Termination with Cause: Acts of Dishonesty Provide Just Cause for Dismissal

A recent BC Supreme Court decision demonstrates that acts of dishonesty by employees may give their employer grounds to dismiss them with cause.

Facts

In Movassaghi v. Harbourfront Wealth Management Inc., 2020 BCSC 579, the defendant employer, Harbourfront, was an investment consulting firm and member of the Investment Industry Regulatory Organization of Canada (“IIROC”). The plaintiff was an employee of Harbourfront.  The employee was in the process of being licensed as an investment advisor through IIROC.  Harbourfront was the employee’s sponsor in the licensing process.  The employee’s previous employer was a different investment consulting firm, where he had developed a client base. 

In August 2016, the employee forged the signature of a client from his previous employer on documents that liquidated and transferred that client’s accounts to Harbourfront.  The client had previously told the plaintiff that she intended to follow him to Harbourfront. When the employee could not reach the client to discuss the transferring of accounts, he therefore thought that he was justified in forging the client’s signature. However, it turned out that the client had changed her mind and no longer wanted to follow the employee to Harbourfront. When the client discovered that her accounts had been transferred, she complained to Harbourfront. The employee admitted to having forged the client’s signature and was summarily dismissed with cause by Harbourfront.

The employee sued Harbourfront for wrongful dismissal. Harbourfront brought a counterclaim for funds advanced to the employee against future commissions.

Issue

The issue in this case was whether Harboufront had established just cause for dismissing the employee.

Legal Test/Analysis

The court held that when assessing whether there was just cause for dismissal, an effective balance had to be struck between the severity of an employee’s misconduct and the sanction imposed. The employee’s alleged misconduct had to be such be that the employment relationship could no longer viably exist. Where dishonesty was the basis for dismissal, the court found that just cause may exist 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 an employee’s obligations to their employer.

The court ultimately dismissed the employee’s claim, holding that Harbourfront had established that the employee was rightly dismissed with cause. The court found that trust and acting with a client’s consent were cornerstones of the financial services industry in which Harbourfront operated. Forging a client’s signature and not reporting it until after the client complained were fundamentally inconsistent with these cornerstones. The employee had clearly breached Harbourfront’s trust and the employment relationship was thus irreparably fractured.

Harbourfront’s counterclaim for the commissions that it had advanced to the employee was allowed.

Implications for Employers

This decision highlights that, although just cause can be difficult to establish, in certain contexts an employee’s dishonesty will justify a dismissal with cause.  This is particularly the case in industries, such as financial services, where trust and client consent are paramount. When considering whether to dismiss an employee with cause due to an act of dishonesty, an employer should therefore assess whether the employee’s misconduct is severe enough that it has resulted in the breakdown of trust, leaving dismissal as the employer’s only proportionate response.

This update was authored by Neal Parker. Questions? Comments? Concerns? Contact Neal at nparker@harpergrey.com or anyone else listed on the authors page.