No Free Lunch: Just Cause Dismissal Upheld in the Case of Misconduct and the Employee’s Dishonesty in the Investigation of that Misconduct

December 5, 2023

Article by: Norika Takacs-Rehm

Previously printed in the LexisNexis Labour Notes Newsletter.

In Mechalchuk v. Galaxy Motors (1990) Ltd., 2023 BCSC 635, the B.C. Supreme Court upheld the just cause dismissal of an employee who had: (1) submitted receipts which he suggested to be business-related but he knew to be personal expenses; and (2) perpetuated his dishonesty during the employer investigation which ensued.

Mr. Mechalchuk began his career in the automotive retail business in 2003. He worked his way up the ladder and eventually landed in the position of general manager at a Galaxy Motors dealership in the late spring of 2020.

He did well in his role and, in 2021, successfully advocated for his job title to be changed to “President of Operations”. About a month after the title change, the owner of Galaxy Motors passed away suddenly. The owner’s niece, Amy Jones, and her brother inherited the business.

During the trial of the matter, Mr. Mechalchuk testified that throughout his employment, he had submitted receipts for expenses that he claimed were for the business. He gave evidence that he was never advised there were parameters or policies regarding reimbursement for alcoholic beverages consumed during business-related meetings or events. He also testified that during the tenure of Galaxy Motor’s previous owner, he was never questioned about his expense claims and those expense claims were always paid.

Galaxy Motor’s Chief Financial Officer (CFO) testified that the process by which Mr. Mechalchuk’s expense claims were processed was that the CFO would review the receipts submitted and, if “nothing was out of line”, the claims would be paid. The CFO testified that he had instituted a policy under which the names of all people to whom the expense related had to be written on the receipt. His evidence was that he had reviewed all of Mr. Mechalchuk’s claims and none were declined. The CFO further testified that he had assumed the names on the receipts to be accurate.

In June 2022, Mr. Mechalchuk and his wife attended an event at a restaurant along with several other Galaxy Motors managers and their spouses. Mr. Mechalchuk testified that when the dinner bill came, he and Ms. Jones had a discussion during which they agreed it was a “team building event” that could be justified as a business expense. Mr. Mechalchuk paid the bill and submitted it for reimbursement. Ms. Jones gave evidence that she thought it was ludicrous that Mr. Mechalchuk had submitted the bill as a business expense and she declined to approve the reimbursement.

Ms. Jones then investigated Mr. Mechalchuk’s expense claims more generally. She found a number of his claims that “stood out” for her. On two of the claims, Mr. Mechalchuk had written the names of work colleagues on restaurant receipts and then submitted those receipts to the CFO for reimbursement. Mr. Mechalchuk had, however, attended at those restaurants with his wife and not his colleagues. There was no mention at all of Mr. Mechalchuk’s wife on the receipts.

Ms. Jones set up video conference meetings with Mr. Mechalchuk to discuss his expense claims. He did not say that he had been with his wife at the restaurants and not with his colleagues; under cross-examination at trial, he suggested he had not been asked this question during the meeting with Ms. Jones.

At one point, Ms. Jones accused Mr. Mechalchuk of fraud. She testified that her concern about his integrity was bolstered by his failure to admit that the restaurant meals had been with his wife and not with work colleagues. On cross-examination, she conceded that the “internal investigation” conducted into Mr. Mechalchuk’s conduct did not include discussions with the CFO or employees who were named on the relevant breakfast and dinner receipts to confirm they had not been present. She testified “there was no point” and “it didn’t matter” because she knew they had not been present. Her evidence was that she gave Mr. Mechalchuk a chance to explain but he failed to be honest. She and her brother (the co-owner of Galaxy Motors) could not trust Mr. Mechalchuk and determined they could not move forward in their employment relationship with him.

The Court acknowledged that Ms. Jones could have conducted a more thorough investigation. It held, however, that her concerns regarding a number of the restaurant receipts being personal in nature were well-founded.

Employer Takeaways

Although decisions always turn on the unique facts of the case, Mechalchuk v. Galaxy Motors (1990) Ltd. provides guidance to employers trying to respond to employee misconduct and establish just cause for termination.

In this case, the amounts of the restaurant receipts were quite small (approximately $250) but the misconduct went to the heart of the employment relationship. Mr. Mechalchuk was in the most senior management position at Galaxy Motors and his position commanded a high level of authority, responsibility and trust. He breached his employer’s confidence when he submitted false expense claims and was then untruthful when given a chance to explain at his meetings with Ms. Jones. The Court found his conduct was such that his employer’s loss of faith and trust in him was warranted and just cause for dismissal did indeed exist.