A car dealership in British Columbia was justified in firing its president after he expensed two meals with his wife, the B.C. Supreme Court has ruled.
Though the amounts involved were small — about $250 — the president claimed the dinner and breakfast were with employees and he didn’t come clean about it when confronted, it ruled. That misconduct went to the “very heart” of the employment relationship.
“He was in the most senior management position at the defendant. His position commanded a high level of authority, responsibility, and trust. He breached that trust by submitting false expense receipts and thereafter being untruthful about them when given an opportunity to explain them” it said.
Background
TM was initially hired as the general manager at Galaxy Motors. He joined the company in June 2020. He received an employee handbook, prior to his first day, that stated that “falsifying records or information” or “intentional disclosure of confidential company information” would result in immediate dismissal.
“Under these conditions, no warning will be given and you will be terminated for just cause and provided no termination pay or severance pay,” it said.
TM was a solid general manager and, by October 2020, had demonstrated significant success in the role, the court said. But he expressed concern to the owner that he was not receiving a share of net income as agreed. Rather, he was being paid the guaranteed minimum of $25,000 per month.
Shortly after that, TM was promoted to vice-president of operations for both the auto and RV business at Galaxy. A new compensation package was agreed that included a one-time payment of $10,000 and a salary of $35,000 per month. It also provided a bonus based on “net.”
In June 2021, TM asked to be made president or CEO, which aligned with the “duties, by job description, I currently am fulfilling for you now.” On July 9, 2021, he was promoted to “president of operations.” It included a base of $30,000 per month and a sliding bonus scale based on net.
The owner of Galaxy died suddenly and unexpectedly on Aug. 9, 2021, and TM was given signing authority for the company. After the death of the owner, control of the company passed to his niece and nephew — AJ and MJ.
Expense claims
On June 22, 2022, TM and his wife attended an event at a brewhouse, along with the new owner AJ and several of Galaxy’s managers and their spouses.
TM said that, when the bill arrived, he had a conversation with AJ about the dinner being a “team-building event” that could be justified as a business expense. TM paid the bill.
AJ, though, said she never considered it to be a company event and thought TM was just being generous when he paid the bill. When she learned later that it had been submitted as an expense, she thought it was ludicrous and refused to approve it.
Based on that, AJ decided to investigate TM’s expense claims. A number of them stood out, including:
- A restaurant receipt dated June 15, 2022, that indicated he had dinner with two employees
- A restaurant receipt dated June 16, 2022, that indicated he had breakfast with an employee
During cross examination, TM admitted the dinner and breakfast had been with his wife, and not employees.
Suspended in first video call
On July 11, 2022, TM attended a meeting with AJ and MJ via video conference. TM was questioned about some of his business expense claims. During the meeting, they presented a slide show that included clauses from his employment contract as well as slides from the news media of an individual who had recently been convicted of fraud in connection with business expense claims. They accused TM of fraud.
At the end of the meeting, TM understood that his employment had been suspended.
An email went out shortly after to all employees noting that TM was on a “temporary leave of absence” and should not be contacted. AJ and MJ decided they could not trust TM going forward and decided to terminate his employment.
Fired in second video call
On July 13, they met with TM again via videoconference. He was told there had been an investigation into his expense claims; that his behaviour was a fundamental breach that caused them to lose faith and trust in him; and his employment was terminated effective immediately.
The termination letter read, in part:
“We have become aware of numerous instances of fraudulent and improper conduct relating to expense claims made by you during your employment. When questioned about these irregularities, you were unable to provide a reasonable explanation. As President of Operations, you are expected to exercise good judgment and uphold the trust inherent in your management and fiduciary position. We consider your conduct to be a fundamental breach of your obligations to Galaxy Motors which has caused us to lose trust and faith in you.”
The ruling
The court said it had “no difficulty” finding that TM submitted the dinner and breakfast receipts “under the guise of having been business-related when he knew they were personal.”
He attempted to deceive Galaxy by claiming he had in fact eaten with other employees when he knew that was not the case, it said.
When confronted during the July 11 call, “instead of confessing what he had done, he perpetuated his dishonesty by repeating it,” the court said.
It noted that dishonesty is not automatic cause for dismissal. But it said Galaxy’s reaction was justified in the circumstances.
“Although (AJ) may have misconstrued and made assumptions about some of the underlying facts and could have conducted a more thorough investigation into them, she had sufficient information at her disposal to be confident that her concerns regarding the Parksville restaurant dinner and breakfast receipts being personal in nature were well-founded,” it said.
Although the amount involved was small, about $250, the misconduct went to the “very root” of the employment relationship.
“He was in the most senior management position at the defendant. His position commanded a high level of authority, responsibility, and trust. He breached that trust by submitting false expense receipts and thereafter being untruthful about them when given an opportunity to explain them on July 11, 2022,” it said.
“Moreover, he failed to “come clean” when he had a second opportunity to do so during the meeting on July 13, 2022. His conduct was such that the defendant’s loss of faith and trust in him was justified.”
It awarded costs to Galaxy at Scale B.
For more information, see Mechalchuk v Galaxy Motors (1990) Ltd., 2023 BCSC 635 (CanLII).
