On occasion, employers find themselves facing a situation where an employee is suspected of having committed a criminal act such as fraud, theft, pornography, drunk driving, or assault, that has the potential to impact on the workplace, or on the employer’s reputation. These actions can occur either within, or outside, the workplace.

It is settled law in Canada that not every finding of misdoing on the part of an employee is grounds for termination of employment for cause. The employer must first consider whether the wrongdoing in question forms a fundamental breach of the employment relationship for which the only proper remedy is termination of employment.

It may be tempting to handle the matter by simply terminating the employment relationship if and when the police lay charges, and then relying on the decision of the police to lay those charges and any police investigation as support for the decision to terminate. However, even where the police lay criminal charges after conducting their own investigation, this alone will not be grounds to terminate the employment relationship for cause.

In the absence of a clear finding of guilt by the criminal court, for example where the charges are dropped by the Crown, or the court finds find the former employee not guilty, the employer may have no defence to a subsequent wrongful dismissal action. This is particularly the case where there has been no independent investigation by the employer to support the decision to terminate the employment relationship. It is extremely important that in most cases the employer conduct its own independent investigation before coming to a conclusion on the appropriate disciplinary step to take.

Except in the most extreme cases, the decision to terminate employment for cause must be based on the employer’s own investigation and assessment of the situation. This means that the employer or an investigator retained by the employer must meet with the employee, get a full explanation from the employee of the situation and response to any allegations, if necessary interview any witnesses, consider any extenuating circumstance, and then reach a decision on whether or not there are grounds to terminate the employment.

There is no obligation under the Criminal Code on employers whose employees have stolen from them to report all such matters to the police. It is often prudent to consider and balance a number of business implications before deciding whether to report the matter. For example, will involving the police act as a sufficient deterrent to other employees, particularly where the criminal act involves customers or other members of the public? Will it be necessary to involve other employees and possibly customers as witnesses in any subsequent criminal proceedings. How widely may the matter then be publicized? Even if the employer does decide to contact the police, timing is important, as once criminal charges are laid, the employer will likely find it difficult to directly interview the employee, whose lawyer will likely advise him or her not to make any statements. This will seriously interfere in the employer’s ability to conduct its own investigation.

Not long ago the Ontario Court of Appeal considered whether an employer owed a duty of care to an employee who was wrongly accused after a faulty investigation conducted by a third party retained by the employer. In that case, a long time supervisor was fired, immediately handed over to the police and arrested for alleged theft and drug dealing in the workplace, based on the findings of the undercover private investigator. However, the wrong employee was fired and handed over to the police. The actual suspect had a similar name, but was much younger than this employee. The Court declined to hold the employer liable for participating in the negligent workplace investigation. However, the Court did note that, if the employer participated in a negligent investigation knowing the serious consequences of a wrongful charge of criminal conduct against the employee, there was still the possibility that such conduct could meet the requirement for a claim by the wrongfully accused employee of intentional infliction of mental distress.

Once charges have been laid, an employer is faced with whether to allow the employee to continue to work pending resolution of the charges. This will depend on the nature of the charges, and the impact they may have on the workplace and/or the employer’s reputation. For example, where an employee who works in a social services or child care setting is charged with possession of pornography or other sexual related crimes, the employer has to consider its own liability of keeping the employee working pending a determination of guilt. The employer has various options, including placing the employee on a paid or unpaid leave of absence, terminating the employment relationship on a without cause basis by paying out the appropriate notice, or terminating the employment for cause.