Wednesday 4 December 2013

Never  fire  an employee  unfairly                       

James Winfield was employed by Pattison Sign Group, a Division of Jim Pattison Industries Ltd. PSG in Edmonton in the province of Alberta from the spring of 1984 until his termination on April 9, 2008. He was 55 years old at the time of his termination.

Mr. Winfield’s income from PSG was earned from commissions and bonuses on sales. In 2007, his T4 (tax form) from PSG showed an employment income of $191,393. In early 2008, he was paid a bonus for having achieved sales exceeding $34,000,000 during his 24 years of employment with PSG. But why then was he terminated after being such a successful sales person for that firm?

Mr. Winfield has been in a common-law relationship with Deborah Felicioni since late 2000. Mr. Winfield and Ms. Felicioni have a joint bank account (the Winfield Account)

Ms. Felicioni did the majority of the banking for the couple. When Mr. Winfield received cheques in the course of his employment, he would take the cheques home and place them on a desk in the residence he shared with Ms. Felicioni. Ms. Felicioni would then prepare a personal bank ledger which would record the date on which she made an entry in the ledger, a brief description of the cheque and the amount of the cheque. She would then place the cheques in a bank envelope and would deposit the funds in the Winfield Account. Such deposits were usually made at an automated teller machine.                                   

In 2007 and early 2008, the Edmonton sales office of PSG maintained an account called the “Imprest Account”. The Imprest Account was for the purposes of making small purchases for the Edmonton office. It was essentially a petty cash account, except that any purchase would be paid for by cheque as opposed to cash. Patricia Sperling was an administrative assistant in the Edmonton offices of PSG in 2007 and 2008. She administered the Imprest Account. The balance to be maintained in the Imprest Account was $3,000. When purchases were made, Ms. Sperling would complete a report to seek replenishment of the Imprest Account to bring it back to the $3,000 balance. She stated that when the replenishment cheques were received, she would immediately take the cheques to the PSG bank in Edmonton and deposit them.                                                                                                                                       After August 2007, all accounts payable for PSG were handled by the Toronto office of PSG. In 2008, Grazia Migliore was the Assistant Controller for the Western Region of PSG, which covered the sales offices in, and west of, Manitoba. She reported to Richard Macina. Mr. Macina was the the Senior Vice President and Chief Financial Officer of PSG. In March and April 2008, he was the Director of Finance of PSG. Ms. Migliore oversaw all accounts payable for the Western Region. The accounts payable department in Toronto processed all expense cheques for sales representatives in the Western Region, as well as cheques to replenish the Imprest Accounts maintained by offices in the Western Region.                                                                                                                 

The accounts payable department in Toronto would receive requests for cheques. It would review each request and if it was in order, the printing of a cheque would be approved. The accounts payable department would then complete a cheque run which would print all of the cheques required on a given day. Ms. Migliore would review the printed cheques to ensure that they were in order and had been properly approved. The cheques would then be returned to the accounts payable department for folding and placement in envelopes.         
 The cheques were printed on an 8 ½ x 11 sheet. The bottom third was the detachable cheque, and the top two-thirds was the cheque stub. The accounts payable personnel would fold the cheques and place the cheques in windowed envelopes. The payee of the cheque would be visible through the window, but the amount of the cheque would not. If the cheque was payable to someone outside of PSG, the cheque would be processed through a mail machine which would seal the envelope. If the cheque was payable to someone within PSG, the envelope would not usually be sealed. An envelope containing a cheque would be placed in an interoffice envelope and sent to the appropriate PSG office.       
Meanwhile, in the PSG Edmonton office, either Ms. Sperling or Joyce Niziol would   receive the courier package with the interoffice envelope containing any cheques for the Edmonton office, and would distribute the cheques as necessary.  Ms. Sperling later said that when doing so, cheques payable to Mr. Winfield would be placed in his mail slot if he was not in the office or on his desk if he was in the office. Ms. Niziol later said that when she distributed cheques, she would hand the envelope to the individual in question or would place the envelope on either the individual’s desk or computer keyboard. In December 2007, Ms. Sperling requested a replenishment of the Imprest Account in the amount of $741.13. On January 4, 2008 the accounts payable department printed a cheque payable to “Pattison Sign Group – Imprest” at the Edmonton office of PSG in the sum of $741.13 (the Imprest Cheque).  In early February 2008, she received the cheque in relation to the January request, but had not yet received the cheque in relation to the December request. Ms. Niziol confirmed to Ms. Sperling that she had not received the required cheque.           

 Ms. Migliore eventually obtained the Imprest Cheque and sent a copy to Ms. Sperling. The Imprest Cheque indicated that it had been cashed in Calgary. Ms. Sperling believed that the Imprest Cheque had been cashed by the PSG Calgary office and therefore asked Mr. Greenawalt to follow up on this. Mr. Greenawalt did so and determined that the Imprest Cheque had not been cashed by the PSG Calgary office. Both Ms. Sperling and Mr. Greenawalt later said that Mr. Greenawalt advised her that the Imprest Cheque was cashed at the Inglewood branch of TD Canada Trust in St. Albert, Alberta. Ms. Sperling then advised Ms. Migliore of this information. Ms. Migliore then informed Ms. Sperling that the Imprest Cheque had been deposited in an account in the name of Deborah Felicioni. Ms. Migliore inquired as to whether Ms. Sperling knew Ms. Felicioni, and Ms. Sperling advised that Ms. Felicioni was Mr. Winfield’s girlfriend. Ms. Migliore then asked Ms. Sperling to review the matter with Mr. Winfield. Ms. Sperling said she was not comfortable doing this. Ms. Migliore said she would review the matter with Mr. Winfield.                                                                            

Now the cheque should not have been cashed by Winfield’s common-law wife so why did she deposit it in their joint account?                                                         

Ms. Migliore contacted Mr. Winfield. Ms. Migliore later said that she had not spoken with Mr. Winfield previously and, therefore, at the outset of the conversation she introduced herself and explained why she was calling. She advised Mr. Winfield that Ms. Sperling had indicated that the Imprest Cheque was missing. She gave Mr. Winfield the account number and the name on the account of Deborah Felicioni. Mr. Winfield confirmed that he recognized the account and that he shared the account with Ms. Felicioni. Ms. Migliore advised of the amount of the Imprest Cheque which had been deposited into the account. She said later that Mr. Winfield replied that he had noted that there was money in that account that was unaccounted for. Ms. Migliore found this to be a strange response.                                                                                            

She advised Mr. Winfield to repay the amount of the Imprest Cheque and that he should give the money to Ms. Sperling for deposit. Mr. Winfield agreed. At the end of the conversation, she indicated she would send a copy of the front and back of the Imprest Cheque to Mr. Winfield, which she did immediately after the telephone conversation.                                                                                    

Now before I go further, let me remind you that both Mr. Winfield and his common-law spouse, Ms. Felicioni had a joint account and she was the person who made the deposits in their account and since she made that deposit of the $741.13 and not him, there would be no reason for him to know why the cheque was put in their account nor should he be have been concerned especially since he might have presumed that it was probably a cheque made payable to her.      

However, this begs the question, how did she get the cheque in the first place? 
Mr. Winfield testified that his recollection was that the first time the Imprest Cheque was raised with him was on March 6, 2008 when Ms. Sperling came into his office and said that Ms. Felicioni had the Imprest Cheque. He recalled Ms. Sperling producing a copy of the back of the cheque which had Ms. Felicioni’s name typed on it and an indication that it had been deposited at an automated teller machine through TD Canada Trust. Mr. Winfield later testified that he advised Ms. Sperling that if he had this money he would return it. He then contacted Ms. Felicioni at home and asked her to check the records. She did so. The bank ledger maintained by Ms. Felicioni indicated that on January 12, 2008 she had made an entry for a deposit in the sum of $741.13. The description was “PSG – EXP” (for expenses) which she testified meant “Pattison Sign Group expenses”. Ms. Felicioni testified that she had no recollection of the cheque with respect to this particular deposit or making the deposit. There is nothing fishy about that since some time had elapsed. The bank ledger also had notes for January 12, 2008 which were for a deposit from her in the sum of $2,000 as well as a deposit in the sum of $117.76, again with respect to Pattison Sign Group expenses.                                                                    

Now we must remember that when Mr. Winfield received his cheques, they were deposited on his desk and he would later give them to his common-law wife who would then deposit them in their joint account without questioning the authenticity of them.                                                                                                  

Mr. Winfield later testified in court that he told his superiors that he thought that the cheque in question was payment of an expense report, and that that he was expecting an expense cheque not for that amount, but for an amount close to the amount of the Imprest Cheque. He said that Ms. Sperling had left the Imprest Cheque on his desk in a windowed envelope and that he did not usually look at the payee on his cheques and simply gave the cheque to his partner to deposit in their personal joint bank account.                                            
Mr. Macina testified that he did not find Mr. Winfield’s explanation to be credible when he was asked to explain why the company cheque was deposited in his joint account with his common-law wife.  He felt that Mr. Winfield had given contradictory explanations in that he had advised Ms. Migliore that he knew there were funds in the Winfield Account which were unaccounted for, and had advised Mr. Macina that he thought the funds were in respect of expenses owed to him. Mr. Macina was under the impression that at the point in time the Imprest Cheque was deposited, there were no expense reimbursements outstanding to Mr. Winfield and, therefore, Mr. Winfield had lied to him. He found Mr. Winfield’s comment that he did not usually look at the payee on cheques to be troubling. Mr. Macina felt that as Mr. Winfield had deposited a cheque payable to the order of PSG to his own account, he had stolen funds from PSG. Finally, Mr. Winfield expressed no apology or remorse in the meeting but, rather, attempted to justify why the Imprest Cheque had been deposited to the Winfield Account. Later, Ms. Migliore, who had doubts about the honesty of Mr. Winfield said “What the fuck, this guy stole from the company”.                                                                                                                           

From then on, everything for Mr. Winfield went downhill. He was fired. And that is when he sued his employer. He claimed the termination of his employment was wrongful and that he was entitled to pay in lieu of notice for a period of 24 months.                                                                                                        

The case was heard in the superior court in Edmonton before Mr. Justice K.G. Nielsen in 2013.                                                                                                                 

I should point out that in ordinary circumstances, damages because of dismissal with neither reasonable notice nor pay in lieu of notice cannot exceed what the pay in lieu of notice would have been. Actually the damages will be less if the dismissed ex-employee mitigated his or her loss (or should have) by getting a new job. There is but one exception to that rule, which the Supreme Court of Canada has now clarified in Keays v Honda Canada Inc. That court said;                                                                                                                                        

“If one assumes that the proper legal question is damages for loss of a job, under-compensation sounds plausible. But that is not the proper legal question. An employee with the usual contract of indefinite hiring has no right to keep the job, only a right to reasonable notice or pay in lieu of notice (absent cause to dismiss). It is arguable that some significant part of the respondent's loss of customers (of Honda Canada Inc) came from his dismissal, but the dismissal itself was not a wrong (even without cause), and there can be no compensation for it.”                                                                                                        

But in Mr. Winfield’s case, the wrong against him was the lack of reasonable notice. Damages must be for lack of reasonable notice or for the unduly unfair or insensitive manner of his dismissal.                                                                          

The judge said in part;                                                                                                       

“I am not satisfied that PSG was justified in dismissing Mr. Winfield, regardless of how the test is framed. In my view, Mr. Winfield’s conduct, when considered as a whole, was not so incompatible with the employment relationship that it could no longer be sustained. The essential condition of Mr. Winfield’s contract was to perform his duties as a sales representative with honesty and integrity. Even if Mr. Winfield was guilty of dishonesty, the circumstances surrounding the Imprest Cheque constituted an isolated event which did not fundamentally undermine Mr. Winfield’s employment relationship or his duties toward PSG.” unquote                                                        

There have been many cases where termination was justified for breach of trust or honesty relate to employees in a retail setting. The position occupied by Mr. Winfield was of a different nature. The evidence established that PSG had entrusted its sales representatives with, and was primarily concerned about, confidential business information.                                                                                 

The Judge also said; “In my view, the dishonesty alleged by PSG does not constitute a breach of trust serious enough to destroy the employment relationship. Mr. Winfield’s conduct after March 5, 2008 (he offered to pay the money back) suggests the contrary. Whether his conduct after that point is characterised as justification, explanation or apology, the fact remains that Mr. Winfield provided an explanation and returned the funds to PSG immediately. If his conduct before March 5, 2008 is properly characterized as dishonest, it was not so egregious as to justify termination without notice. I conclude that the sanction in this case was not proportional to the severity of Mr. Winfield’s misconduct. Lesser forms of sanction could have been considered in this case. I find that Mr. Winfield was not dishonest in the circumstances before the Court. Even if Mr. Winfield was dishonest, I find that his conduct did not warrant dismissal for just cause. Mr. Winfield was, therefore, entitled to reasonable notice of his termination. This leads to a consideration of the length of reasonable notice to which he is entitled. ” unquote                                                    

There can be no one simple rule laid down as to what is reasonable notice in all classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the employee, the age of the employee and the availability of similar employment, having regard to the experience, training and qualifications of the employee.                                                                

In this case, Mr. Winfield submitted that the reasonable notice period with regard to these factors should be 24 months. PSG submitted that the reasonable notice period is should be to 12 to 15 months.                                         

The question as to how many months the notice should have been was dealt with by Justice Neilson when he said;                                                                           

“The courts in Alberta have adopted a rough upper limit of 24 months as reasonable notice. Those cases which have awarded the upper limit of 24 months are reserved for senior employees in management positions with significant responsibilities. While Mr. Winfield was a long term employee, he was not in a senior management position within PSG and his responsibilities were limited to selling signs for PSG. Counsel argued that Mr. Winfield had suffered a loss of income for at least 24 months. Counsel for PSG urged me to employ a “rule of thumb” of approximately 2.5 weeks per year of service for employees holding sales representative positions. The reasoning for this rule of thumb appears to be that sales representatives have skills that are more readily transferable to a new employer than employees in other positions may have. That is, the skills and qualities necessary for a sales career in a particular industry are readily transferable to a similar position in a different industry. While Mr. Winfield is entitled to significant notice, I do not find that he is entitled to notice at the upper end of the range as he was primarily responsible for his own performances as a salesperson and he did not occupy a senior management position with PSG. In all of the circumstances, I conclude that a reasonable notice period for Mr. Winfield is 18 months.”  unquote                       

The judge ruled that Mr. Winfield’s cumulative loss of income was $169,689 and that he was entitled to this amount in lieu of reasonable notice.                     

Mr. Winfield also sought damages in relation to the manner in which PSG conducted the investigation and in which Mr. Winfield’s employment was terminated. Damages resulting from the manner of dismissal can only be available if they result from the circumstances where the employer engages in conduct during the course of dismissal that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.                                     

Examples of these three examples of bad faith are if the employer lied or misrepresented facts detrimental to the employee so that he would be fired, or after being fired, is escorted unjustly out of the building by security guards.  In Mr. Winfield’s case, that didn’t happen. For this reason, he was not entitled to damages resulting from bad faith by management of PSG. The fact that PSG erroneously didn’t accept Mr. Winfield’s explanation as an honest one and subsequently believed that Mr. Winfield was an outright crook; didn’t galvanize his dismissal.                                                                                                                       

There is no reason to retain the distinction between ‘true aggravated damages’ resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded                                                           

The amount is to be fixed in cases were aggravated damages are sought according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee's reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance or interfere with the employer’s search for future employment.                                                                                                                       

Years ago, I represented a client who was unjustly fired and the employer wrote on his employment insurance form that he was fired for cause. We took the matter before the Unemployment Commission and a settlement was made to my client’s satisfaction. He was given $2,000 from the company and the      Commission gave him what was due to him with respect to his benefits  and he was also given a good reference letter from his employer. It was a good thing we succeeded because shortly after that, the company that previously employed him soon after went out of business.                                                                               

There is authority for awards of ‘aggravated’ damages as contrasted with ‘punitive’ damages—the former being granted to compensate the plaintiff for the loss to dignity resulting from the defendant's malicious conduct, the latter being given to express the Court's outrage and in order to deter such conduct in the future.                                                                                                                             

For aggravated damages to be awarded, a plaintiff employee must establish that the employer acted unfairly or in bad faith in the manner of dismissal, the employee suffered harm beyond the ordinary distress caused by the fact of dismissal, and the harm was caused by the manner of dismissal.                           

The trial judge said in his decision;                                                                               

“In my view, the conduct of PSG in both the investigation of this matter and the termination of Mr. Winfield’s employment was not unduly unfair or insensitive. I am not satisfied that Mr. Winfield suffered any harm beyond the ordinary distress caused by the fact of the dismissal. Mr. Winfield gave evidence that he was essentially embarrassed by the situation. He had to advise two voluntary associations in which he was involved of the circumstances. There is no evidence, however, that he suffered any harm from the manner in which his termination was conducted. That is, the conduct in this case was not so egregious as to attract aggravated damages therefore I find that Mr. Winfield is not entitled to aggravated damages.”                                                                         

Punitive damages are designed to punish whereas aggravated damages are designed to compensate. For example, had Winfield’s employer ordered him off the property and at the same time, had ordered that he be escorted off the property surrounded by security guards and other employees would see this happening, such an order would be outrageous. The company would be subjected to punitive damages but in Winfield’s case, he didn’t apply for punitive damages since he wasn’t subjected to such outrageous conduct by his former employer.                                                                                                                

The judge summed up his ruling by saying;                                                                

In summary, I find that PSG did not have just cause to terminate Mr. Winfield’s employment. A reasonable notice period in the circumstances is 18 months. Mr. Winfield is entitled to damages for this reasonable notice period in the sum of $169,689. Pre-judgment interest on this amount from the date of termination to the commencement of trial is $12,801. Mr. Winfield is entitled to additional pre-judgment interest from June 17, 2013 to the date of these reasons for judgment. Mr. Winfield is not entitled to aggravated damages. PSG is entitled to make deductions and remittances from the amounts owed to Mr. Winfield as required by law.                                                                                            

There is a lesson to be learned from this article and that is; what not to do when you are firing an employee.                                                                                  

Be meticulous when searching for the truth                                                

Had Macina known about the outstanding expense claims and cheques  owed to Winfield, his suspicions of a wrong committed by the employee would have been allayed.                                                                                                                        

Separate the investigator from the decision maker.                                 

Such a separation of the duties assures an unbiased assessment of the findings. Permitting Macina to wear two hats (police and judge) was a mistake.                 

Years ago when I was the manager of a large collection agency, I had suspicions that one of our employees was collecting some of the money from debtors and pocketing the money instead of turning it over to our agency. I contacted the debtors and got signed statements from them as to when and how they paid the collector. There was no record in the employee’s files that the money was paid by the debtors. I then gave the owner my report and he subsequently fired the man.                                                                                                                                        

Be fair to the employee you have presumed to be dishonest                  

Calling an employee to an interview without first giving him the reason and advance warning so that he can provide proof that he did no wrong, is unfair. Had he been given such an advance warning, he might have satisfied management that he wasn’t dishonest and that his actions and that of his common-law wife were simply inadvertent. However in this particular case, management foolishly disbelieved him without any justification whatsoever.     

Keep careful records of any suspicious occurrences.                                

An employer’s credibility is enhanced when it has documented every discussion and steps in its inquiries. When I was asked by a large Canadian bank to investigate suspected frauds instigated against the bank, I kept a record and the photos taken of every person I interviewed and their statements to me and as a result, all six of the persons who committed the crimes were convicted, based entirely on my reports and testimony.                                                                

Separate the investigation from any personal animosity against the employee.                                                                                                                     

The judge in the Winfield case had noted that Winfield’s immediate supervisor wanted him fired so he sent an e-mail to his manager, Macina to that effect. Using his suspicions of Winfield as a means of getting rid of him backfired. It didn’t impress the judge at all as to the motives for firing Winfield.                      
The employee risks fading memories so it is necessary to act as soon as a wrongdoing is committed. When I was practicing law, a client who was the owner of a large car and truck wash company hired me to represent him in court. He had fired an employee who refused a direct order to wash the office floors. The fired employee maintained at the trial that he was hired to wash cars and trucks and not floors. But the terms of his employment included, “any other work designated to the employee by management.”  Fortunately, the employee kept a record of the exact words stated by the employee to the manager and the time and date when the employee refused the order to wash the floors. The employee lost his civil case against my client.                                   

I will take this time to give you an interesting example as to what went wrong when an employer fired a salesman working in his firm. Ironically, I also worked for that firm as the credit manager and I too was fired unfairly but I wasn’t too disappointed because I didn’t like the owner anyway. Two weeks later, I was hired by an investigation company as an investigator and would you believe it, our firm was asked by my former employer to investigate the background of the salesman that it had just fired. Guess who was sent to conduct the investigation.                                                                                                 

The man was fired because he gave false information in his application for the job, information if known by the owner to be false, would have resulted in the man not being hired. The former salesman sued for wrongful dismissal on the grounds that although he gave wrong information in his application, he brought a lot of money to the firm from his sales and therefore his dismissal was unjustified. Further, the day when his probationary period as a salesman was over, he told his wife that she could quit her job as he was now going to work permanently in the firm as the salesman. Unfortunately, he was fired the next day and now both he and his wife were unemployed. I told the employer that he would lose his case because he should have investigated the man’s application right after he received it and not six weeks later. The court arrived at the same conclusion and awarded the man $5,000.                                               

I hope that this article gives you some idea as to what employers should do if they suspect an employee of committing a wrong. It also gives employees some ideas to where they will stand in such cases as I have described in this article.      


No comments: