Dismissal of whistleblower upheld after ultimatum

Employer showed encouragement and gratitude to employee for revealing financial mismanagement, but employee took things too far with demands and refusal to work
By Jeffrey R. Smith
|Canadian Employment Law Today|Last Updated: 01/23/2019

Whistleblowers are getting more protection as jurisdictions realize the importance of getting the truth about businesses and organizations that could affect the public interest. This protection allows those with knowledge of wrongdoing to come forward without fear of reprisals. Having it in place is a good thing for getting to the truth, but it’s also not meant to give employees power over their employers and freedom from just cause dismissal.

A Manitoba worker’s termination of employment was the result of her issuing an ultimatum and walking off the job, not a reprisal for reporting accounting irregularities with her employer, the Manitoba Labour Board has ruled.

Stradbrook Residential Services was a provider of life skills support and training for people with emotional and physical disabilities in Winnipeg for 40 years before it closed in March 2018. In June 2017, Stradbrook hired a worker, referred to as L.C., to perform accounting and bookkeeping duties on a part-time basis. L.C.’s work included payroll, billing, and rent top-ups for clients and it was agreed when she was hired that she would work six to eight hours per week.

Soon after she started employment with Stradbrook, L.C. discovered accounting irregularities and questionable management practices. She reported her concerns to Stradbrook’s executive director, who recognized that some of the same problems had been found during financial statements for the period ending March 31, 2017. The executive director agreed to give L.C. more hours of work to fix things and ensure Stradbrook was operating according to Generally Accepted Accounting Practices. As a result, L.C. began working 25 to 30 hours per week.

In September, Stradbrook’s financial statements were audited by an independent accountancy firm, which was a requirement to receive government funding. The firm informed the president of the board of directors that there were irregularities and other problems and made recommendations for improved controls over its finances.

At the annual meeting, the board of directors expressed concern of “apparent deficiencies in management.” There was also some questioning of the amount of hours L.C. was working on assignments that weren’t part of the internal function she had been initially hired to perform. The board stipulated that L.C. should work eight hours per week going forward, “unless there was some good explanation as to why the functions could not be performed in that amount of time.”

The president of the board of directors met with the executive director and another board decided to ask one of the supervisors if she could take on the accounting work normally done by L.C. in order to streamline operations and help with Stradbrook’s financial problems. The supervisor in question wasn’t comfortable handling financial matters and refused. They asked another supervisor but the second supervisor also refused.

In response to the concerns raised at the annual meeting, L.C. reduced her hours to previous levels, putting in between six and eight hours. However, she continued to have concerns about improper billing, bonuses, missed funding opportunities, and low wages paid to staff.

On Oct. 19, L.C. emailed a letter to the president of the board of directors stating she wanted to give him an opportunity to address her accounting concerns before she reported them to the Agency Accountability and Support Unit of Manitoba Families (AASU). She criticized the executive director and suggested the two supervisors who had been asked about accounting duties were both capable of running things without the executive director’s presence if the board supported them. She also said she was willing to resume additional hours and work to reconcile the financial records.

The president of the board of directors felt L.C.’s comments reinforced the board’s concerns about the executive director and, after meeting with him, decided he shouldn’t continue in that role. One of the supervisors was appointed to be the new executive director and confirmed that L.C. could perform the accounting functions “approximately one day per week.”

The new executive director — who had been one of the supervisors asked to take over L.C.’s duties — told L.C. about the request. L.C. was shocked and thought it had been an attempt to terminate her as a reprisal for her disclosure of alleged wrongdoing in Stradbrook’s financial matters. She said she felt that Stradbrook was only going to keep her around until she fixed the accounting problems and then fire her. The president of the board of directors sent her an email thanking her for bringing the financial matters to the board’s attention and he hoped she could continue in her role supporting payroll, billing, and rent top-up.

Worker issued ultimatum

However, L.C. still didn’t feel confident Stradbrook still wanted to employ her on an ongoing basis and told the president of the board of directors that she would “not continue on” unless the board of directors met with her, explained “its attempt to terminate” her, and included her in discussions that affected the accounting department. She specified that she wasn’t quitting but instead was “suspending my duties” until her demands were met and the AASU clarified if it would be proceeding with investigating the accounting irregularities.

L.C. also told the new executive director that she couldn’t “clean anything up working one day a week,” so the board of directors must not be interested in clearing up the financial problems. She said she would be in Oct. 30 to complete the payroll, but wasn’t interested in returning after that.

L.C. reported for work on Oct. 30, completed the payroll including her own pay for the next pay period. She walked around saying goodbye to co-workers and when a few asked if she had quit, she said that it appeared so. L.C. sent an email to the executive director saying she had enjoyed working with her and wishing her success. She also offered support in the board’s situation with the AASU. She left and didn’t return to work after that day.

Stradbrook issued a record of employment two weeks later indicated that L.C. had quit. She contacted the new executive director, saying she “was not quitting, just not willing to come back into the office until the issue of the board trying to fire me for reporting the irregularities in the accounting office was addressed.” She said if her record of employment wasn’t reversed, she would file a full complaint with the provincial ombudsman and “yet another government agency” would know all the details of what had been going on.

The executive director responded that the record of employment was accurate since L.C. had “walked off the job and didn’t report back.” Later, L.C. was informed her position had been filled. She then filed a complaint alleging that Stradbrook “took measures against her which negatively impacted her employment” as a reprisal to her good-faith disclosure of wrongdoing, contrary to Manitoba’s The Public Interest Disclosure (Whistleblower Protection) Act (PIDA).

The labour board agreed with L.C. that her report of accounting irregularities at Stradbrook was a disclosure protected under PIDA. However, the labour board found there was no indication Stradbrook, the board of directors, or the new executive director were upset with L.C. for making that disclosure.

The president of the board of directors had acknowledged L.C.’s report and agreed with her concerns about the old executive director. After installing a new executive director, he specifically contacted L.C. to inform her of what happened, to thank her for her report, and to say he hoped she would continue in her current role. This showed appreciation for L.C. for raising her concerns, the labour board said.

Legitimate business concerns

The labour board also found that the inquiries about supervisors taking over accounting duties was motivated by legitimate business concerns. Stradbrook had financial difficulties and was “in a perilous financial situation, and the board of directors was concerned over the amount of hours L.C. had been working, as they were much greater than for what she had been hired. The board of directors recommended L.C. return to the hours she had been hired to work as it couldn’t justify the increased hours.

In addition, the board of directors wasn’t prepared to meet directly with L.C. — instead, it believed any communications about L.C.’s employment status should be through the new executive director, who was L.C.’s direct boss. The refusal to meet with L.C. did not fall under PIDA’s definition of a reprisal and could not be a reprisal for making a disclosure, said the labour board.

Finally, the labour board found that it wasn’t a reprisal when Stradbrook determined L.C. had quit her job. L.C. indicated she wasn’t quitting, but she said she wouldn’t come back before the board met with her. She paid herself in advance on her last day of work, said goodbye to various staff members, and left without returning. Two weeks later, she still hadn’t returned, so it was reasonable for Stradbrook to take the position she had quit and issue a record of employment indicating as much.

“Although (L.C.) maintained that she had not quit, and she provided no letter of resignation, by her actions it was reasonable for the employer to conclude that she had ended the employment relationship,” said the labour board in dismissing L.C.’s complaint. “This cannot be viewed as an act of reprisal by the employer. Rather, it was an action by (L.C.) who was not prepared to continue to work for the employer absent it meeting certain conditions.”

For more information see:

• L.C. and Stradbrook Residential Services, Re, 2018 CarswellMan 535 (Man. Lab. Bd.).

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