Wilful misconduct can occur when an employee engages in unlawful, wrongful, or improper conduct while in the workplace. In the recent case of Park v Costco Wholesale Canada Ltd. (“Costco”), the Ontario Superior Court of Justice was asked to determine whether Costco’s decision to terminate an employee’s employment without notice, for cause, should be upheld. In determining whether the termination should be upheld, the Court was required to assess whether the employee’s behaviour met the legal test for dismissing an employee for dishonest conduct.

Employee was Subject to Costco’s Standard of Ethics for Managers and Supervisors

The employee was hired by Costco in 1995. He was employed for over 20 years, during which time he worked at many warehouse locations and was then transferred, at his own request, to Costco’s head office in Ottawa, Ontario. When his employment was terminated, he was an assistant buyer in the lawn and garden department, earning approximately $74,600 per year. In this role, the employee monitored inventory and sales, set prices, negotiated with vendors, and resolved accounting discrepancies.

The parties agreed that in this role, the employee was in a management-level position and, therefore, that Costco’s “Standard of Ethics – Managers/Supervisors” applied to him.

In addition, the employee’s employment was governed by an Employee Agreement, which included expectations for managers as well as causes for termination of employment.

Section 11.2 of the Employee Agreement provided that termination of employment would be caused by “wilful damage or destruction of Company property, equipment, merchandise or property of others on Company premises” as well as “any act of insubordination including but not limited to: a. refusal to comply with the direct instructions or directions of a manager; b. contemptuous behaviour or remarks to a manager.” Section 11.6 provides expectations for managers, providing that:

“In accepting a position of management, you must be committed to and demonstrate a role of honesty and forthrightness. Anytime there is the slightest doubt about an activity that could be questioned regarding honesty, integrity or intent, you must discuss it with your Manager or Regional Vice President to remove any doubt. Managers above all else lead by example.”

Employee Develops Website; Seeks Approval of Management

The employee’s termination arose from his deletion of a Google Cloud-based website that he had created for the toys department at Costco. The website was intended to allow users within the toy department to share files with each other. This website was developed during work hours and was Costco’s property.

It was suggested to the employee that he bring his website to management’s attention to see if it could have a wider application within the company. The employee was told management would look into the website, however, no feedback was ever provided.

Employee Deleted Website Which was Property of Costco

Almost three months later, management discovered that they could no longer access the website. They emailed the employee to request access to the website and change the ownership from the employee to other management team members. The employee stated that he deleted the website right after receiving the email from management, as he was angry that he had never received feedback on the website. In his response email, the employee stated that he was under the impression that no one was interested in it.

Costco was able to restore the website and did so. Before Costco informed the employee that it had been restored, the employee deleted it again and also removed it from his computer’s recycling bin. The employee’s evidence was that he did not know it had been restored by Costco, but thought that he had not deleted it properly the first time.

Deleted Website Results in Employee’s Termination

Costco launched an internal investigation into the deletion of the website. Their IT support reported that:

“The Site was firstly deleted by robert.park@costco.com on 4/14 4:35am PST. After, at the same date, it was restored on 4/14 8:04am PST by tclarkg@costco.com. Subsequently, the site was deleted and then permanently deleted by robert.park@costco.com on 4/14 at 10:12am PST.”

The employee’s termination was approved by upper management (as required for termination for an employee of longer than five years by Costco’s policies), and management then met with the employee to advise of the termination. Costco noted that the employee was being terminated for cause, due to the deletion of the website.

The Legal Test for Termination for Dishonesty

In McKinley v. BC Tel, the Supreme Court of Canada set out the test to determine if an employee’s conduct justifies termination for dishonesty, stating that:

“the test is whether the employee’s dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamentally or directly inconsistent with the employee’s obligations to his or her employer.”

Courts must take three steps to apply this standard, namely:

1. determining the nature and extent of the misconduct;

2. considering the surrounding circumstances (this includes age, employment

history, seniority, role, responsibilities in relation to the employee and the type of business, policies, and position of the employee for the employer); and

3. deciding whether dismissal is warranted (i.e. whether dismissal is a proportional

response, which will include an assessment of whether the misconduct can be reconciled with sustaining the employment relationship).

The Nature of the Employee’s Misconduct was Deliberate and Dishonest

The Court found that the employee had engaged in four acts of misconduct.

The first was the employee’s deliberate deletion of the website was damage or destruction of Costco property contrary to the Employee Agreement.

The second act occurred when the employee sent an email to management stating that he thought no one was interested in the website, but did not indicate that he had deleted it in response to management’s request for access. Instead, the employee made it seem as though it was deleted at some point in the past due to not being used, which was not the case.

The third act occurred when the employee sent a further email to management in which he used disrespectful and insubordinate language, including asking: “exactly how many times should I be asking for an update, can I not trust in my managers to be able to get back to me in a timely manner and not ignore my requests?” He then suggested that the recipients “need to review with your managers how to manage their workloads…I shouldn’t have to babysit.” The Court found that these statements were acts of insubordination under the Employee Agreement and did not set a proper example for a manager.

The fourth act of misconduct occurred when the employee deleted the website for the second time. This was contrary to the terms of the Employee Agreement (again) and also in defiance of an earlier email from management telling the employee to inform management before removing anything from the system that other employees would use. The Court added that this was further dishonest conduct as the employee did not inform anyone that he had permanently deleted the website.

The Surrounding Circumstances Support Termination

The Court considered both the employee’s surrounding circumstances and Costco’s circumstances. The Court acknowledged that the employee had been a long-time employee with overall positive performance reviews. The employee held a position of trust and authority and Costco trusted him with significant security access to Costco’s systems, as well as expected him to comply with the Employee Agreement.

The Court also found that Costco’s Employee Agreement specifically provided for wilful damage of company property and insubordination as causes for termination, which occurred here.

The Misconduct was Serious Enough to Support Termination

In determining whether termination was a proportionate response to the employee’s conduct, the Court considered three measures:

1. Did the misconduct violate an essential term of the employment contract?

2. Did it breach the faith inherent to the work relationship?

3. Was it fundamentally inconsistent with the employee’s obligations to Costco?

The Court found that termination was a proportionate response to all three of these measures. The employee’s misconduct was serious, and it was “indispensable to the parties’ employment relationship” that the employee “exercised the duties of his position with integrity and honesty.”

Given the employee’s conduct, he could no longer be trusted with the autonomy of a manager in his position.

Contact the Employment Lawyers at Bader Law in Toronto for Advice on Wrongful Terminations

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