In the Right Context, “Revelation of Character”, Including After-Acquired Cause Dating Back Years, Can Warrant Summary Dismissal

Previously printed in the LexisNexis Labour Notes Newsletter.

In Smith v. Pacific Coast Terminals Co., 2016 BCSC 1876, an employee was considered by his employer to have misled it regarding the necessary permits for a construction project.  Although the employer viewed the misconduct to be serious, it decided to dismiss the employee without cause and offer him a severance package.  Before the severance package was accepted, the employer discovered additional misconduct on the employee’s work computer relating to conflicts of interest as well as a breach of the company’s pornography policy.  The employer held a meeting with the employee to investigate but found he was not forthcoming regarding his actions.

Based on the totality of the misconduct, the employer rescinded the severance offer and discharged the employee for just cause. The employee commenced a civil action for wrongful dismissal, claiming aggravated and punitive damages and damages for intentional infliction of mental shock.

In its decision, the B.C. Supreme Court addressed various employment law issues. First, the Court accepted that the employer was not prevented from relying on the permitting problem when it terminated for cause, as the employer had never condoned that conduct.  As a result, evidence regarding the problem could be considered as well as the after-acquired evidence.

Second, with respect to the after-acquired evidence, the Court found that the impugned e-mail messages and files were found as a bi-product of the employer’s legitimate review of the employee’s computer after termination.

Third, regarding the grounds for termination: i) the Court found the employee to have been overly optimistic but wrong in his judgment regarding the permits but did not find him to have actively misled the employer; ii) of the allegations relating to conflict of interest and, more particularly, a personal relationship with another employee, the Court focused on the breach of his duty of loyalty and his duty to avoid conflicts of interest when he helped the other employee get a raise (seven years earlier) and look for other employment; iii) regarding the allegations of conflict of interest and, specifically, sharing confidential information with a third party, the content shared was not specific and already partially public; and iv) the employee breached the prohibition on storing pornographic material on company computers but had not accessed the material for ten years.

Combined, the employer relied on the notion of “revelation of character” to justify the termination without notice. This raises questions about the employee’s character, honesty, morality, judgment, integrity and/or ethics and calls for a contextual analysis of the nature of the position and the kind of misconduct, approached objectively.

The Court held that the revelation of character cases can be roughly divided into three categories: i) where misconduct is extremely serious, sometimes bordering on criminal acts (e.g. theft or fraud), just cause for termination will usually exist; ii) where conduct reveals deceit, misrepresentation or misleading of employers, cause will likely be found; and iii) where there are errors in judgment or a failure to follow rules, it cannot automatically be said that the employee was dishonest for the purposes of justifying summary dismissal.

Applying the law to the facts of the case, the Court found the misconduct was not acceptable given the employee’s senior role and position of trust. It did not, however, warrant summary termination.  The Court made clear that if the employee had been intentionally deceitful regarding the permitting problem, in combination with the other less serious forms of misconduct, termination for just cause would have been warranted.

Fourth, the employee was awarded 19 months of notice, less earnings or monies received in mitigation and bonuses to which he would have been entitled had he worked through the notice period.

Fifth, aggravated damages were not awarded as there was no bad faith on the part of the employer. The distress he suffered was not beyond what might be characterized as the normal distress and hurt feelings arising from the lawful termination of his employment.

Sixth, none of the elements for intentional infliction of mental shock was made out. There was no conduct that was calculated to harm the plaintiff, no conduct that was flagrant and outrageous, and no conduct that caused a visible and provable injury to the plaintiff.

Finally, there was nothing in the conduct of the employer deserving of punitive damages.

Employer Takeaways

• Revelation of character can effectively support summary dismissal where the employee is in a position of trust and the misconduct is extremely serious and/or reveals the employee’s willingness to deceive.
• Misconduct known to the employer prior to termination without cause, but not condoned, can be relied on to allege cause at a later time.
• After-acquired evidence will be considered by a court but where the evidence of misconduct is several years old, it will be given less weight.
• Piling on less serious grounds for cause is typically not an effective strategy for employers. Where there is a common underlying theme in the misconduct, a court is, however, more willing to consider the cumulative effect.
• Aggravated damages are not appropriate in cases where the employer legitimately felt it had cause but a court does not agree.