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Court Upholds Dismissal of Long Service Employee who Falsified Health Care Benefit Claims

The recent decision in Mykki Cavic v. Costco Wholesale Canada Limited confirms that serious breaches of trust, despite long service, will justify termination for cause and relieve an employer of its obligation to provide common law reasonable notice.

Mykki Cavic, employed by Costco for 19 years, was dismissed from her position as a first level manager after an investigation by Costco and its group insurance administrator, Manulife Financial, revealed that Ms. Cavic had put through $170.00 in benefit claims for a “phantom dependent” named Sara-Eve Dore. Costco is a self-insurer and retained Manulife to process and analyze the claims submitted by Costco’s employees. Costco would reimburse Manulife for all claims paid out. While Ms. Cavic admitted to putting through fraudulent claims for this phantom dependent she alleged that she did so in order to get Manulife’s attention after several failed attempts to get the phantom dependent removed from her benefits profile. However, when Manulife conducted a random audit on the plaintiff’s file after receiving an on-line massage therapy claim for Sara-Eve Dore and contacted Ms. Cavic to discuss the claim, the plaintiff told Manulife that Sara-Eve Dore was her daughter. Further, when Costco’s senior management team brought Ms. Cavil in during its investigation and gave her an opportunity to comment on the claim or speak about the matter, Ms. Cavic declined to say anything in her defence. Ms. Cavic did, however, co-operate in providing her consent for Costco to obtain the confidential medical claims submitted by the plaintiff. When subsequent falsified claims were discovered and put to Ms. Cavic she admitted that it was her signature on the claims but denied that she was the one who submitted the claims. The plaintiff suggested that someone may have broken into her home and used her computer to submit the fraudulent claims.

After a thorough investigation and giving Ms. Cavic every opportunity to explain the fraudulent claims, Costco fired Ms. Cavic for cause for both the falsification and because it determined that she was not forthright or honest during the investigation process. In upholding the dismissal for cause, Justice Carole Brown made the following determination:

"I find that the conduct of the Plaintiff in falsifying and submitting medical benefits claims forms, in lying to Manulife about Sara-Eve Dore being her daughter when asked, and in failing to forthrightly tell her employer when asked during the investigation that she had falsified the documents and her justification therefore, constituted conduct so fundamental to the employer-employee relationship and to her managerial position that it constituted cause for termination without reasonable notice or pay in lieu thereof."

The lessons to be learned from this decision are three-fold. First, employers must remember that “cause” positions are considered the exception rather than the rule when dismissing employees. Had Ms. Cavic been forthright in admitting to the falsification and had Costco not directly paid the claims one can speculate that the court would have been less inclined to find cause given her clean disciplinary record and 19 years of service. Second, the courts rightly continue to hold managers, even first level, to a higher standard of integrity and trust. Third, the importance of a thorough, fair and impartial investigation is paramount if employers want to succeed in taking a cause position to trial. Costco, together with Manulife, thoroughly investigated this matter and gave the plaintiff every opportunity to “come clean” and defend herself. When it was determined that she was not being honest about her conduct, Costco then had a second ground of dismissal to rely on in its defence.  In two previous blogs (May 24, 2012 and February 23, 2012) we reported on court decisions where serious conduct that may not have been cause for dismissal resulted in dismissals being upheld where employees were not honest during the investigation process. The breach of trust, as much as the conduct itself, led the courts to uphold the cause positions advanced by employers. This underscores the value of a properly conducted investigation.

The lawyers at CCP can assist employers with dismissals of long-term employees where allegations of cause may be appropriate as well as conduct or provide legal advice on investigating serious allegations of misconduct.

Please Note: This blog has been prepared as an informational service for our clients and other interested parties. It is not intended to constitute legal advice, a complete statement of the law or opinion on any subject. Although we endeavour to ensure the accuracy of the content, no one should act upon the information provided without a thorough examination of the law after the facts of a specific situation are fully considered.


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