Canada: Howling At The Moon-Lighting Employee

Employer justified in terminating employee's employment for cause after discovering misconduct through an accidental phone-call (a pocket dial!)

In the recent decision of Ross v IBM Canada Limited, 2015 ABQB 563, the Alberta Court of Queen's Bench upheld the termination of employment with respect to an employee who was caught working for his personal business on company time. The Court held that the employee's actions in the particular circumstances of the case amounted to a serious and repeated breach of the company's guidelines, and that the employer was justified in summarily dismissing the employee as a result.

The facts of the case are unusual to say the least. D'Arcy Ross was hired by IBM as a full-time senior salesperson with a substantial annual salary. Due to the nature of his position, Ross spent the majority of his work days away from the office and was considered for the most part to be a 'mobile' and autonomous employee. During the hiring process, Ross informed IBM that he was the president and co-owner of a personal business, but assured his future employer that he would transfer his operational activities for that business to his wife upon starting work at IBM. It was a condition of Ross's employment that he understand and abide by IBM's conduct guidelines, which had, among other things, clear restrictions with respect to using IBM assets and performing non-IBM work on company time.

As you may have guessed, Mr. Ross continued to work for his personal business after being hired and without informing IBM that he was doing so. On an ill-fated day in January, Ross cancelled a weekly telephone meeting with his supervisor due to 'double-booking another appointment'. Little did Ross know that on that same afternoon, he twice 'pocket dialed' his supervisor, who in turn overheard Ross conducting work for his personal business. Ross later admitted that he was still doing work for his business, albeit for a limited number of hours per week. Days later, his employment was terminated for cause.

Before starting its analysis, the Court reiterated the test for what constitutes just cause. Whether an employer has just cause to terminate an employee's employment will depend on the particular facts and circumstances of the case, and the court must consider the nature and seriousness of the misconduct in order to assess whether the employment relationship can continue. If the misconduct goes to the very core of the employment relationship, it carries the potential to warrant dismissal for just cause.

In finding that IBM was justified in terminating Ross's employment, the Court took into account a number of factors and considerations.

First, it was reasonably expected that Ross would devote his full time and attention to the interests of IBM, particularly given his significant overall remuneration package. Second, the evidence clearly showed that Ross was soliciting and performing work for his personal business during IBM company time. The employer had the right to a full-time commitment from Ross and his decision to perform outside work during company time amounted to a serious breach of the employment relationship.

Third, the 'pocket dial' meeting was not an isolated incident — Ross himself admitted that he spent 3-4 hours per week on his personal business. Fourth, IBM had clear and comprehensive conduct guidelines which covered the very situation that was at issue in this case. Although Ross insisted that he was not off-side of the guidelines because his business was in a completely different industry, the Court said that he could (and should) have made inquiries with IBM's human resources department if he had had any questions or difficulties.

Fifth, Ross's inability to understand why IBM was entitled to compliance of its guidelines suggested to the Court that Ross was unlikely to change his attitude going forward. Sixth, given the seriousness of the misconduct, IBM was not required to give Ross a warning and a chance to improve his conduct. And finally, Ross was a senior, mobile and autonomous employee whose employment relationship with IBM was rooted in an 'honour system'. IBM had to be able to reply on the assumption that Ross was doing what he was supposed to be doing. Because his misconduct was, among other things, deceitful, it was reasonable for IBM to conclude that the employment relationship could not be repaired.

So what are the key takeaway points for employers from this decision?

  1. Deal with a policy breach quickly and consistently
  2. Document all communications with the employee (even pocket dials!)
  3. Most importantly, ensure that you have clear policies and guidelines in place to address conflicts of interest and moonlighting situations. With respect to such policies :
  • Employees should be able to readily understand what a moonlighting scenario looks like, and what will put them off-side of company policy
  • Employers should ensure that employees are provided with the name of a contact person or department should they have any questions about the application of the policy
  • Employees should be put on notice that any breaches of the policy could result in discipline, up to and including, the termination of their employment.

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