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Coming Back to Bite You in the Butt: Wrongful Dismissal Claim Thrown Out Where Butt-Dials Revealed Employee Working for Personal Business on Company Time

It is an unwritten and implied term of every employment contract that an employee owes a duty of fidelity and loyalty to their employer.  This means that an employer is entitled to expect that an employee will perform their work duties for the employer, and not for some other beneficiary, while on duty with the employer.  In a recent case out of Alberta, the Court of Queen’s Bench held that an employer had just cause to terminate an employee who was working for his personal business while being paid by his employer.

D’Arcy Ross was hired into a full-time senior sales position with IBM Canada in August of 2010.  He was a home-based “mobile employee” with an annual base salary of $140,000.00, plus commission.  He worked primarily from home with supervisor contact by telephone.

Prior to being hired, Mr. Ross owned and operated a private business with his wife, Compartment Inc., which sold residential storage units.  At the time of being hired, Mr. Ross disclosed this business, and represented that his wife would be obtaining operational responsibilities for Compartment Inc.

As a condition of his employment with IBM Canada, Mr. Ross was bound to IBM’s Business Conduct Guidelines, which stated in part:

You may not perform non-IBM work or solicit such business on IBM premises or while working on IBM time, including time you are given with pay to handle personal matters.  Also, you are not permitted to use IBM assets, including equipment, telephones, materials, resources or proprietary information for any outside work.

The Guidelines further held that breach of the Guidelines could result in dismissal.

On January 21, 2011 Ross’ supervisor scheduled a phone call with him, which Ross cancelled alleging that he was double-booked on an earlier scheduled appointment.  However, Ross’ supervisor later overheard a conversation between Ross and a subcontractor retained by Compartment Inc. when Ross inadvertently dialled the supervisor on his company mobile phone.  Later that same day, Ross did not reply to work emails received through his device, but did make a phone call on it for the benefit of Compartment Inc..

Ross’ supervisor confronted him about the calls on January 31, 2011, at which point Ross admitted that he was spending roughly three hours weekly working for Compartment Inc.  Ross was terminated by IBM Canada for violation of the Business Conduct Guidelines, and in turn sued for wrongful dismissal damages.

The Alberta Court of Queen’s Bench ruled in favour of IBM Canada, dismissing Ross’ claim upon determining, that the nature and seriousness of the misconduct was not reconcilable with sustaining the employment relationship.  The Court found that this was not an isolated incident, and in fact that “spending 3 hours a week on one’s own business when one is in full-time employment with an employer who expects, and has a right to, full-time commitment, is a significant breach of the employment relationship.”

It is not in every case that an employer will have just cause to terminate an employee who disregards their duty of fidelity and loyalty, but as the Court noted, there were numerous aggravating factors working against Ross in this case.  The Court decided that it had been made abundantly clear to Ross that he was obliged to conform to IBM’s Business Conduct Guidelines, and that a breach of the Guidelines could lead to dismissal.  In the final analysis, the Court held that IBM Canada’s decision to terminate Ross for just cause was objectively reasonable in the circumstances, where Ross was a senior, mobile, autonomous employee, and the working relationship was embedded in the honour system, and his misconduct had rendered the employment relationship irreparably damaged.

The lesson for employers should be more about what IBM Canada did right, rather than what Ross did wrong.  In this case the employer had a very clear policy about what it expected from its employees.  The Business Conduct Guidelines plainly set out what was unacceptable conduct, and expressly stated that a violation of the Guidelines could result in termination of employment on a just cause basis.  In this case, Ross was not even entitled to a first warning, or other measure of progressive discipline, but that is largely owing to his particular circumstances as a senior employee in whom significant trust had been placed, and the fact that the Court found there was no prospect of the employment relationship being repaired.

While you employers may be able to invoke the duty of fidelity and loyalty in the event that an employee is conducting other business on company time, it would be wise to first implement a proper policy with a clear statement of the consequences for a breach.  The professionals at CCPartners have significant experience in this regard, and can help give you the best chance to enforce such a policy.

And for employees, the lesson here is to lock your cell phone.

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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