Falsification of Expenses and Just Cause

Just cause dismissals are viewed as the capital punishment of the employment law world and for that reason, employers have a high bar to reach before a judge will find that they have just cause to dismiss an employee.  Dishonesty is one basis that has been found to constitute just cause, although the courts have said that a contextual analysis must be conducted, taking into consideration all the circumstances of the particular case.  Our Court of Appeal recently confirmed a trial decision in which just cause was found to exist for falsification of expenses.

In Mechalchuk v. Galaxy Motors (1990) Ltd., 2023 BCCA 482 the court held that despite the small amount of money at issue in the falsification (approximately $250) just cause for the termination existed.  Mr. Mechalchuk was the most senior employee at Galaxy.  He falsified two receipts relating to meals that he had with his wife, claiming them as expenses for meals that he had had with other Galaxy employees.  When asked to confirm the expenses, he doubled down, again asserting the falsehood.  Galaxy Motors terminated him for cause.  At his wrongful dismissal trial, the trial judge found that Galaxy Motors had just cause for the termination, despite the small amount of money at issue, noting:

[65]…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.

Mr. Mechalchuk appealed this decision, alleging that the judge erred in law in finding that the dishonesty surrounding the Parksville restaurant expenses, standing alone, was sufficient to provide just cause for his dismissal.  The court of appeal confirmed that if the act relied on by the judge to justify the with cause dismissal went to the heart of the employer/employee relationship, then that is sufficient to find that there is just cause.  The Court of Appeal held that there was a considerable body of evidence upon which the trial judge could reach the conclusion that the falsification of the Parksville receipts went to the heart of the employment relationship, including:

• Mr. Mechalchuk was in the most senior management position as the President of the company which commanded a high level of authority, responsibility and trust.  His responsibilities included signing authority and his income and responsibilities were commensurate with Galaxy Motors’ expectations of him;
• The employee handbook specifically provided that “falsifying records or information” was considered a serious offence that due to its severity would lead to dismissal from employment;
• Mr. Mechalchuk submitted the Parksville restaurant receipts as being business-related when he knew that they were personal in nature;
• He submitted the receipts as business expenses by writing the names of other Galaxy Motors employees for the purposes of indicating the meals had been with them when he knew that was not the case; and
• He breached his employer’s trust by submitting false expense receipts and being untruthful about them when given an opportunity to explain.  When confronted by his employer about the receipts during the July 11, 2022 meeting, instead of admitting what he had done, Mr. Mechalchuk repeated his account.  Unbeknownst to him, Ms. Jones had contacted some of the persons identified on the receipts and was aware that they had not been present.

In dismissing the appeal the Court of Appeal said:

[39]  In conclusion I am of the view that there is no principled basis upon which this Court could or should interfere with the judge’s conclusions, in particular that Mr. Mechalchuk’s conduct was such that Galaxy Motor’s loss of trust and faith in him was justified.  The judge correctly applied the contextual analysis which was required in considering Mr. Mechalchuk’s position and level of responsibility.  He assessed the severity of the misconduct, that is submitting false expense receipts and being untruthful when given a chance to explain and found that in all the circumstances, termination of employment for cause and without notice was a justifiable response by the employer.

This case does not change the law.  Employer’s bear the onus to establish that a dismissed employee has engaged in conduct that goes to the heart of the employment relationship, such that the employer’s loss of trust and faith in the employee was justified.  What this case does demonstrate though, is that it is not the monetary value of dishonesty when it concerns wrongly claimed expenses, rather it is the nature of the relationship, the role of the dismissed employee and the circumstances surrounding the discovery of the falsification and the employee’s response to it that will determine whether an employer has just cause.  Unfortunately when it comes to cause for terminating in circumstances of dishonesty, there is no bright line in the sand, rather each case will be judged on its particular facts.