Dismissing employees for theft

Proceed with caution when alleging theft

Background

In dismissing an employee for alleged criminal conduct, such as theft or fraud, employers need to be particularly careful. Not only should an employer carefully and fully investigate the allegations, but the employer should also be aware that such allegations have the potential to be defamatory.

The case: Litster v. British Columbia Ferry Corporation

Elaine Litster had been employed by the British Columbia Ferry Corporation for more than 20 years when it terminated her employment for cause. At the time of her termination, Litster was the terminal manager at one of the ferry terminals. B.C. Ferries alleged it had cause to terminate her because she removed paint products from its premises without the permission of the employer. While Litster admitted to taking the paint, she claimed she intended to take it to a recycling depot.

The paint in question was stored in a shed at the ferry terminal where Litster worked. The paint was close to or past its useful life. In the fall of 1999 an environmental audit was conducted on the ferry terminal. The storage of the paint in the shed was a particular concern of the auditor because there was nothing to prevent the paint from escaping in the event of a spill. When Litster told a maintenance employee about the auditor’s concern, in the spring of 2000, she was told that building a containment for the shed would be too costly. As an alternative the maintenance employee suggested that she dispose of the paint. Litster agreed.

Litster arranged to have some of the paint shipped to other ferry terminals. She then told the assistant terminal manager to send the remaining paint to a recycling depot. The assistant terminal manager thought she asked him to send only opened paint cans for recycling. As a result at least 10 unopened cans remained in the shed.

Litster said she asked all employees to help bring the remaining paint to a recycling depot. Two employees said they could use some of the paint and Litster told them to take it. She put the remaining paint cans in her car with the intention of taking them to a recycling depot.

One of the employees who had taken some paint had second thoughts and returned the cans she had taken to the shed at the ferry terminal.

A variety of factors prevented Litster from taking the paint stored in her car to a recycling depot. A few days after she took the paint, Litster had to take her car on the ferry. Because she was unsure whether she could take the paint on the ferry without dangerous goods documentation, she placed the cans in a shed at her home.

Personal and work-related reasons continued to prevent her from taking the paint to a recycling depot.

In October of 2000 Trafford Taylor, Litster’s supervisor, was scheduled to visit the ferry terminal. When advised that paint cans still remained at the shed (the cans returned by the ferry terminal employee), Litster took this paint to a recycling depot.

In the Fall of 2000 the employee who removed and then returned some paint told her union of her actions. In turn the union told management who started an investigation into Litster’s handling of the paint.

Litster was eventually suspended with pay. The day after being suspended, she was interviewed by a security officer. Litster took the officer to the shed where she was storing the paint. The officer then accompanied Litster to her new home that had been recently renovated. At Litster’s home, the officer saw several cans of paint and noted that the house had been recently painted.

After reading the officer’s report, Taylor concluded it was not reasonable that the paint remained in a shed at Litster’s former residence for six months. He was also concerned she had not followed the policy of B.C. Ferries regarding corporate assets and she had given away some paint. Taylor discussed the situation with his supervisor and with the human resources manager. They concluded Litster had stolen the paint and her employment should be terminated.

Litster sued B.C. Ferries for wrongful dismissal.

The court found B.C. Ferries did not have cause to terminate Litster. It accepted her explanation that although she intended to take the paint to a recycling depot, a variety of factors prevented her from doing so in a timely manner. Several factors also suggested it would be unreasonable to conclude she had stolen the paint.

Litster’s reasonable notice period, according to the court, was 15 months.

Litster also sued Taylor personally for defamation in connection with the letter of termination he prepared. In his letter Taylor asserted that

Litster “admitted to taking paint and you gave the explanation that the paint was still in your possession after approximately six to eight months because you had not yet taken it to a recycling depot. Your explanations are not acceptable to the corporation. It is the corporation’s view that you had no authorization to take the materials in your possession, and that those materials had a value to the corporation.”

Copies of the letter were sent to the following employees of B.C. Ferries: the senior vice-president of Litster’s department; Taylor’s supervisor; the human resources manager who participated in the decision to terminate Litster; the human resources representative responsible for Litster’s personnel file; and the payroll manager.

The court concluded the letter was defamatory. The issue was whether it could be defended on the ground of justification and qualified privilege.

Proof that a defamatory statement is true is a complete defence to a defamation claim. Because the court found that Litster did not steal the paint the defence of justification was not available to Taylor.

Qualified privilege will arise when a person who makes a statement has an interest or duty to make the statement and the recipient has a corresponding interest or duty to receive the information. The defense of qualified privilege will fail if a statement is motivated by malice.

The court accepted the defence of qualified privilege. In so doing it confirmed that Taylor had a legitimate interest in advising all of the recipients of his letter about Litster’s termination and that the recipients had a corresponding interest in receiving the letter because they were either involved in the decision to terminate or they required this information to discharge their employment duties. The court concluded Taylor was not acting maliciously when he circulated his letter. Therefore Litster's defamation claim was dismissed.

This in-depth look at just cause was provided by Nicole Guerin, a lawyer with Rubin Manning and Thomlinson LLP in Toronto. She can be reached at [email protected] or (416) 847-1814.

Tips for employers

As the Litster case illustrates, when terminating an employee for cause, employers should be mindful of the content of the termination letter as well as who receives a copy.

A termination letter outlining conduct upon which an employer is relying to support a contention that it has cause to terminate an employee will potentially be defamatory. In other words, the letter will likely reduce the esteem or respect in which the employee is held by others. While an employer who is defending a defamation action arising from a termination letter can rely on the defence of justification, this defence will only be successful if a court is satisfied that the contents of the termination letter are true.

If faced with a defamation claim, employers can also rely on the defence of qualified privilege. This defence will be lost if a termination letter is malicious towards the former employee. Courts will examine both the letter and the circumstances surrounding the drafting of the letter when determining whether it was motivated by malice. Malice will always be found if the employer does not believe the contents of the letter are true.

The defence of qualified privilege will also be lost if individuals who receive a copy of the termination letter had no duty or interest to receive it. Employers should, therefore, carefully consider who is copied on a termination letter. Only those individuals who need to know about the termination in order to fulfil their employment duties should receive a copy of a termination letter. While some employees may need to know there has been a termination they do not necessarily need to know the detailed reasons for the termination. For instance, in Litster, it would have been open to the court to conclude that the payroll manager had no legitimate interest in receiving a document which outlined the allegations of theft. Presumably the payroll manager simply had to be advised the termination was for cause and therefore no severance would be paid.

Employers who fail to follow the suggestions noted above may, after terminating an employee for cause, find themselves defending an action involving damages for wrongful dismissal as well as damages for defamation.

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