Employee’s breach of his duty of fidelity to his employer was just cause for termination
Gary Rupert had worked for the Greater Victoria School District No. 61 since 1975. He joined initially as a teacher and served as both a teacher and a librarian until 1981. He then worked as an administrator for the school district until 1992 when he was appointed vice-principal at Oak Bay High School in charge of the school district’s International Student Program (ISP). He worked in that position until December 1998 at which time he was dismissed from his employment without notice.
As a result of the dismissal, Mr. Rupert brought an action against the school district seeking damages for wrongful dismissal and breach of his contract of employment.
The ISP program was established in 1992. Over the years, Mr. Rupert recruited foreign students from Asia, South America and Mexico to attend school in the district. As the administrator of the program, Mr. Rupert set up a marketing plan that included communication with contacts in foreign countries. He even traveled to Asia to participate in education fairs set up for the purpose of attracting students to study at schools in Canada.
In addition to setting up and maintaining the program, Mr. Rupert was responsible for setting up the procedure for student registration, advertising, marketing seminars, and creating a database to track expenses, students and payment of student fees. He was also responsible for programming that included arranging for counselors in each participant school as well as providing a level of academic expectations and arranging a “home stay program” which included the assignment of students to various homes.
In February 1998 it came to the school district’s attention that Mr. Rupert was operating the ISP in a manner inconsistent with his obligation to his employer. After a thorough investigation, which included a full forensic investigation, Mr. Rupert was first suspended with pay and subsequently dismissed without notice. The allegations included that Mr. Rupert:
1) received into his personal account up to $150,000 in tuition fees from Korean students through their Korean agent for later transfer to the school district;
2) entered into consulting contracts with other school districts in which he provided a fee of $400 per day plus disbursements, which fees were not disclosed to the school district nor submitted to the school district; and
3) operated a private holiday program for international students during his normal working hours, retaining profits from these programs of approximately $34,000.
With respect to the tuition fees for the Korean students, Mr. Rupert alleged that he was advised by the Korean agent that the Korean government had begun enforcing a currency exchange regulation intended to prohibit Korean monies from being sent out of that country for tuition fees for the education of Korean children under the age of 19. Because it was not contrary to regulations for Koreans to send money out of the country for personal matters, the monies were deposited into Mr. Rupert’s account and later transferred to the ISP’s account. Mr. Rupert did not advise nor seek the approval of the school district in this situation. Although it was not alleged by the school district that Mr. Rupert retained the monies for himself, it did argue that this arrangement to circumvent Korean foreign currency regulations could have resulted in an embarrassment to the school district. The Court held that, although this arrangement constituted bad judgment by Mr. Rupert, it alone was not sufficient to justify dismissal for cause.
With respect to the consulting fees earned from other school districts, Mr. Rupert argued that this money was earned during his vacation time and therefore he was not obligated to inform his school district or give them the monies earned. However, this argument was in conflict with the fact that Mr. Rupert had for a number of years complained to his immediate supervisors that his workload prevented him from taking his vacation time entitlement.
The evidence did show that senior administration of the school district was aware of some of the consulting services. While the Court expressed a concern that Mr. Rupert felt that he had no obligation to disclose or to seek approval for these activities or to document that fact that he was using vacation time to pursue these private engagements, this alone was not sufficient to justify dismissal for cause.
With respect to the private holiday programs, these were programs of short duration created to provide some structure for foreign students between programs put on by the ISP. They included both recreational activities and English language instruction. Mr. Rupert rented out school district space for these programs, although he did not advise the person making the bookings for space that the rental involved his personal business. As such, Mr. Rupert was not charged the full rate for bookings. In addition, Mr. Rupert used the ISP letterhead to send out information about these private holiday programs, causing participants to believe that the programs were part of the ISP program. He did not advise the school district that he was operating these programs privately. He did not make adequate disclosure to his employer.
The school district alleged that it had just cause to dismiss Mr. Rupert as he was in breach of his duty of fidelity and good faith (also known as duty of loyalty or faithfulness). This duty is a fundamental term implied into every contract of employment. Canadian Courts have held that an employee who competes with his employer in the very business the employer is in business to provide and makes a secret profit, unknown to the employer, is in breach of his duty of fidelity. Such conduct justifies immediate dismissal without notice.
Mr. Rupert, by operating the private holiday program outside the ISP and for personal gain, was in breach of his duty of fidelity. The Court also considered the fact that the operation of these programs by Mr. Rupert could have had serious implications for the school district. For example, if a child had been injured during one of these programs, the school district may have been faced with a liability issue.
The other actions raised by the school district demonstrated a lack of judgment by Mr. Rupert but do not alone constitute just cause for dismissal. However, it was his involvement in the private holiday programs for his own profit that required the use of significant school district time was sufficient to justify dismissal without cause. The claim by Mr. Rupert was therefore dismissed.
For more information:
• Rupert v. Greater Victoria School District No. 61, 2001 BCSC 700.
As a result of the dismissal, Mr. Rupert brought an action against the school district seeking damages for wrongful dismissal and breach of his contract of employment.
The ISP program was established in 1992. Over the years, Mr. Rupert recruited foreign students from Asia, South America and Mexico to attend school in the district. As the administrator of the program, Mr. Rupert set up a marketing plan that included communication with contacts in foreign countries. He even traveled to Asia to participate in education fairs set up for the purpose of attracting students to study at schools in Canada.
In addition to setting up and maintaining the program, Mr. Rupert was responsible for setting up the procedure for student registration, advertising, marketing seminars, and creating a database to track expenses, students and payment of student fees. He was also responsible for programming that included arranging for counselors in each participant school as well as providing a level of academic expectations and arranging a “home stay program” which included the assignment of students to various homes.
In February 1998 it came to the school district’s attention that Mr. Rupert was operating the ISP in a manner inconsistent with his obligation to his employer. After a thorough investigation, which included a full forensic investigation, Mr. Rupert was first suspended with pay and subsequently dismissed without notice. The allegations included that Mr. Rupert:
1) received into his personal account up to $150,000 in tuition fees from Korean students through their Korean agent for later transfer to the school district;
2) entered into consulting contracts with other school districts in which he provided a fee of $400 per day plus disbursements, which fees were not disclosed to the school district nor submitted to the school district; and
3) operated a private holiday program for international students during his normal working hours, retaining profits from these programs of approximately $34,000.
With respect to the tuition fees for the Korean students, Mr. Rupert alleged that he was advised by the Korean agent that the Korean government had begun enforcing a currency exchange regulation intended to prohibit Korean monies from being sent out of that country for tuition fees for the education of Korean children under the age of 19. Because it was not contrary to regulations for Koreans to send money out of the country for personal matters, the monies were deposited into Mr. Rupert’s account and later transferred to the ISP’s account. Mr. Rupert did not advise nor seek the approval of the school district in this situation. Although it was not alleged by the school district that Mr. Rupert retained the monies for himself, it did argue that this arrangement to circumvent Korean foreign currency regulations could have resulted in an embarrassment to the school district. The Court held that, although this arrangement constituted bad judgment by Mr. Rupert, it alone was not sufficient to justify dismissal for cause.
With respect to the consulting fees earned from other school districts, Mr. Rupert argued that this money was earned during his vacation time and therefore he was not obligated to inform his school district or give them the monies earned. However, this argument was in conflict with the fact that Mr. Rupert had for a number of years complained to his immediate supervisors that his workload prevented him from taking his vacation time entitlement.
The evidence did show that senior administration of the school district was aware of some of the consulting services. While the Court expressed a concern that Mr. Rupert felt that he had no obligation to disclose or to seek approval for these activities or to document that fact that he was using vacation time to pursue these private engagements, this alone was not sufficient to justify dismissal for cause.
With respect to the private holiday programs, these were programs of short duration created to provide some structure for foreign students between programs put on by the ISP. They included both recreational activities and English language instruction. Mr. Rupert rented out school district space for these programs, although he did not advise the person making the bookings for space that the rental involved his personal business. As such, Mr. Rupert was not charged the full rate for bookings. In addition, Mr. Rupert used the ISP letterhead to send out information about these private holiday programs, causing participants to believe that the programs were part of the ISP program. He did not advise the school district that he was operating these programs privately. He did not make adequate disclosure to his employer.
The school district alleged that it had just cause to dismiss Mr. Rupert as he was in breach of his duty of fidelity and good faith (also known as duty of loyalty or faithfulness). This duty is a fundamental term implied into every contract of employment. Canadian Courts have held that an employee who competes with his employer in the very business the employer is in business to provide and makes a secret profit, unknown to the employer, is in breach of his duty of fidelity. Such conduct justifies immediate dismissal without notice.
Mr. Rupert, by operating the private holiday program outside the ISP and for personal gain, was in breach of his duty of fidelity. The Court also considered the fact that the operation of these programs by Mr. Rupert could have had serious implications for the school district. For example, if a child had been injured during one of these programs, the school district may have been faced with a liability issue.
The other actions raised by the school district demonstrated a lack of judgment by Mr. Rupert but do not alone constitute just cause for dismissal. However, it was his involvement in the private holiday programs for his own profit that required the use of significant school district time was sufficient to justify dismissal without cause. The claim by Mr. Rupert was therefore dismissed.
For more information:
• Rupert v. Greater Victoria School District No. 61, 2001 BCSC 700.
