Is dishonesty by an employee automatically grounds for termination of their employment?

By Charles Thompson

You may assume if an employee is caught deceiving, stealing from, or defrauding their employer, that employer has the right to terminate their employment immediately for “just cause”, with no advance notice or severance.

And, for a long time, this was largely the case - any act of dishonesty by an employee constituted just cause for termination.

However, in the 2001 case of McKinley v. BC Tel, 2001 SCC 38, the Supreme Court of Canada ruled dishonesty is not always just cause for dismissal. It stated there has to be a “contextual” approach in determining whether any misconduct, even if it involved significant dishonesty by the employee, truly justifies dismissal without notice or severance.

This requires employers to analyze all of the circumstances of the case before deciding whether the “nature and degree of the dishonesty warrant dismissal.” The employer must also consider proportionality of the offense, and there must be a balance between the severity of an employee’s misconduct and the sanction the employer imposes.

The employee’s dishonesty in the McKinley case involved him lying to his employer about his medical condition and ability to return to work. The Court ruled the evidence in the case did not show the employee’s statements about his health were so egregious as to completely undermine the employment relationship, and found the employer did not have just cause to terminate his employment.

Since the McKinley decision, Courts have held that in some cases dishonesty is just cause for dismissal, and in some cases it is not.

Examples of cases where the Court found there was not just cause for termination include:

• A British Columbia Court held that there was not just cause to terminate an employee who used their employer’s vehicle and gas card for personal travel.1

• In an Alberta case, the judge stated that an employer did not have just cause to terminate an employee who had dishonestly deposited a company cheque to his own account.2

• An Ontario judge ruled that a senior manager at an accounting firm was not dismissed for just cause when he was fired for breaching the company's expense claim policy for a second time, only months after he had been formally reprimanded for submitting inaccurate expense claims and warned that repeating such behaviour could lead to his dismissal.3

A 2023 British Columbia case provides an example of a case where dishonesty was just cause for dismissal. In Mechalchuk v. Galaxy Motors (1990) Ltd.,4 the B.C. Court of Appeal ruled two fraudulently expensed meals were enough to fire a senior executive for just cause. The employee had improperly presented receipts to expense a dinner and breakfast with his wife, for a total of $250, and had then lied and attempted to cover up the fraud.

The Court found his conduct met the standard for just cause for dismissal for several reasons, including:

• The employee was in a senior management position, which meant he had a high level of responsibility and trust.

• He submitted the receipts as being business-related when he knew they were personal in nature.

• As part of his deception, he wrote the names of other company employees on the receipts to falsely indicate the meals had been with them.

• When confronted by the employer, the employee did not admit what he had done but had lied further about having the meals on business with other employees rather than his wife.

This case shows one incident of dishonesty, even involving a small amount of money, can be just cause for dismissal in certain circumstances, particularly where the employee compounds the dishonesty by lying or attempting to cover up the incident.

The general rule remains that an employee’s dishonesty or theft is not automatically grounds for summary dismissal, but employees need to be aware that the Courts are still likely to uphold terminations for dishonest conduct.

Employers must keep in mind that the question of whether they have just cause for termination depends on the circumstances, and they need to think carefully and should get legal advice before jumping to terminate an employee who has committed an act of dishonesty.

This article is for information only and is not intended to be legal advice. If you have any questions or would like further information, you should consult a lawyer.

1 Strauss v. Albrico Services (1982) Ltd., 2007 BCSC 197; affirmed, 2008 BCCA 173

2 Winfield v Pattison Sign Group, 2013 ABQB 595

3 Tsakiris v. Deloitte & Touche LLP, 2013 ONSC 4207

4 2023 BCCA 482