Employers Beware: When a Warning is Warranted

In a recent case in the area of employment law, the Supreme Court of British Columbia confirmed that, even if an employee has acted dishonestly or deceitfully, an employer cannot dismiss an employee without giving adequate warning unless the nature and degree of the dishonesty justifies immediate dismissal. In the case of Stock v. Oak Bay Marina Ltd., 2017 BCSC 359, the defendant employer applied for a dismissal of the plaintiff’s wrongful dismissal lawsuit on the basis that the employer was justified in terminating the employee because she had breached the employer’s policy prohibiting her from claiming credit for sales that she did not generate.

The plaintiff, Ms. Stock, was a sales representative who had been employed by the defendant, Oak Bay Marina Ltd. (“Oak Bay”), for 20 years. Oak Bay owned and operated fishing resorts in B.C. and employed Ms. Stock, among other people, as a sales agent for hotel room and excursion bookings. Ms. Stock was paid a base salary and was eligible to earn a bonus and commission if she met certain sales targets. She had an annual sales target of $1 million, which she met in most years and in some years even surpassed it.

When she first became a sales agent, bookings were made directly with customers and Ms. Stock obtained credit for those sales. During her time as an employee, online booking became more prevalent, which meant that customers sometimes made their own bookings without any direct contact with a sales agent. In those circumstances, no sales agent would get credit for the booking and the booking would therefore not be considered as part of the agent’s reported sales for the purposes of determining whether a sales target was reached and a commission or bonus was payable. Oak Bay developed a policy to prevent sales agents from claiming credit for such bookings since these did not result from any direct contact with guests. Referred to as “marking”, Oak Bay prohibited an agent from accessing a reservation in Oak Bay’s reservation system and manipulating (or “marking”) it to show as a reservation for which the agent should get credit. The policy was communicated to employees on multiple occasions, with the caution that “marking” was “unacceptable” and would lead to “disciplinary action”.

In July 2015, Oak Bay became aware of some bookings that appeared to have been “marked” by Ms. Stock. In August 2015, Oak Bay met with Ms. Stock and confronted her with a report prepared by one of its managers which contained information and evidence in support of its position that Ms. Stock had marked multiple reservations. Ms. Stock admitted to adding her name to certain guest reservations, but offered an explanation for doing so: she intended to contact these guests in order to attempt to “upsell” them by having them purchase an activity while staying at the resort. Since Oak Bay encouraged its employees to upsell its guests, Ms. Stock believed that she was justified in doing this, even though she ultimately made no effort to contact the customer. She also stated that she had marked reservations because she believed that she had not received proper credit for bookings that she should have received credit for. Ms. Stock was sent home following the meeting and was terminated, purportedly for cause, the following day.

The court applied the two-part test established by the Supreme Court of Canada in McKinley v. BC Tel, 2001 SCC 38, in order to determine whether Oak Bay was justified in dismissing Ms. Stock on the grounds of dishonesty. The court found that Oak Bay satisfied the first part of the test, namely that there was sufficient evidence to establish Ms. Stock’s deceitful or dishonest conduct on a balance of probabilities. However, Oak Bay did not satisfy the second part of the test because the nature and degree of the dishonesty did not justify Ms. Stock’s dismissal.

The court noted that “the test requires an assessment of whether the employee’s misconduct gave rise to a breakdown in the employment relationship justifying dismissal”, or whether the employment relationship could continue with a more proportionate response to the misconduct. The critical question to be determined is whether the misconduct was of a nature that “the employment relationship could no longer viably subsist”. Although the court did not elaborate on what this means, it is in keeping with the long-standing notion that only misconduct that goes to the “root” of the employment relationship justifies termination. In such cases, the employment relationship is fundamentally broken such that the employer cannot be expected to give the employee a second chance (see Leung v. Doppler Industries Incorporated, 1995 CanLii 2530, [1995] B.C.J. No. 690 (B.C.S.C.)  at para. 26). An example of behaviour that would justify immediate termination is theft by the employee.

In this case, although the court accepted that the misconduct was serious from Oak Bay’s perspective and that it warranted a “strong sanction”, Ms. Stock’s immediate firing was not appropriate. Rather, Oak Bay should have imposed a more proportionate disciplinary measure that took into account things like Ms. Stock’s age, her lengthy employment with Oak Bay, her pristine discipline record, and the fact that Oak Bay did not warn employees that a consequence of marking would be immediate termination. Importantly, the court noted that Ms. Stock did not benefit in any way from the marking of reservations because she had already reached her sales target for the year and had earned her bonus without counting the marked reservations. In the circumstances, the court held that the appropriate punishment would have been a “strong and final warning” that if she did it again, she would be fired.

In the result, the court dismissed Oak Bay’s application and awarded Ms. Stock damages for wrongful dismissal.

This case serves as a caution to employers that they need to deliver a clear message to employees if the employer seeks to fire employees for certain types of misconduct that do not, in and of themselves, amount to misconduct that goes to the root of the employment contract. It is important to remember that the employer has the responsibility, or onus, of proving just cause for termination – not the employee. This is all the more reason to take great care when dealing with disciplinary matters.

 

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