Dealing with suspected employee theft often places an employer in a sticky situation. A recent Alberta Court of Appeal case, 581257 Alberta Ltd. v. Aujla is, however, good news for employers. The court reversed the normal onus of proof, requiring the employees to prove that certain monies they deposited into their bank account were not stolen from their employer.
From 2001 to 2008, an Edmonton liquor store called Crown Liquor North employed husband and wife Balwinder and Harwinder Aujla as cashiers. Routine surveillance video in late 2007 suggested that the couple was failing to deposit all sale proceeds into the till. Additional security cameras were installed. More evidence of theft was obtained.
The biggest problem for Crown Liquor was proving how much money had been stolen. Not only did the thefts occur in small amounts over seven years, but it was done by the Aujlas while they were alone in the store. It was impossible to tell from Crown Liquor’s own records exactly how much money they had stolen.
Rather than relying on its own records, Crown Liquor relied on the records of the Aujlas. The Aujlas were questioned under oath. Their bank records were obtained and analyzed. The Aujlas ultimately failed to explain how $116,000 had been deposited into their accounts over the seven-year period. Crown Liquor used this $116,000 figure as the basis for its claim to recover stolen funds.
Although the trial judge readily accepted that theft had occurred, she did not accept Crown Liquor’s method of calculating the amount stolen. The employer argued that the Aujlas were fiduciaries, that is, employed in highly responsible positions of trust. That would shift the onus of proof onto them. Rather than the employer having to prove the amount stolen, Crown argued that the Aujlas should be required to prove that the $116,000 was not stolen.
The trial judge disagreed. She found that as cashiers, the Aujlas were not employed in fiduciary positions. This finding meant that Crown Liquor had to prove the amounts stolen. For the most part, it could not conclusively do so. The trial judge awarded Crown Liquor only $15,000. This was based on what could be proven with the surveillance records.
The Alberta Court of Appeal overturned the trial judge’s finding on fiduciary duties. Although courts usually tend to limit the scope of fiduciary duties in employment situations, this is often where an employer is trying to restrict a former employee from competing. The Court distinguished these cases from the situation at hand. The Aujlas were left alone in the store and responsible for the actual proceeds of the business, including cash. While a cashier position is not normally associated with fiduciary duties, the Aujlas were in a fiduciary position regarding the handling of money.
Once the Court found that a fiduciary duty existed and that the employer had made all reasonable efforts to establish the amount stolen, the onus shifted to the Aujlas to disprove that the $116,000 was stolen from their employer. Regarding “reasonable efforts”, the Court stated that this requirement varies according to the facts of the case. The Court also ruled that “reasonable efforts” did not mean that the employer had to exhaust all avenues before the onus would shift onto the fiduciary employees.
Although the Court of Appeal ruled that the Aujlas breached their fiduciary duties, it refused to rule on the actual amount of damages. It sent the case back to the lower court for a re-trial on that issue.
Lessons for Employers
The Court of Appeal’s employer-friendly decision is important for several reasons. Most obviously, it confirms that in cases of employee theft, the burden may sometimes shift to the employee to prove that the alleged funds were not stolen from the employer. Further, an employer does not have to exhaust all avenues to determine how much might have been stolen before this burden shifts. Rather, the employer merely has to engage in reasonable efforts.
In addition to this reassuring finding, the decision is notable for its interpretation of fiduciary duties. The extension of fiduciary duties to employees who would not normally qualify as being employed in a fiduciary position (ie: employees who are not senior officers or directors) is important. In this case, the finding of fiduciary duty was based on a specific employee duty - the handling of cash - rather than their overall roles and job descriptions. While this seems like a natural conclusion given the facts, the finding opens the door for future arguments that employees other than senior managers may have fiduciary obligations.