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Termination for cause due to breach of fiduciary and other implied employment duties

September 25, 2023

Chura v. Batten Industries Inc., 2023 BCSC 1040

The plaintiff, Chura, commenced an action alleging wrongful dismissal against her former employer, the defendant, Batten Industries Inc. (“Batten”).  The action was dismissed in its entirety as the court found that Chura’s conduct had breached her fiduciary and implied employment duties at common law.

This decision discusses issues of i) conflict of interests; ii) breach of fiduciary duties and common law employment duties; and iii) termination with cause.

Facts

Chura knew the owner of Batten through her husband, and was hired due to that relationship.  Chura started working for Batten on April 4, 2008, originally as a receptionist earning approximately $32,000/year.  Chura never had a formal employment contract. 

Chura’s role with Batten steadily increased over the years.  Her last position with Batten was a senior sales and management position, where she earned over $114,000 in 2014.  The number of employees at Batten doubled during Chura’s employment, and Batten also experienced substantial growth.  The parties agreed that Chura was a senior employee who had substantial autonomy and discretion in carrying out parts of Batten’s sales operations. 

In 2016, Batten became concerned with Chura’s conduct, including her use of company credit cards, tardiness, and attendance.  After an investigation, on January 11, 2017, after almost 9 years of employment, Batten was terminated, which Batten claimed was for cause.  At the time of termination, Batten offered $20,000 in exchange for a signed release.    Chura did not accept the offer and sued for wrongful dismissal. 

After Chura’s termination, Batten became aware that Chura (or her husband) received a 20% kickback for Batten retaining a company called WebStager to provide Batten with digital and website development services.  Batten claimed a conflict of interest, breach of fiduciary duties and common law employment duties, and damages in their counterclaim.

Issues

The main issue that the court had to determine was whether Batten had just cause to terminate Chura’s employment.  In summary, the court stated that to decide if there was cause for termination, they have to decide whether the actions of the employee may reasonably be said to have given a rise to a breakdown in the employment relationship.  The court also noted that not all acts of dishonesty are sufficient to constitute just cause. 

Conclusion

Chura’s action was dismissed, and the court awarded damages to Batten.  The court made the following findings in support of their decision:

  1. Chura engaged in deceitful conduct in relation to alleged expenses for work and seeking/obtaining reimbursement;
  2. It was a clear conflict of interest that Chura’s husband was paid by WebStager, and that Chura did not inform Batten;
  3. Chura did cause Batten to retain WebStager and in doing was a breach of her fiduciary duties, as well as her duties of good faith and honesty to Batten;
  4. Although a fiduciary relationship was found, the finding of breaching her duties of good faith and honesty to Batten would be consistent, regardless if Batten was found to be a fiduciary of Batten or not;
  5. Chura’s conduct in relation to Webstager alone was sufficient to constitute just case for termination; and
  6. The long-standing pattern of dishonest and deceptive behaviour on behalf of Chura meant that the employment relationship could no longer viably exist.

Note to Employers

It is important for all employers to ensure that they have enforceable written employment contracts with all their employees, specifically contracts that clearly outline notice entitlements upon termination.  If not, the employer could be exposed to reasonable notice at common law, which is often much greater than what is provided in the Employment Standards Act.  Termination for cause is a high standard to prove.  Although it is not stated, we expect Batten offered $20,000 in exchange for a release to avoid the risk that they could not establish cause in court and they did not have a formal employment agreement with Chura.  Batten later discovered Chura’s relationship with WebStager, which allowed them to be successful in establishing termination for cause in court.

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Important Notice: The information contained in this Article is intended for general information purposes only and does not create a lawyer-client relationship. It is not intended as legal advice from Harper Grey LLP or the individual author(s), nor intended as a substitute for legal advice on any specific subject matter. Detailed legal counsel should be sought prior to undertaking any legal matter. The information contained in this Article is current to the last update and may change. Last Update: September 25, 2023.

©Harper Grey LLP 2023

 

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