While employee theft is frequently grounds for termination, shades of grey do appear in the case law. In a recent case, the Ontario Superior Court enforced a settlement agreement in a wrongful dismissal action even though an employee had not told her employer of a loan she had taken from a social committee without permission.
In Dennis v Ontario Lottery and Gaming Corporation, the plaintiff employee was terminated on a without cause basis. She agreed to terms of settlement with her employer and signed a full and final release.
After the release had been executed, the employer discovered irregularities with respect to the plaintiff’s administration of a social committee. The social committee received tickets from a local amusement park, sold them to employees at a discount from face value, and then sent the remaining tickets and cash receipts back to the amusement park.
At the time of termination, the employee did not tell the employer about the shortfall, and admitted at trial to having omitted the details on purpose. The shortfall resulted from the employee “borrowing” $1,200 from the social committee fund, to help offset approximately $12,000 of the employee’s money that she had lost to an unrelated online scam.
Although charges were laid against the employee in connection to the shortfall, those charges were quickly withdrawn. The employee never admitted that she had committed theft. The employee maintained that she intended to pay back the money, and in fact had repaid the money by cheque shortly after her termination.
The employer refused to release the settlement funds. The employer argued that the settlement should be null and void and relied on the missing funds to argue that the employee was terminated for just cause.
The Court rejected the employer’s argument and ordered the employer to pay the settlement in full.
The Court found that the employer’s investigation was fundamentally flawed. The investigation concluded that the employee had confessed on several occasions to what was described as “theft.” The Court found that this was unsupported by any evidence. Further, because the charges against the employee had been withdrawn, there was no way to rely on the charges against the employee as demonstrating any sort of criminal wrongdoing.
The Court did not elaborate further on what in the investigation it found inadequate other than the determination that there was a theft and the employee admitted to that theft.
The Court pointed to the employee’s intent to repay the shortfall, the fact that her social committee work was not part of her employment duties, and the poor quality of the internal investigation as mitigating factors. As a result, the Court found that it was “totally disproportionate” for the employer to view the employee’s conduct as support for termination with cause.
The Court’s decision is perhaps a little surprising, in light of the fact that the employee admitted she had not brought the shortfall to her employer’s attention upon her termination for fear that it would jeopardize her severance package. Nonetheless, the Court found that the settlement agreement was valid and enforced it.
What employers should know
In order to protect themselves, employers must ensure that they diligently and fairly investigate any suspicions of wrongdoing by a departing employee.
It is important not to rely on criminal charges alone (conviction, of course, is another story). Employers should always consider a parallel investigation. First, because the criminal process in often long and authorities will not likely release the fruits of their investigations. Second, because the criminal standard of proof is much higher (beyond a reasonable doubt), and so prosecutors often withdraw charges in criminal proceedings when they believe they cannot meet that high burden. On the same facts and evidence an employer may be able to meet the civil standard of proof (balance of probabilities with clear and cogent evidence) to support a case for cause.
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