Some false representations contravene the law; some do not. The law does not pretend to punish everything that is dishonest. That would seriously interfere with business, and, besides, could not be done. The line between honesty and dishonesty is a narrow, shifting one... – Clarence Darrow

Clarence Darrow is an unlikely inspiration for an employer-focused article about dishonest employees. However, Darrow captures a key truth about the employment relationship: the difference between honest and dishonest behaviour in the workplace isn’t easily discernible and can seriously impact your business.

The most important take away from this article is the value of having a clear, well-known workplace policy that covers dishonest employee activity such as theft or fraud.

To protect your business from dishonest employees, you should do at least three things:

  • Implement a workplace policy that clearly defines dishonest conduct and the consequences for it;
  • Make employees aware of the workplace policy and how it will be enforced; and
  • Follow the workplace policy and be consistent when imposing discipline.

Recent decisions of the Nova Scotia Labour Standards Tribunal – now part of the Labour Board of Nova Scotia - involving employee theft emphasize the importance of a workplace policy. It’s helpful to summarize the employee’s legal duty of good faith and honesty and to distinguish between dishonest conduct and poor judgment before reviewing these decisions.

The duty of good faith and honesty

An employee owes its employer a common law duty of good faith and honesty. A breach of this duty may be just cause for dismissal.

An employee’s position with the business will affect the scope of his or her duty of honesty. Generally, an employee in a senior position or position of trust is expected to operate at a higher level of integrity than a lower level employee.

Conduct worthy of dismissal (or not)

An arbitrator or tribunal will distinguish between employee conduct that’s dishonest and that which is simply poor judgment. Dishonest conduct may provide cause for dismissal. Poor judgment generally won’t. In other words, being dishonest is always poor judgment but poor judgment isn’t always dishonest.

As Darrow noted, the line between dishonest behaviour and poor judgment is often blurry. For instance, an Ontario employer justifiably dismissed an employee who inflated his mileage expenses by $300 because the employer refused to pay for a $300 membership to a board of trade. On the other hand, a British Columbia employee was dishonest once confronted with excessive baggage charges and mileage claims but was found to have exercised poor judgment that didn’t warrant dismissal.

It’s not always clear what employee conduct constitutes dishonesty warranting dismissal. However, the Nova Scotia decisions make it clear that a workplace policy plays an important role in upholding employee terminations for dishonest behaviour.

Cigarettes and a bunch of flowers

What do cigarettes and flowers have in common? Theft of both has given employers justifiable grounds to dismiss employees for dishonest conduct. In both situations, a clearly written workplace policy was known to the employee. The existence and knowledge of the workplace policy carried considerable weight in the Tribunal’s decision to uphold the terminations.

In Paul W. Gosse v. Atlantic Wholesalers Limited, a grocery store manager with over 20 years of experience and a clean employment record was dismissed for cause for stealing cigarettes. The Tribunal upheld the dismissal even though the employee offered to pay for the cigarettes after being confronted with video footage of the theft.

The employer had an employee handbook that contained a workplace policy prohibiting products from leaving the store without payment. The handbook made it clear that any violation of this prohibition was serious and subject to disciplinary action, including dismissal. The employee was aware of the policy and had even relied upon it to terminate another store employee one week prior to stealing the cigarettes.

The Nova Scotia Labour Tribunal found that the employee occupied a position of trust and it was his responsibility to uphold the employer’s policies. The employee:

in taking the cigarettes without the intention of paying for them, has demonstrated a revelation of character incompatible with the due and faithful discharge of his duty to his employer...

In Crystal Joy Debay v. Sobeys Group Limited, a seven-year employee with no disciplinary record was dismissed for giving another employee a discount on a floral arrangement, contrary to an employee shopping policy. She sought four weeks’ pay in lieu of notice. The Tribunal dismissed her complaint. The employer was entitled to dismiss the employee for cause.

The employee shopping policy stated that any violation of its terms would lead to termination in all but exceptional circumstances. The employee was fully aware of the policy.

The employee failed to disclose the particulars of the incident when she knew the circumstances of events. The employer interviewed the employee on more than one occasion, reviewed video evidence and spoke to other employees before deciding to terminate the employee.

What this means for you

A workplace policy isn’t necessary to terminate an employee for dishonest behaviour. However, a well-drafted, well-known, and consistently enforced workplace policy can help an employer defend the discipline or discharge of an employee.

The narrow line between dishonesty and honesty is continuously shifting. Employee conduct that’s dishonest today isn’t necessarily dishonest conduct tomorrow. Employers who don’t have a workplace policy dealing with dishonest employee conduct should consider implementing one. Employers with an existing workplace policy should continuously review their policy to ensure it effectively addresses the issue of dishonesty in their workplace.