A case decided by the Ontario Superior Court of Justice last month, is a potent reminder of how difficult it is for employers to justify terminations for cause, even when the employee’s workplace behaviour is highly questionable.

In Tsakiris v. Deloitte and Touche LLP (ONSC 4201 Can LII), the Court considered the wrongful dismissal claim of a 33 year old senior manager, with 8 years of service. The accounting firm had fired him for cause, after he allegedly breached its expense claim policy.

Deloitte had a business travel and expense reimbursement policy. The policy allowed employees to be reimbursed for various client-related, and business development expenses. The policy stipulated that filing a fraudulent expense report was cause for immediate dismissal.

Some years into the plaintiff’s employment, a concern arose with respect to his expense claims. The employer undertook its own investigation. The plaintiff eventually admitted that he had routinely altered the supporting receipts that accompanied his expense claims. He would tear off the date and time portion of the receipt, or wrote over it, in order to obscure the date and time. These expenses were almost all charged to a client.

The plaintiff explained that he believed that his expenses were appropriate. For example, on one occasion, he expensed a meal with his girlfriend, after his supervisor told him that to do that, because he had put in a lot of work that weekend.

The employer decided not to terminate the employee at that time, and to give him a second chance. However, it issued a letter of reprimand and warning. For the two subsequent months, the plaintiff’s expenses were in line. However, at month three, he submitted expenses that were problematic. There were meal receipts charged to clients on which the attendees had nothing to do with the client or work being done for the client. The employer concluded that this violated the policy, as well as the warning letter the plaintiff had received. It terminated the plaintiff for cause. It did not ask for the employee’s explanation of the expense reports, or the perceived anomalies with them, prior to letting him go.

At trial, the employee said that the expenses related to recruitment and business development activities, and he had charged them to client matters, because he did not know where else to put them. He also indicated that if a new matter was eventually opened, he would transfer the expense to that new matter. Testimony of other witnesses at trial confirmed that this was a common practice at the firm. In addition, the plaintiff said that he had never been instructed on the use of nonclient codes. These expense claims, unlike the earlier ones on which the plaintiff had been warned, did not obscure the date and time.

The employer argued that the expense report was created well after the expenses were actually incurred, and given the employee’s past conduct, showed a recklessness that went to the heart of the employment relationship.

While the trial judge did not entirely accept the plaintiff’s explanation, he found in favour of him. He stated that it is the employer’s onus to prove cause, and that:

The defendant did not confront the plaintiff with these anomalies at the time of his termination and gave the plaintiff no opportunity to explain the context in which the expenses were incurred.

The trial judge also said that the termination for cause was not a proportionate response. He noted that there were other less drastic measures available such as not reimbursing the expenses, or providing the plaintiff with a warning or instruction on the use on non-client codes.

The plaintiff was awarded 10 months’ pay in lieu of notice, plus a small bonus. This amounted to approximately $110,000.

What does this mean for employers?

  1. Even on evidence that an employer thinks is compelling and proves employee misconduct, it is crucial that an employee be given an opportunity to respond before he or she is terminated for cause. The employer’s failure to do so in this case was mentioned repeatedly by the trial judge as a factor he considered important. Had the employer done so, the outcome of this matter might have been different.
  2. The onus of establishing just cause is always on the employer, and it is a high onus indeed. Most cases do not succeed, even on facts such as these, which suggest the employee’s behaviour was problematic. While it is tempting to litigate just cause cases on principle, the outcome for employers is always risky. There are, of course, exceptions, but it is important to recognize that in the vast majority of cases, succeeding in a case of just cause is an uphill battle.
  3. This trial of this matter took 7 days. There were discoveries, and undoubtedly extensive trial preparation on both sides. Depending on whether there was an offer to settle, the defendant may end up paying the judgment, its own legal fees, and a significant portion of the plaintiff’s. The total cost may well be in excess of what the plaintiff would have been prepared to walk away with at the time of termination.