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BC Employee Learns the Hard Way there is no Free Lunch: Court Upholds General Manager Dismissal for Falsified Restaurant Expense Claims

Although perhaps counterintuitive to most people, it is an established point of Canadian employment law that employee dishonesty does not necessarily justify cause for dismissal.  However, a recent decision of the Supreme Court of British Columbia provides a welcome message for employers as to when such dishonesty may be enough to justify that termination.

In Mechalchuk v. Galaxy Motors (1990) Ltd., the plaintiff was an industry veteran who had been in the role of general manager of the defendant’s 5 used-car and 2 RV locations on Vancouver Island for two years when he submitted some receipts that raised concerns for the defendant’s CAO.  After a detailed investigation, the defendant found 6 expense claims in particular that “stood out”, including 4 separate restaurant receipts and gasoline receipts for the plaintiff’s wife and son (the son worked for the defendant).  Essentially, the CAO believed that the plaintiff had falsely claimed expenses for some meals he had with his wife as meals with other employees of the defendant.

In examining the evidence, the Court found that although the plaintiff’s testimony was “generally given in a truthful and convincing manner,” the evidence he gave regarding 2 of the restaurant receipts was different:

However, I found his evidence regarding his discussion with Jav about the Parksville restaurant dinner and breakfast receipts as well as his evidence regarding what was discussed during his July 11, 2022 meeting with Amy and Mark to have been dishonest.  In marked contrast to the rest of his testimony, his recall of that meeting and his evidence regarding what was discussed became vague, equivocal, and lacked genuineness and veracity.  He became noticeably uneasy and defensive when asked on cross-examination about the Parksville restaurant dinner and breakfast receipts.  His testimony that he could not recall any discussion about the Parksville restaurant dinner and breakfast during the July 11, 2022 meeting defied credulity, as did his evidence that Jav told him to falsely put the names of Luke and Scott on the receipts to “keep it simple”.  I do not believe his evidence that during the meeting he was “struggling to recall” the reason for the receipts.  Rather, I find that, if anything, he was struggling to find a way around his having been caught in a deception of his employer.

Having determined that the plaintiff had, in fact, deliberately deceived his employer, the Court then evaluated the level of dishonesty in relation to the test for just cause; for, as the Court states at paragraph 61 (and as referenced at the beginning of this piece), “[D]ishonesty is not automatically just cause for dismissal.  The entire circumstances must be taken into account.”  Referencing the BC Court of Appeal case of Roe v. British Columbia Ferry Service Ltd., for an application of the contextual test, the Court determined that despite the relatively small value of the false expense claims, the entire context dictated that termination was appropriate, summing up at paragraph 65:

I agree with the submissions of counsel for the defendant that the facts in Roe are analogous to those before me in this case.  Although the total amount of the Parksville restaurant dinner and breakfast receipts (approximately $250) was relatively small, the misconduct went to the very root of the plaintiff’s employment relationship with the defendant.  He was in the most senior management position at the defendant.  His position commanded a high level of authority, responsibility, and trust.  He breached that trust by submitting false expense receipts and thereafter being untruthful about them when given an opportunity to explain them on July 11, 2022.  Moreover, he failed to “come clean” when he had a second opportunity to do so during the meeting on July 13, 2022.  His conduct was such that the defendant’s loss of faith and trust in him was justified.

Clearly, the high level of autonomy and authority the plaintiff enjoyed in his role required a great degree of trust, and the Court determined that the plaintiff’s actions represented a significant and irreparable breach of that trust.  This was magnified when he “perpetuated his dishonesty” at the investigation meeting.

For employers, it is important to always take into account the context in which any misconduct – but in particular dishonesty – is perpetrated.  Generally, this means not having a knee-jerk reaction to any discovery of misconduct, but rather ensuring that you investigate fully any time you learn of, or suspect, dishonesty from an employee.  As always, the team at CCPartners is ready to assist: whether it be in assessing whether the level of misconduct you have discovered rises to the level of just cause for termination, or for help investigating workplace misconduct, we’ve got you covered.

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