Dishonest employees have more to lose than just their jobs
Original article by Howard Levitt published in the Financial Post, February 26, 2019.
Employee theft is increasingly ubiquitous, costing Canadian businesses more than $1.4 billion dollars annually. In addition to merely dismissing the perpetrators, employers should aggressively pursue employees to recover those damages.
What if the theft is only ascertained after the employee’s dismissal and severance has already been paid? My advice then is to not only sue for the purloined funds or products but to recover the severance.
That is what York University did. Michael Markicevic was an assistant vice-president who misappropriated nearly $1 million. Before York was aware of the extent of Markicevic’s dishonesty, his employment had been terminated without cause. York negotiated and finalized a severance agreement with Markicevic including a mutual release. During the negotiations, Markicevic denied any wrongdoing. York agreed to pay him 36 months gross salary, totalling $696,166.
In an investigation after his departure, York learned the full extent of his behaviour. From 2007 to 2010, Markicevic masterminded two fraudulent schemes, which he implemented through his subordinates, including the use of York employees to improve his personal residences. York sued to set aside his release and recover the severance in addition to the money stolen.
The judge found that Markicevic had misrepresented his innocence to York and, if York had known of the fraud, they would never have paid him and provided a release. Markicevic was ordered to pay more than $1.8 million in damages plus $1.37 million in costs. He unsuccessfully appealed the decision to the Ontario Court of Appeal.
Employers must demonstrate to their employees and to shareholders that dishonest employees have more to lose than their jobs. I generally recommend that criminal charges also be laid. But civil recovery proceedings should not await the outcome of those.
An employee’s apparently fraudulent behaviour will not automatically justify cause for discharge.
In British Columbia, an employee’s unauthorized use of a company gas card was not found to be cause. David Strauss was terminated for cause after he had used a company gas card on multiple occasions, without authorization, to purchase gasoline for his personal vehicle.
Use of a company gas card without authorization is indeed theft. However, that court was not satisfied that the employer had just cause for termination. The court was not satisfied that Strauss’ behaviour met the requirement of dishonest intent. The behaviour was classified by the court as bad judgment, which did not meet the threshold for cause.
The court was not satisfied that Strauss’ behaviour met the requirement of dishonest intent. (It) was classified as bad judgment, which did not meet the threshold for cause.
OLG later discovered the shortfall in the Wonderland cash and reported Dennis to the Ontario Provincial Police. OLG refused to pay the settlement it had previously agreed to, believing that it now had just cause to terminate Dennis. The court disagreed.
It considered Dennis’ intent to repay the money, the fact that her management of the money was outside of her ordinary employment duties and the inadequate investigation performed by OLG, in deciding that it was disproportionate for OLG to view Dennis’ conduct as cause.
These decisions demonstrate the difficulty employers can face in proving cause for termination, even for theft. Unlike Markicevic’s behaviour, the behaviour of the latter two employees was not viewed as purposely deceitful. Unable to demonstrate a dishonest intent, the employers were unable to establish cause.
An immediate interview with the employee, in which appropriate questions are asked, before they have the time to perfect their version of events, will make your case far more likely to succeed. Conduct this through your own trained managers rather than by outside investigators. If you use an outside lawyer, the employee has every right to refuse to answer without their own lawyer present and objecting. If company personnel conduct the interview, a refusal to answer can itself be cause for discharge.