The Ontario Superior Court has released a decision, Goruk v. Greater Barrie Chamber of Commerce, 2021 ONSC 5005 (CanLII) ("Goruk"), in which a series of individual acts of misconduct, poor judgement, and dishonesty were found to cumulatively justify an Executive Director's termination for cause.
The Goruk decision provides a helpful example for employers of a situation in which an employee in a fiduciary position may be terminated for cause without relying on standard progressive discipline. The case is also noteworthy because of its finding that the individual acts of misconduct at issue, taken in isolation, would not have provided grounds to terminate for cause.
Background & Facts
Goruk concerned an Executive Director who had been employed with the Greater Barrie Chamber of Commerce (the "Chamber"), a not-for-profit organization, for 17 years. The Executive Director held a position of trust with the organization, which was governed by a volunteer Board of Directors (the "Board") who relied entirely on her for the Chamber's day-to-day management. In particular, the Board relied extensively on her honesty and integrity. The Executive Director was placed on paid administrative leave pending the results of an investigation into certain financial irregularities. This suspension followed her decision to allow a controversial e-broadcast to be circulated, challenging the Board's proposed constitutional amendments.
The investigation revealed several concerning incidents, which resulted in the Executive Director's termination for cause without notice or compensation. The independent incidents included, among other things, that the Executive Director (a) uttered a falsified document to the Chamber's bank (though the Chamber suffered no loss as a result), (b) took out vacation pay in cash on an unauthorized basis, (c) granted herself an unauthorized pay raise (the result of a bookkeeping error which she failed to correct), and (d) awarded contracts to her sons without following the appropriate procedure and without disclosing the transactions to the Chamber's auditor. Moreover, issues had arisen between the Executive Director and the Chamber's new Treasurer after she impeded access to financial statements that hindered the Treasurer's ability to prepare monthly reports for the Board's review.
The Executive Director was immediately terminated for cause following the conclusion of the investigation. She was not provided with any warnings or opportunity to correct in connection with the above-noted incidents.
Justice Boswell addressed each of the issues supporting the Board's decision to terminate the Executive Director. Separately, none of the acts supported termination for cause. However, he found that the culmination of the incidents did amount to cause for termination. Specifically, Justice Boswell considered the Executive Director's decision to circulate the e-broadcast, which was found to have undermined the Board's proposed amendments to the constitution, as well as her impediments to the Treasurer's access to financial records. The falsification of bank documents and unauthorized raise were both found to be acts of misfeasance which, though arguably "not major", were dishonest. The Executive Director was also found to have a tendency to exercise "very poor judgment", which was demonstrated in her conduct vis à vis the Treasurer and the e-broadcast, and in her decision to take out vacation pay in cash without proper approval.
Critically, Justice Boswell reasoned that the Executive Director stood in the position of a fiduciary to the Chamber and the Board, and as such she owed them duties of loyalty, honesty, and good faith. These duties were particularly important given that the organization was a not-for-profit organization that served the community. The Executive Director's termination was a direct result of a loss of faith and trust in her ability to continue to carry out her responsibilities. Justice Boswell noted that because the Board was unable to supervise the Executive Director's actions, if they could not trust her implicitly, she simply could not continue to hold the role.
Justice Boswell also found that because the issues that led to the termination of the Executive Director's termination "came to a head at or around the same time period", this situation was distinct from the more typical cases in which warnings and the use of escalating forms of discipline are the appropriate and proportionate response to repeated misconduct (for an illustration of this type of case, see here on our blog).
This case provides several important considerations for employers when faced with a possible for cause termination, particularly in respect of employees who are fiduciaries or otherwise occupy positions of trust. First, acts of poor judgement and misfeasance that independently do not amount to just cause for termination, may, when taken together, amount to just cause for termination. Second, an employee in a position of trust and autonomy may be terminated for cause if it is determined that they repeatedly failed to act with honesty when discharging their duties. Third, proportionate discipline will usually involve warnings and the opportunity for correction, or a ladder approach to discipline. However, this case illustrates that multiple incidents of misconduct that occur around the same time period may amount to a repudiation of the employment contract such that progressive discipline is not required.
The findings in Goruk do not change the fact that the threshold for terminating an employee for cause is extremely high, and that the facts and strategy in each case must be evaluated on an individual basis.
The author would like to acknowledge the support and assistance of Alexandra Mathieu, Summer student at law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.