Executive sues for wrongful dismissal and ends up paying his employer $530,000

A president and CEO in Alberta sued after his employment was terminated for cause.

During the course of his employment, the employee habitually exceeded the spending limits imposed by the Board of Directors. In one instance, the employee authorized expenditures totaling $800,000 when his spending authority was only $25,000. The employee did not seek Board approval required for the extra spending. In addition, the employee misappropriated company funds by approving payments to a person who had not provided goods or services to the company. He also paid himself and others significant bonuses.

When confronted about a transaction full of “red flags,” the employee lied about his role in authorizing the transaction. The employee had not notified the Board of the transaction and chose to authorize the transaction without ever reading the final version of the contract (which was written in a foreign language). The employee also advised the Board that a bidder’s bond was not required when in fact it was. This resulted in a $52,000 penalty to the company.

Throughout the entire course of his employment, the employee deliberately withheld information and misled the Board.

The decision

The Court was quick to dismiss the employee’s wrongful dismissal claim and found that the employee had engaged in significant levels of misconduct during his employment. The Court determined that the employee was fundamentally dishonest and incompetent and that his conduct was contrary to the fiduciary duty he owed his employer.

The Court found that employers are entitled to place high levels of expectation and trust in their senior or managerial employees and when that trust is undermined, employers are entitled to terminate with cause.

As the employee’s conduct was so reprehensible, the Court awarded $50,000 in punitive damages. The Court stated that it was prepared to award much more had the employer asked for it.

The employee was also ordered to pay $200,000 in damages and to repay $280,000 he had misappropriated in gifts and bonuses.

Takeaway for employers

This case is a win for employers and encourages employers to seek compensation for losses caused by the misconduct of high-level employees.

The MLT Aikins Labour & Employment team has extensive experience advising on misappropriation of funds and other claims against former employees. To learn more about how employee misconduct matters can impact your organization, contact a member of our team today.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should not be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.