A recent decision of the Supreme Court of British Columbia held that an employer had just cause for dismissal of a senior employee who submitted personal meal expenses for reimbursement as business expenses.
In Mechalchuk v. Galaxy Motors (1990) Ltd., 2023 BCSC 635, the plaintiff/employee held the position of President and CEO of the defendant automotive retail company, Galaxy Motors. The employee had a well established career in automotive sales and a seemingly stellar performance track record at Galaxy Motors, quickly advancing from a general manager, to a VP of Operations and then finally President and CEO in a span of two years. At every level of employment, the employee commanded a high level of authority, responsibility, and trust.
The employer-employee relationship appeared strong until the parties ended up in a seemingly minor dispute over whether it was appropriate to expense a group dinner. The dispute resulted in the employer investigating the employee’s past business expenses and this led to the employer’s discovery of other questionable expense claims. This included two receipts for meal expenses which the plaintiff indicated were meals with other employees. Those meals turned out to be meals the plaintiff shared with his spouse.
When confronted about the questionable expenses, the employee was not forthcoming about the fact that the meals were with his spouse (not the two employees whose names were written on the receipt).
Although the receipts at issue were not of a significant dollar value (in the range of about $250), this was a costly decision for the employee. As a result of his actions, employer terminated the employee for cause. In response, the employee sued for wrongful dismissal as well as aggravated and punitive damages.
At trial, the court decided in favour of the employer. The court found that the employee breached his employment contract by submitting false expense receipts and thereafter being untruthful and not forthcoming when given an opportunity to explain. The employee’s conduct was such that the employer’s loss of faith and trust in him was entirely justified.
The notion that employees should not submit false, misleading or improper expense claims is not new or particularly surprising. Mechalchuk is a noteworthy decision not because it changes the law, but because it largely reaffirms the law regarding cause.
Although cause remains a contextual analysis, this decision reaffirms that submitting false, misleading or improper expense claims may amount to cause for termination, and particularly of an employee in a senior position of significant trust or authority. It reaffirms that cause may be established even if amounts at issue are not of a significant dollar value, as the primary issue is not so much the financial cost to the employer, but the damage the employee’s actions caused to the employer’s trust.
This case additionally affirms that an employee’s actions in the course of an employer’s investigation are critically important contextual factors in the analysis of whether the employee’s conduct rises to the level of cause. Further dishonesty or lack of candor in the investigation can be an aggravating factor supporting dismissal for cause.
If you have any questions regarding this article, please contact Shannon Faleiro or your Harris lawyer.