did the adjudicator do?

Not surprisingly, the adjudicator didn’t buy Mr. Cavan’s defence saying:

Accordingly, I find that the complainant was in breach of the bank’s code of conduct as alleged.  I also reject the ‘defence’ that the complainant was duped, especially in that there is no evidence to sustain it in light of the complainant’s decision not to testify.  In so saying, I can see how a proven assertion that the complainant was a gullible (or gulled) innocent might excuse or mitigate an accusation of fraud, but I do not understand how that gullibility (if it existed) excuses the complainant’s failure to report the existence of the three sole proprietorships and their bank accounts, as well as Mr. Burella’s ongoing involvement with them, to the bank.  I would have thought that, if the complainant truly believed that Mr. Burella’s conduct of the businesses were entirely legitimate, he would have reported them without hesitation and, most likely, opened the bank accounts for them at his own bank.

Adjudicator McNamee also concluded Mr. Cavan’s conduct was serious enough to justify termination notwithstanding a McKinley v. BC Tel “irreconcilable” analysis. 

Why was continued employment irreconcilable?

In a nutshell Mr. Cavan was “…at least in large measure, the author of his own misfortunes”:

  • For 11 of 26 years of employment he was involved in outside businesses when he knew, or should have known, he was obligated to report this to the employer – his failure to report over this period was a “course of conduct upon which he deliberately embarked”;
  • At a minimum, he demonstrated poor judgment and “good judgment was an essential element of the position he held”;
  • He suffered no greater degree of financial hardship than any other employee who loses a job; and,
  • He continually portrayed himself as a victim: whether as having been duped, as an alcoholic, as having some undisclosed mental illness or some other outside influence – he failed to accept any personal responsibility for what lay behind his termination.

What does this mean for employers?

One of the biggest advantages for employees in wrongful dismissal litigation is lengthy service.  This decision highlights that long service is a double edged sword as the employee’s length of service actually worked against the employee.  Mr. Cavan violated policies for a substantial period of time.  However, long service or not, the employer would not have been able to show this was incompatible with his employment if it had not implemented and required acknowledgement of its policies and routinely reminded employee’s of these policies. 

What’s clear in this case is that if employers do not have code of conduct or conflict of interest policy, chances are a termination may not be a slam dunk.  If you don’t have such policies, you’re depending on your employee’s common sense.  Think about what Voltaire said so many years ago: “Common sense is not so common”.