Law Times

Law Times • augusT 7, 2017 Page 7 www.lawtimesnews.com Dishonesty and just cause dismissal BY NIKOLAY Y. CHSHERBININ A single act of dishonesty may constitute cause for dismissal, even if the specific incident is of minor consequence. It is not so much the dishonest act itself; rather it is the revelation of a character that is un- trustworthy that provides the legitimate basis for termination of the employment relationship. In Aboagye v. Atomic Ener- gy of Canada, 2017 ONCA 598, the On- tario Court of Appeal upheld the lower court's decision that an employee's single act of dishonesty went to the core of the employment relationship and justified dismissal for cause. In Aboagye, Atomic Energy of Canada offered employment to Francis Aboagye as an industrial safety specialist. The of- fer was conditional upon Aboagye ob- taining security clearance. AEC operates in a highly regulated environment and is legally obligated to conduct a security as- sessment of all employees, because they have access to nuclear facilities and infor- mation that is vital to the security of the country. In filling out a Security Ques- tionnaires for Site Access clearance form, Aboagye deliberately concealed his then employer, Ivaco Rolling Mills LP, by in- dicating that he was unemployed, despite the form warning that there should be "no gaps" left in the employment information and that there would be implications for failing to be forthright. Shortly after Aboagye began working at Atomic Energy, the company received numerous allegations of harassment con- cerning Aboagye, 12 of which had been substantiated. As part of Atomic's inves- tigation into the allegations, Aboagye's employment at Ivaco was discovered. When questioned why he had not dis- closed this employment on his security questionnaires, Abo- agye admitted that he withheld information. Having deter- mined that Aboagye inten- tionally misled the company, AEC dismissed him for cause. In response, Aboagye launched a wrongful dismissal action. AEC brought an appli- cation to dismiss the action by granting summary judgment on the basis that there is no genuine issue for trial. In granting the application, Justice Michal Fairburn concluded that, standing on its own, Aboagye's dishonesty in the hiring process destroyed the trust relationship between employer and employee. The na- tional security context in which Aboagye was hired was critical to the assessment of whether his dishonesty was such that it gave rise to a breakdown in the employ- ment relationship. Aboagye appealed to the ONCA on the basis that he was not dismissed for cause. The ONCA dismissed his appeal stating that the breach of honesty in this case went to the core of the employment relationship. Having agreed that the se- curity clearances are designed to protect national security, the ONCA concluded that, "on this basis alone," there were clear grounds for Mr. Aboagye's dismissal and, consequently, there was no genuine issue requiring a trial. Dishonesty can take many forms, such as embezzlement, fraud, theft of an employer's property, falsification of company re- cords or expenses, lying to an employer, obtaining a leave of absence under false pretenses or deliberately concealing in- formation that, as Aboagye illustrates, employers consid- er to be of significance. In order for an employer to rely upon dishonesty as a ground for dismissal, it must be established that an em- ployee acted with intention and that the dishonesty goes to the core of the employment relationship. Aboagye adds another, albeit limited in its reach, dimension that employers may consider prior to dismissing an employee for a single act of dishonesty. This dimension is the context in which an employer op- erates and an employee was hired. Argu- ably, outside the national security, public safety and related concepts, Aboagye is of limited utility. The Supreme Court of Canada's unan- imous decision in McKinley v. B.C. Tel, 2001 SCC 38 has clearly established that there is no strict or absolute right to termi- nate for cause in cases of dishonesty. Rath- er, the court continues to endorse an ap- proach of proportionality, where the focus is on whether the punishment imposed for the misconduct was proportional. When dismissing an employee for dishonesty, the test is whether an employee's dishones- ty gave rise to a breakdown in the employ- ment relationship. The question whether an employer is justified in dismissing an employee requires an assessment of the context of the alleged misconduct. In Aboagye, the employee misled his employer when he filled out the security questionnaires and outright lied to AEC about his employment status at Ivaco. If not for the national security context, these instances of misconduct might not have otherwise justified Aboagye's dis- missal for cause. Because there was no advance warning given, there was no op- portunity to correct the errors, there was no probation and there was no progres- sive discipline. Although, in Aboagye, the employer succeeded in establishing just cause for a single act of dishonesty, its success was primarily due to the unique regulatory context in which AEC operates. The na- tional security context of this case co- loured its outcome and, therefore, Abo- agye should be relied upon with caution. Generally, it remains difficult to sat- isfy the just cause standard under the law. The burden lies on an employer to prove that there was just cause to dismiss an employee. Consequently, whenever em- ployers terminate employees for cause, and especially when it is based on a single incident, they should always ensure that an employee is given every opportunity to respond to the allegations prior to the final decision being made. Failure to do so may result in augmented damages. LT uNikolay Chsherbinin is an employment and immigration lawyer and author of The Law of Inducement in Canadian Employ- ment Law. He can be reached at 416-907- 2587 or by visiting nclaw.ca. Terror ruling may impact Khadr case BY LINCOLN CAYLOR AND NATHAN SHAHEEN R ecently, the Ontario Court of Appeal sub- stantially upheld the Superior Court's deci- sion in Tracy v. Iran. Previously, the Supe- rior Court had recognized U.S. default judg- ments in favour of victims of terrorist groups sponsored by the Iranian government and, in turn, ordered that Iran's state assets located within Canada be paid to the victims. The decision was the first of its kind in Canada under the Justice for Victims of Terrorism Act. In its ruling upholding the Superior Court on every key conclusion, the Court of Appeal reproached the ap- pellants for arguments "that appear designed solely to frustrate Parliament's intention and the proper opera- tion of the JVTA." The Court of Appeal expressed strong sentiments on terrorism, calling it "repugnant to civil society" and its sponsorship "chilling." The Court of Appeal also af- firmed that the Superior Court was correct to enforce the U.S. default judgments because Iran was "deemed to admit the allegations (against it) in the statements of claim" by virtue of those judgments. The Court of Appeal's comments in Tracy may im- pact Speer v. Khadr, slated to be heard in October 2017. Like in Tracy, the U.S. plaintiff in Speer will ask the On- tario Superior Court to recognize a U.S. default judg- ment in a terrorism liability case carrying significant monetary damages. In Speer, the widow of U.S. Sergeant Christopher Speer, killed in a firefight with Omar Khadr, a Cana- dian fighting with terrorist forces overseas, is urging the Canadian court to enforce a U.S. default judgment obtained against Khadr. The U.S. judgment must be recognized by Canadian courts in order to realize on the much-publicized $10.5-million payment made by Justin Trudeau's government assuming Khadr still has any assets in this jurisdiction. The Court of Appeal held that the Superior Court properly relied on the facts found in the U.S. default judgments, and that the only proof of support for ter- ror required to enforce the judgments in Canada was that Iran be listed under s. 6.1 of the State Immunity Act. Further, the Court of Appeal held that the Superior Court's function was to consider whether the criteria of s. 4(5) of the JVTA were met based on factual find- ings of the American courts, including "Iran's deemed admissions, having been noted in default." It affirmed that it would be an error and contrary to Canadian law to review or reconsider the factual findings and "look behind the American statutory authority." The ruling said that "any argument that the court must look behind the foreign courts' factual findings and conduct its own inquiry is contrary to the plain language of the JVTA and the jurisprudence on the en- forcement of foreign judgements." In Speer, the Superior Court will similarly have to consider whether to recognize and enforce a Utah de- fault judgment against Khadr. Consequently, the Court of Appeal's comments in Tracy greenlighting reliance on the factual findings of a foreign court in a default judgment, including the deemed admissions of the de- fendant, could have a major impact. The Court of Appeal in Tracy held that a foreign judgment must violate "conceptions of essential jus- tice and morality" to be unenforceable on public policy grounds. To the contrary, in Tracy, the U.S. judgments arose from acts that are "repugnant to civilized soci- ety" and anti-terrorism laws that are an inoffensive and "peaceful legislative means to combat terrorism." In addition, the Court of Appeal held that the large non-pecuniary damages issued by the U.S. courts were "entirely consistent with Canadian legal morals" and a "sensible and measured response" to state-sponsored terrorism, despite exceeding the Canadian cap on non- pecuniary damages. It will be interesting to see whether the public policy goals noted in Tracy will have any bearing on the Speer court's decision whether to enable the plaintiff to collect on the large damages awarded to her in the U.S. default judgment. The Court of Appeal's decision in Tracy signals that the JVTA and SIA provide a solid foundation upon which to advance claims in Canada against foreign states accused of state-sponsored terrorism. It also confirms that foreign judgments in respect of state-sponsored terrorism may be enforced in Canada by saying, "Once it is determined that a foreign court properly assumed jurisdiction, a foreign judgment is prima facie enforceable." The Tracy decision also confirms that the JVTA brings liability for state-sponsored terrorism in line with the Canadian approach to commercial actions seeking compensation for foreign state misconduct. The SIA provides an express carve-out from the im- munity typically enjoyed by foreign states when their misconduct relates to commercial activity. Like in Tracy, the foreign default judgment in Speer will be heavily contested. The Court of Appeal in Tracy was clear that U.S. default judgments are prima facie enforceable with the defendant deemed to have admit- ted fault, and that it is an error for the court to reconsid- er factual findings. In terms of public policy, the Court of Appeal was resolute that terrorism is fundamentally at odds with Canadian morals, and that it is sensible to enforce even large non-pecuniary foreign awards against terrorists and their supporters. The Superior Court may, therefore, take guidance from the Court of Appeal's comments in Tracy when it is called upon to recognize and enforce the U.S. default foreign judgment issued in connection with the terrorist acts at issue in Speer. LT uLitigators Lincoln Caylor and Nathan Shaheen, of Bennett Jones LLP in Toronto, both focus on cross-border financial crime disputes. u SPEAKER'S CORNER COMMENT Labour Pains Nikolay Y. Chsherbinin

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