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Is employee dishonesty grounds for dismissal for cause?

July 21, 2004
by Israel Foulon LLP

Question: One of our employees continues to lie on his time sheets. Our company communicates both the procedure to log hours of work as well as the penalties for falsifying the time sheet entries. Is employee dishonesty grounds for dismissal for cause?

Answer: The general principle of wrongful dismissal is that an employee is entitled to reasonable notice of termination of his contract by the employer. But an exception to the general rule exists when there is just cause for dismissal.

In a contract of employment, traditionally there is an implied duty of faithfulness and honesty owed by the employee to the employer and breach of that implied duty is cause for dismissal. The principal justification for this type of dismissal is the lack of confidence and trust which must exist between the employer and employee, particularly if the employee is in a responsible position.

But recently the Supreme Court of Canada overruled a Court of Appeal decision which had held a single act of dishonesty, no matter how minor, constitutes just cause for dismissal. The Supreme Court proposed a new analytical framework to determine whether the context and nature of an employee’s dishonesty warrants dismissal or not.

According to this “contextual approach” the dishonest act must be viewed in the context of the employment relationship as a whole. The main factor to be considered is whether, following the dishonest act, the current employment relationship is reconcilable. If the dishonesty goes to the core of the employment relationship the dismissal will be just.

This Supreme Court decision does not preclude an employee from being punished based on his dishonest act — it simply provides for lesser sanctions for less serious misconduct. The spirit of this decision is to have a just and fair punishment that is proportional to the offence instead of a strict rule that equates dishonesty to just cause for dismissal. Each case must be evaluated on its own facts.

You suggest in your question that the employee “continues” to lie on his time sheets. If this is a recurring problem for which the employee has been repeatedly warned and disciplined, there may be just cause for dismissal. But bear in mind that given the dishonest act in question, dismissal will likely only be justified after lesser penalties have first been imposed. For example, before dismissing the employee you could dock his pay for the loss incurred by the company and/or suspend him without pay. If the dishonest acts continued, you could then impose harsher penalties eventually culminating in the termination of his employment for cause.

Peter Israel is the senior partner in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. He can be reached at 416-640-1550 or pi@israelfoulon.com. A version of this article originally appeared in the Carswell publication, Canadian Employment Law Today


Legal Disclaimer

This article is for informational purposes only and is not intended to provide legal advice, which in all circumstances must be tailored to the specific facts of any problem. You should obtain a proper legal consultation in order to determine how this article applies to your specific situation. Please feel free to contact Israel Foulon LLP to learn more at 416-640-1550.