Dishonesty Reconsidered

In a discharge case, if the employer could establish some dishonesty on the part of an employee the employer had a slam dunk reason to discharge that employee for cause, avoiding the necessity to give notice or pay damages to the dishonest employee.  On June 28, 2001, the Supreme Court of Canada issued reasons for decision in McKinley v. B.C. Tel, which changes, significantly, the employer’s considerations when deciding to dismiss a non-unionized employee for dishonesty.   Most dishonesty cases that make it to court are serious cases, with the dishonest conduct going to a work performance issue.  McKinley involved a case where, if there was dishonesty, it went to the employee’s representations concerning his health, in a case where an employee was dismissed because he was unable to work.

McKinley was an accountant, with 17 years of seniority. The employer dismissed him, because at the time of the dismissal, it believed that he was incapable of working and performing the employment contract. After the trial started, the employer added the claim that the employee was dishonest about his medical condition and available treatments.  McKinley argued that there was no dishonesty, and that he could not return to work, unless it was a job that carried less responsibility, and that he was entitled to additional damages because the employer terminated him based on his disability.   The jury found that McKinley was wrongfully dismissed and awarded over $100,000 in damages.  The employer appealed and won in the Court of Appeal. The employee appealed to the Supreme Court of Canada and won on the issue of wrongful dismissal, restoring the judgement of over $100,000, plus court costs.

Prior to the McKinley case, if an employer was able to establish some dishonest conduct, an employer could terminate an employee for just cause, and not have to pay an employee damages for wrongful dismissal.  The court did not have to look at the degree of misconduct or how the misconduct related to the employment relationship. A single incident of misconduct was sufficient to establish cause.  Any  forgiveness of minor misconduct was for the employer to decide, and the court would not interfere with that decision. It was a rather clear situation for the employer.

The employer must now analyze how the nature and seriousness of the dishonesty relates to the employment relationship.  Where the dishonesty violates an essential condition of the employment contract, breaches faith inherent to the working relationship, or is fundamentally or directly inconsistent with the employee’s obligations to his or her employer there will be just cause.  The court favoured an analytical framework that examines each case on its own particular facts and circumstances and considers the nature and seriousness of the dishonesty in order to assess whether it is reconcilable with sustaining the employment relationship.  Such an approach mitigates the possibility that an employee will be unduly punished by the strict application of an unequivocal rule that equates all forms of dishonest behaviour with just cause for dismissal.  At the same time, it would properly emphasize that dishonesty going to the core of the employment relationship carries the potential to warrant dismissal for just cause.

For any serious type of misconduct, such as stealing money or business opportunities, a court may find that the conduct is incompatible with a continuing employment relationship.  After McKinley there is a greater flexibility for the court to examine all the circumstances around the dismissal. From the employee’s viewpoint, there is arguably a greater degree of fairness, if the employee can afford the time and expense to litigate the circumstances.  McKinley got his answer from the highest court in country almost seven years after he was dismissed.

There are many interesting and unanswered questions raised by the decision. What is an essential condition of employment?  What constitutes a significant impairment of that relationship such that an employer can discharge for cause?   Is dishonesty more tolerable in the senior or junior employee?  If the employee lacks managerial or financial responsibilities is a greater degree of dishonesty tolerable?  Must dishonesty be repetitive or can the employer discharge for a single incident? Must an employer consider alternative sanctions short of dismissal?  I expect that the answers to these questions will be fleshed out on a case by case analysis. In the meantime, employment lawyers, judges, and adjudicators will struggle with the unanswered questions inherent in an approach which is more flexible, fact oriented and less rule driven.


Paul Love, Arbitrator & Mediator