As we must account for every idle word, so must we account for every idle silence. -Benjamin Franklin
A recent case from British Columbia found that a controller had a duty to bring a dishonest practice to the attention of a new owner of the business. The Court found that by failing to do so, a former controller intentionally continued a dishonest practice and the employer had successfully established after acquired cause for termination.
The plaintiff, Mr. Campbell, was terminated without notice after 14 years service. At the time of termination he was 69 years old and earned approximately $60,000 per year. When Mr. Campbell was hired in 1997, he was the controller and responsible for day-to-day financial dealings. When the company owner, Mr. Harrigan, passed away in 2007, the company was run by a general manager until Mr. Harrigan’s daughter, Ms. Harrigan, took over in 2008. Ms. Harrigan had no experience in operating the company. Ms. Harrigan became concerned when she discovered that Mr. Campbell was separated from his wife, but was using a company gas card for gas for his wife’s car. She met with Mr. Campbell who agreed that the gas card was not a family gas card, but said “I know but I haven’t had a raise in four years and everyone else has.” Ms. Harrigan sent him home while she investigated.
During the investigation, Ms. Harrigan telephoned Mr. Campbell and asked him whether there was any further information that he would like to share with her. He replied “no”. While reviewing his files Ms. Harrigan discovered that Mr. Campbell had submitted medical expenses for his separated spouse which she believed was contrary to the insurer’s policy.
Three days after sending him home, Ms. Harrington met with Mr. Campbell and told him he was terminated. She gave him a termination letter that said:
The reason for the termination of your employment is your unauthorized use of a Petro-Canada Credit Card to regularly fill your wife’s vehicle with gas. …
You were asked by Shelley Harrigan if there were any other financial issues which had not been disclosed. You denied there were, although the Company has determined that you submitted medical expenses on behalf of your wife, although your wife was ineligible to receive benefits under the extended health plans….
Mr. Campbell sued for wrongful dismissal. The company was not successful at trial in arguing that Mr. Campbell was intentionally dishonest in using the gas card, or that he had made any improper medical expense claim.
What was the after acquired cause?
The after acquired cause was rooted in the phone call Ms. Harrigan made to Mr. Campbell where she asked him if there was anything further she should know about his accounting practices. What Mr. Campbell failed to mention was:
- He took two unauthorized $500 cash advances – and, even though he repaid these advances, by failing to disclose them to Ms. Harrigan he had abused his position.
- He made various accounting errors that were discovered by the new controller who replaced him. The greatest of these errors was a variance between the General Ledger and physical year end count of inventories ($700,000) as the accounts had not been properly reconciled for several years. The company established that Mr. Campbell was aware that the inventory was not recorded accurately. Mr. Campbell argued that Mr. Harrigan had encouraged this practice.
The bottom line, however, was that the court said Mr. Campbell had not brought this to the attention of Ms. Harrigan when she took over:
I am satisfied that this, along with the unauthorized salary advances, provides just cause for the plaintiff’s dismissal, notwithstanding that these were not the reasons given to the plaintiff at the time of his dismissal.
What does this mean to employers?
This is not the first time an employer has discovered things after an employee has been terminated. Whether misconduct discovered after an employee has been terminated is enough to justify dismissal can be complex. In this case, both incidents of misconduct went to the root of the employment relationship and the employee’s actions did not survive the McKinley text (i.e., the employer established on a balance of probabilities that the former employee engaged in deceitful conduct and that the nature and degree of the dishonesty warranted his dismissal).
The big takeaway is how the employer dealt with the issue during its investigation. Asking whether there were any other accounting practices that should be reported to the employer resulted in the former employee remaining silent on a few practices that he should have known were inappropriate given his position with the company.
The case is a reminder to fully investigate once red flags are raised. Campbell v. Harrigan Rentals and Equipment Ltd. 2013 BCSC.