Many employers seeking advice about when they can “fire” employees for “just cause” without notice or severance are often discouraged with how high the courts set the bar. But the recent decision of the B.C. Court of Appeal in Michaluk v Galaxy Motors, 2023 BCCA 482 emphasizes that in cases of falsifying expenses, it is not so much the amount, as the degree and extent of dishonesty demonstrated that will determine whether just cause is upheld.
Michaluk was a highly successful well-paid CEO of a large car dealership. He frequently incurred business expenses, including for travel and meals. While traveling with his wife, he charged two meals totaling some $250 with his wife to the company, falsely submitting them as meals with co-workers. When the owner became suspicious and questioned the expense claims, the CEO continued to lie both the first time he was asked about the expense and a final time before he was terminated.
Although the employer tried to rely on other supporting grounds, including another disputed meal expense claim, the trial judge disregarded those. But both the trial judge and the Court of Appeal found that his persistent dishonesty about the false expenses, even when challenged and given an opportunity to tell the truth, undermined the necessary trust the owners needed to have in him. The trial judge rejected the CEO’s explanations that he had been told to keep his trip expenses simple, which he felt justified submitting the two meals with his wife.
Employers need to remember that the Supreme Court of Canada has held that just cause, even when based on dishonesty, must always be assessed taking the context into account. However, in this case, despite the employee’s successful work performance, the court found just cause based on the following:
- As her CEO, the owner needed to have the highest level of trust in Michaluk’s honesty. A similar offence by a lower level employee might not lead to the same result;
- The employer had undertaken a reasonable investigation including confronting the CEO. Employers need to avoid jumping to conclusions and firing without gathering all the evidence and hearing from the employee suspected of wrongdoing before terminating;
- The CEO’s falsification of the two meal expenses, including falsely implicating other employees as in attendance, was clearly intentional, unacceptable, and contrary to policy;
- Most importantly, when asked about the expenses, the CEO lied on two separate occasions. Indeed, it seems clear that both courts relied upon his failure to “come clean” about the improper expense was really the crucial factor in finding just cause.
A lesson for our employee readers: if you are asked about suspected misconduct of which you are guilty, admitting it may save you from termination for just cause.
If you want more information or advice about termination for cause, you can contact us at:
Geoffrey Howard: firstname.lastname@example.org
Sebastian Chern: email@example.com