DATE: 20041126
DOCKET: C40220
COURT OF APPEAL FOR ONTARIO
CATZMAN, GILLESE and LANG JJ.A.
B E T W E E N :
MICHAEL DOWLING
John A. Campion and Nicole D. Samson for the appellant
Plaintiff
(Respondent)
- and -
WORKPLACE SAFETY AND INSURANCE BOARD
Katherine A. Cotton for the respondent
Defendant
(Appellant)
Heard: July 19 and 20, 2004
On appeal from the judgment of Justice David L. McWilliam of the Superior Court of Justice dated May 23, 2003.
GILLESE J.A.:
[1] Michael Dowling worked for the Workplace Safety and Insurance Board for approximately twenty-five years. He was a dedicated employee. On November 9, 2000, the Board dismissed him without notice. The stated reason for the dismissal was that Mr. Dowling had used his position with the Board to obtain a direct monetary benefit.
[2] Mr. Dowling sued the Board, alleging that his employment had been wrongfully terminated.
[3] Justice McWilliam held that the Board had wrongfully dismissed Mr. Dowling and awarded Mr. Dowling damages of $603,570.42, representing 24 months’ notice.
[4] The Board appeals.
[5] As explained below, I am of the view that the trial judge erred in finding that Mr. Dowling had been wrongfully dismissed. This error arose, in my view, as a result of failing to apply the correct legal standard and failing to consider all of Mr. Dowling’s acts of dishonesty when deciding whether termination without notice was justified. A contextual consideration of all of Mr. Dowling’s misconduct, in my view, shows that it gave rise to a breakdown in the employment relationship.
[6] Accordingly, I would allow the appeal and dismiss Mr. Dowling’s action.
BACKGROUND
[7] The Workplace Safety and Insurance Board is a statutory body that administers a public insurance scheme in Ontario. It provides compensation to workers for injuries arising from their employment. Employers registered with the Board pay a premium to insure their employees. The Board is responsible, by statute, for setting and collecting employers’ insurance premiums. It sets premium rates for employer groups based on the group’s injury and illness record and costs. Premiums are calculated according to the employer’s premium rate, which depends on how the employer is classified, and the employer’s payroll.
[8] In the course of fulfilling its statutory mandate, the Board handles premium reassessments and adjustments for employers.
[9] The Board’s Code of Conduct sets out the principles governing the conduct of its employees. The Code is directed at ensuring, among other things, that Board employees avoid using their positions to obtain personal benefits. The following extracts are illustrative of the Code’s governing principles:
Managers are expected to demonstrate their support for the Code of Conduct by personal practice.
All [Board] staff are expected to carry out their work with personal and professional integrity and trustworthiness, while protecting the interests of the [Board].
Employees must ensure that their conduct does not bring disrespect to them or damage the [Board’s] interests.
[Board] employees must not enter into any situation wherein any actual, potential or perceived inconsistency exists between their personal or professional interests and their obligation to act solely in the best interest of the [Board].
[Board] employees must retain their impartiality in the conduct of business and must not accept any direct or indirect gift, honorarium or other benefit from any staff member, job applicant, client, supplier, external individual or organization which could be construed in any way as influencing or rewarding a business decision or action.
[10] The Board also had a written conflict of interest policy applicable to all employees. In it, conflict of interest is defined in this way:
Conflict of interest refers to any actual, potential or perceived inconsistency between the personal or professional interests of an employee and their obligation to act solely in the best interests of the WCB, which might adversely affect their judgment in the discharge of their duties.
[11] At the time of his dismissal, Michael Dowling was approximately 50 years old and had been working for the Board for about 25 years. He was one of two managers in the Ottawa office. He held the position of Manager, Small Business Services and earned an annualized salary of $75,704.72. On March 19, 1999, the acting director said that Mr. Dowling had “satisfactorily met all expectations of a manager” and “contributed significantly to provide good customer service to the Ottawa community”. Just a few days before his termination, Mr. Dowling received the Board’s thanks for service “above and beyond”.
[12] Mr. Dowling supervised ten Board employees, six or seven of whom were customer service representatives (“CSRs”). CSRs are responsible for handling employers’ accounts and processing related transactions. The CSRs whom Mr. Dowling supervised were authorized to make account adjustments, with respect to premiums paid by employers, up to $5,000. Mr. Dowling, as Manager, had authorization limits of $25,000 for refunds and $100,000 for premium adjustments.
[13] Frances Lazar was an employer representative. Some of her clients were reclassified by the Board and received refunds or credits to their Board accounts. Mr. Dowling supervised the accounts of some of Ms. Lazar’s clients.
[14] The accounts of three of Ms. Lazar’s clients, MicroAge, Hartco and Telephone Booth, were reassessed and adjusted by the Board in 1998 and 1999. Hartco was the parent company of MicroAge and Telephone Booth.
[15] It was common ground between the parties that the benefits to Ms. Lazar’s clients were justified under Board policies and practices and that none of the adjustments were improper.
[16] Mr. Dowling’s superior introduced him to Ms. Lazar in late 1994 and asked that Mr. Dowling help Ms. Lazar understand how claims impacted on premiums paid. Gradually, Mr. Dowling and Ms. Lazar developed a more personal relationship. In 1996, Ms. Lazar was a good friend to Mr. Dowling when he separated from his wife. In early 1998, when Ms. Lazar was having financial and emotional problems, Mr. Dowling was a good friend to her.
[17] In August 1998, Ms. Lazar told Mr. Dowling that she had a contract with a computer company to provide training and advice on human resources. She also told him that she could arrange for him to purchase computers at wholesale prices. Mr. Dowling agreed, as he wanted to give a computer to each of his sons as an early Christmas present.
[18] On September 25, 1998, Mr. Dowling gave Ms. Lazar a cheque for $1,700 for the purchase of two computers. This price represented a discount from the regular retail price. The cheque was made payable to a numbered company owned by Ms. Lazar. Ms. Lazar said the computers would be available in a few days. She also offered Mr. Dowling a computer of his choice but he refused.
[19] Ms. Lazar raised the reclassification of MicroAge with the Board in a letter sent to Mr. Dowling dated September 25, 1998.
[20] After learning from Ms. Lazar that the computers were to come from MicroAge, Mr. Dowling called MicroAge and asked the owner about Ms. Lazar’s arrangements for the computers. The owner did not seem to know about any such arrangements but said he would follow up.
[21] On November 6, 1998, Mr. Dowling picked up the computers from Compusmart. Mr. Dowling conceded that he knew that Ms. Lazar had obtained the computers from MicroAge at the time that he picked them up.
[22] On November 13, 1998, Mr. Dowling approved a refund to MicroAge in the amount of $16,086.50.
[23] On January 14, 1999, Ms. Lazar wrote to Mr. Dowling requesting a rate reclassification for Telephone Booth. Mr. Dowling approved the reclassification on or about February 1, 1999. He also exercised his discretion and authorized an adjustment to the Telephone Booth account to cancel service charges that had accrued.
[24] Around Easter of 1999, Ms. Lazar told Mr. Dowling that Hartco wanted to give him back what he had paid above cost for the two computers but he refused.
[25] On or about April 15, 1999, a classification adjustment resulting in a refund was processed on the Hartco account.
[26] On or about April 30, 1999, Ms. Lazar wrote to Michael Lemieux, her contact at Hartco, advising of the refund and enclosing an invoice for her services in the amount of 20% of the refund.
[27] On May 21, 1999, Mr. Dowling cashed a cheque for $1,000 from Ms. Lazar. The memo line on the cheque referred to “Telephone Booth Savings Partial Cheque”.
[28] Ms. Lazar testified that the $1,000 payment to Mr. Dowling was part of an agreement between them whereby he would help her clients get reclassified by the Board and she would invoice her clients for 20% of the money received. According to Ms. Lazar, she and Mr. Dowling would then split the 20% amount.
[29] At trial, the Board produced a letter from Ms. Lazar to Mr. Dowling that purported to confirm this arrangement. Mr. Dowling denied ever having received this letter. He conceded that Ms. Lazar had proposed that he participate in improper transactions but testified that he refused. He said that he received the $1,000 payment because he had been a friend to Ms. Lazar when she was experiencing emotional difficulties and because he had assisted her in understanding her job insofar as it related to the Board’s policies and practices.
[30] Mr. Dowling did not approach his superiors to discuss Ms. Lazar’s proposal.
[31] In late August 2000, Mr. Dowling was asked to go to meet with two investigators from the Board’s head office regarding allegations that he had received money and a computer from Ms. Lazar. Mr. Dowling met with the investigators on August 31, 2000. During the interview, Mr. Dowling was asked about the computers and whether he had received a cheque for $100 from Ms. Lazar. He admitted to receiving the computers but denied receiving the $100. He did not disclose that he had received a payment of $1,000 from Ms. Lazar.
[32] Thereafter, Mr. Dowling tried to contact Ms. Lazar on several occasions. He met with her three times. During one such meeting on November 1, 2000, Ms. Lazar suggested that they characterize the $1,000 payment as a loan.
[33] Mr. Dowling typed up a fictitious loan receipt and backdated it to January 15, 1999. He met again with Ms. Lazar on November 6, 2000. She signed the false receipt and wrote out a Christmas card that she dated two years earlier. The message in the Christmas card suggested that Mr. Dowling had loaned her money to help her pay rent. Mr. Dowling returned the $1,000 to Ms. Lazar at that meeting.
[34] On November 9, 2000, Mr. Dowling had a second meeting in relation to these events. He met with his superior, Wayne Weatherbee, and the Director of Human Resources Development, Mark Goodale. Messrs. Weatherbee and Goodale confronted Mr. Dowling with a copy of the $1,000 cheque from Ms. Lazar with the notation on it. Mr. Dowling maintained that he received the money as repayment for a loan from him to her. He initially denied having contacted Ms. Lazar after September 2000 but then admitted to seeing her a few days earlier. He also denied that any money had recently changed hands between them. He further denied seeing the notation on the $1,000 cheque stating “Telephone Booth Savings Partial Cheque”.
[35] Messrs. Weatherbee and Goodale did not accept Mr. Dowling’s explanation and informed him of the decision to terminate his employment. They believed that Mr. Dowling had an “arrangement” with Ms. Lazar in which he received money for helping employers get reclassified. They presented him with a termination letter in which the stated grounds for termination were that Mr. Dowling “had used his position to obtain a direct monetary benefit”. Mr. Dowling raised the fact that he would be eligible to bridge to early retirement in a few months, to no avail.
[36] At trial, Mr. Dowling conceded that he lied about not contacting Ms. Lazar in November 2000, that he lied when he said he had returned the $1,000 in January of 1999 and that he lied about the loan to explain receiving the $1,000. He explained that he lied about the $1,000 payment because he panicked when a copy of the cheque was presented to him at the second interview. He also conceded that he had been aware of the description on the cheque that referred to the Telephone Booth account.
[37] The Board did not comply with its own policy for dismissal for cause that required that Mr. Dowling be given written notice that he might be subject to dismissal for an act of misconduct and that an investigation was being carried out.
THE TRIAL JUDGMENT
[38] As noted above, the trial judge found that all the adjustments to employers’ accounts were justified. In addition, the trial judge:
Found that Mr. Dowling adopted the Board’s Code of Conduct (para. 6).
Noted Mr. Dowling’s admission that he lied at the second interview meeting when he said that received the $1,000 from Ms. Lazar as repayment for a personal loan (para. 21).
Noted that Mr. Dowling also said in the second interview that he had no further dealings with Ms. Lazar after she repaid the loan, that the last time he had spoken with her was in September 2000 and that Mr. Dowling volunteered the information that he had receipts for the money loaned (para. 21).
Referred to Mr. Dowling’s admission that he received the $1,000 payment “because he had been a friend to Ms. Lazar when she was experiencing emotional difficulties, and because he had taken the time to explain to her how the Board and its administrative policies and philosophy related to her ‘human relations’ functions for her clients.” (para. 27)
[39] The trial judge was not satisfied that proof had been made out sufficient to establish a “business relationship” between Ms. Lazar and Mr. Dowling. It is clear from the context that when the trial judge speaks of a “business relationship” he was referring to Ms. Lazar’s evidence that she and Mr. Dowling had entered into an arrangement in which she would share “kickbacks”. He preferred Mr. Dowling’s evidence to that of Ms. Lazar on their relationships in matters affecting the Board (para 26).
[40] The trial judge did not accept Mr. Dowling’s evidence that he did not notice the notation on the $1,000 cheque referring to Telephone Booth Savings. He also found that even if Mr. Dowling’s evidence relating to the gift from Ms. Lazar was accepted, conflict of interest considerations arose. These findings are contained in para. 28 of the reasons for judgment.
[28] … In particular, the $1,000 cheque’s memo refers to a specific employer account: “Telephone Booth Savings Partial Cheque.” Telephone Booth was a client of Ms. Lazar and Mr. Dowling knew that account had benefited from a classification change because he had given his approval in the administrative chain of command. His evidence was he did not care what was written on the cheque, he simply wanted “his money”. (At this stage the plaintiff was explaining this cheque as a repayment of a non‑existent loan. Although Mr. Weatherbee noted that after the decision of termination was announced Mr. Dowling immediately began calling the $1,000 cheque “a gift”. The truth it seems will out.) I am unable to accept that he did not notice what was plainly written in the memo on the face of a cheque payable to him and which he kept in his possession for a number of days until he deposited in on May 21 in his bank at her direction. If Mr. Dowling’s evidence is accepted that Fran Lazar only wanted to make a gift to him of $1,000 for his courtesies towards her, since some of those were employment related, at the very least arguably, conflict of interest considerations necessarily arose. …
[41] He went on to note, in para. 29, that even Mr. Dowling admitted that accepting the $1,000 cheque could lead to conflict of interest considerations:
[29] In his evidence, Mr. Dowling admitted that the circumstances of his accepting the cheque for $1,000 might very well give rise to considerations of conflict of interest. He said he knew of procedures existing in the Board’s administration for discussing potential conflicts of interest with his boss. He never raised the $1,000 cheque with Mr. Lamanna. In the particular circumstances of this case he ought to have done so, in my opinion. Had this step been taken when the cheque for $1,000 was received then the story of the “loan” and the lies surrounding it, and the eleventh hour reimbursement of the gift to Ms. Lazar would have been rendered unnecessary.
[42] After rejecting the Board’s argument that the $1,000 cheque amounted to a “secret commission” within the meaning of s. 426(1)(a)(ii) of the Criminal Code, the trial judge concluded that there was insufficient evidence that Mr. Dowling had used his position to gain a monetary benefit such that termination was justified. He held that early retirement, which had been considered by all parties prior to the November 9 meeting at which Mr. Dowling was terminated, would have been the proportional response in the circumstances.
[43] The trial judge’s reasons for concluding that the Board was not justified in dismissing Mr. Dowling can be found in paras. 30 to 33 of his judgment, set out below.
[30] In all the circumstances does this conflict of interest analysis justify the termination finding of November 9, 2000 that Mr. Dowling “used [his] position to obtain a direct monetary benefit?’ As Iacobucci, J. said in McKinley v. B.C. Tel 2001 SCC 38, [2001] 2 S.C.R. 161, {2001} S.C.J. No. 40 that mere dishonesty “in and of itself” does not “suffice to warrant an employee’s termination,” and “the nature and context of such dishonesty must be considered in assessing whether just cause for dismissal exists.” Misconduct does not “by itself” give rise to just cause, Iacobucci, J. said, “rather the question to be addressed is whether, in the circumstances, the behaviour was such that the employment relationship could no longer viably subsist.” Mr. Justice Iacobucci cited the following language of Flinn J.A. in Blackburn v. Victory Credit Union Ltd. (1998) 1998 6089 (NS CA), 36 C.C.E.L. (2d) 94, with approval:
“The courts do not consider an act of misconduct, in and of itself, to be grounds for dismissal without notice, unless it is so grievous that it gives rise to the inference that the employee intends no longer to be bound by the contract of service. There is no definition which sets out, precisely, what conduct, or misconduct, justifies dismissal without notice, and rightly so. Each case must be determined on its own facts….”
[31] Mr. Justice Iacobucci observed that even those “second line of jurisprudence” cases which seem to support a factual finding of any dishonesty automatically means just cause is made out still support a contextual approach. In most of those cases he pointed out the employee “had intentionally devised to extract some financial gain or profit to which he or she was not entitled, at his or her employer’s expenses.” He went on to cite with approval from H.A. Levitt’s The Law of Dismissal in Canada (2nd ed. 1992) at p. 124:
“The existence of misconduct sufficient to justify cause cannot be looked at in isolation. Whether misconduct constitutes just cause has be analyzed in the circumstances of each case. Misconduct must be more serious in order to justify the termination of a more senior, longer‑service employee who has made contributions to the company.”
[32] The application of a contextual approach to assess whether an employee’s dishonesty (or conflict of interest in the context of these facts) provides just cause for dismissal involves the principle of proportionality. As Iacobucci, J. said in McKinley, supra. “An effective balance must be struck between the severity of an employee’s misconduct and the sanction imposed.”
[33] Notwithstanding the endorsement on the cheque memo, I am satisfied on all of the evidence that Ms. Lazar was motivated by all the factors outlined in Mr. Dowling’s evidence given his appreciation of what was happening. Without the evidence of a secret commission of Ms. Lazar which I have rejected, I am unable to find that there is convincing evidence on a balance of probabilities that Mr. Dowling “used [his] position to obtain a direct monetary benefit.” Ms. Lazar initiated the cheque and the computers (and the computers on the basis that she had done that before). Whatever motives she had for doing so, apart from her stated ones as related by the plaintiff, her motives cannot be simply transferred to him. Since he accepted the $1,000 in the context of a gift from a friend whom he had helped over some rough spots in her emotional life, then the fact that he met her “on the job” does not justify a finding that he used his position to obtain a direct monetary benefit. That finding is appropriate for an employee of whom his boss wrote that he brought customer service “to an exemplary level.” [Ex. 1, Tab 6] Of course, his subsequent actions (the loan was her idea) are subject to the comments I have made earlier. Proportionality in such a factual context with a 25‑year employee requires the court to consider Mr. Dowling’s observation to Mr. Weatherbee and Mr. Goodale after he got the termination letter of November 9, that dismissal was “too harsh”. He had already checked out the possibilities of early retirement after his first meeting with the investigators and he felt that was possible. Indeed Mr. Weatherbee had made his own inquires about Mr. Dowling’s early retirement before the November 9 meeting. Since he had the letter of termination in his coat jacket (having brought it from Toronto after the Board’s solicitor drafted it) the inferential temptation is very compelling that Mr. Weatherbee had rejected that option before Mr. Dowling even presented it after the announcement that he was terminated without notice at the November 9th meeting. I find Mr. Weatherbee’s language at trial that the matter was “closed” upon receipt of the copies of Lazar’s letters and the cheque the day before in Toronto meant Mr. Dowling was more that “leaning into the wind” at the termination meeting. Early retirement as an option was the proportional response mandated in the McKinley case in my view. It ought to have been explored. Termination without notice was not an option in these circumstances. Had notice been given, early retirement could have been easily achieved.
THE ISSUES
[44] This appeal raises the following two issues:
(1) Did the trial judge err in holding that the Board did not have just cause to dismiss Mr. Dowling? and
(2) Did the trial judge err in “grossing‑up” the damages award?
ANALYSIS
Issue #1: Dismissal for Dishonest Conduct
[45] In my view, the trial judge committed two errors when deciding whether the Board was justified in dismissing Mr. Dowling. First, he failed to apply the correct legal standard. Second, he erred in failing to consider the full nature and extent of the misconduct when making his determination.
The Applicable Standard
[46] In McKinley v. B.C. Tel, 2001 SCC 38, [2001] 2 S.C.R. 161, the Supreme Court of Canada established the standard to be applied when assessing whether an employee’s dishonest conduct gives rise to just cause for dismissal.
[47] The Court says in paras. 48 and 49:
[W]hether an employer is justified in dismissing an employee on the grounds of dishonesty is a question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether the employee's dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamentally or directly inconsistent with the employee's obligations to his or her employer.
In accordance with this test, a trial judge must instruct the jury to determine: (1) whether the evidence established the employee's deceitful conduct on a balance of probabilities; and (2) if so, whether the nature and degree of the dishonesty warranted dismissal. In my view, the second branch of this test does not blend questions of fact and law. Rather, assessing the seriousness of the misconduct requires the facts established at trial to be carefully considered and balanced. As such, it is a factual inquiry for the jury to undertake [emphasis added].
[48] And, at paras. 56 and 57, the Court explains the standard to be applied in these terms:
Absent an analysis of the surrounding circumstances of the alleged misconduct, its level of seriousness, and the extent to which it impacted upon the employment relationship, dismissal on a ground as morally disreputable as "dishonesty" might well have an overly harsh and far-reaching impact for employees. …
Based on the foregoing considerations, I favour an analytical framework that examines each case on its own particular facts and circumstances, and considers the nature and seriousness of the dishonesty in order to assess whether it is reconcilable with sustaining the employment relationship. Such an approach mitigates the possibility that an employee will be unduly punished by the strict application of an unequivocal rule that equates all forms of dishonest behaviour with just cause for dismissal. At the same time, it would properly emphasize that dishonesty going to the core of the employment relationship carries the potential to warrant dismissal for just cause.
[49] Following McKinley, it can be seen that the core question for determination is whether an employee has engaged in misconduct that is incompatible with the fundamental terms of the employment relationship. The rationale for the standard is that the sanction imposed for misconduct is to be proportional -- dismissal is warranted when the misconduct is sufficiently serious that it strikes at the heart of the employment relationship. This is a factual inquiry to be determined by a contextual examination of the nature and circumstances of the misconduct.
[50] Application of the standard consists of:
determining the nature and extent of the misconduct;
considering the surrounding circumstances; and,
deciding whether dismissal is warranted (i.e. whether dismissal is a proportional response).
[51] The first step is largely self-explanatory but it bears noting that an employer is entitled to rely on after discovered wrongdoing, so long as the later discovered acts occurred pre-termination. See Lake Ontario Portland Cement Co. v. Groner, 1961 1 (SCC), [1961] S.C.R. 553.
[52] The second step, in my view, is intended to be a consideration of the employee within the employment relationship. Thus, the particular circumstances of both the employee and the employer must be considered. In relation to the employee, one would consider factors such as age, employment history, seniority, role and responsibilities. In relation to the employer, one would consider such things as the type of business or activity in which the employer is engaged, any relevant employer policies or practices, the employee’s position within the organisation, and the degree of trust reposed in the employee.
[53] The third step is an assessment of whether the misconduct is reconcilable with sustaining the employment relationship. This requires a consideration of the proved dishonest acts, within the employment context, to determine whether the misconduct is sufficiently serious that it would give rise to a breakdown in the employment relationship.
The Standard Applied at Trial
[54] In the instant case, the trial judge does not appear to have considered Mr. Dowling’s misconduct and asked whether it gave rise to a breakdown in the employment relationship. Instead, he directs his mind to whether Mr. Dowling’s conflict of interest in accepting the $1,000 payment justified the Board’s decision to dismiss Mr. Dowling. This is apparent in para. 30 of the reasons where he begins his analysis by asking:
In all the circumstances does this conflict of interest analysis justify the termination finding of November 9, 2000 that Mr. Dowling “used [his] position to obtain a direct monetary benefit?”
[55] The trial judge does refer to the McKinley test in para. 30. However, in para. 33, he returns to the notion that dismissal was warranted only if the evidence supported the Board’s stated reason for termination. He says:
Without the evidence of a secret commission of Ms. Lazar which I have rejected, I am unable to find that there is convincing evidence on a balance of probabilities that Mr Dowling “used [his] position to obtain a direct monetary benefit.”
[56] With respect, the question to be addressed was not whether Mr. Dowling used his position to obtain a direct monetary benefit. That is, the inquiry ought not to have been directed at assessing whether the reason for termination given by the Board had been proved. Rather, as already stated, the question is whether all of the misconduct, considered in context, was sufficiently serious that it gave rise to a breakdown in the employment relationship.
Assessment of the Misconduct at the Trial Level
[57] In my view, the trial judge also erred in his application of the standard to the facts of the case. As set out above, the standard requires a full consideration of the nature and extent of the misconduct, placed in the context of the surrounding circumstances, before it can be determined whether dismissal is warranted.
[58] In relation to the first step, namely an examination of the nature and extent of the misconduct, the trial judge limited his examination of Mr. Dowling’s misconduct to the conflict of interest caused by Mr. Dowling’s acceptance of the $1,000 payment. He failed to consider that Mr. Dowling’s purchase of computers at a discount, from a Board registered employer, constituted a conflict of interest. He also failed to consider Mr. Dowling’s prevarication in the first interview; repeated contact with a witness in the investigation; lies in the second interview; and, preparation of a false document. A proper application of the standard requires a consideration of the full extent of the misconduct.
[59] Moreover, when considering the surrounding circumstances, the trial judge was alive to the relevant considerations relating to Mr. Dowling but he neglected to consider the other equally significant aspect of the surrounding circumstances, namely the nature and function of the Board.
[60] Absent both a consideration of the full range of misconduct and an appreciation of the surrounding circumstances, it is not possible to properly determine whether dismissal is warranted.
The Standard Applied to the Instant Case
[61] In light of the errors committed by the trial judge and because all of the necessary findings of fact have been made that would enable us to do so, this court is entitled to render the decision that ought to have been made. I will consider each component of the standard in turn.
Nature and Extent of the Misconduct
[62] In my view, Mr. Dowling’s first act of misconduct occurred when he purchased two computers from an employer registered with the Board and whose account he supervised, at a discount and without disclosure. This is contrary to the Board’s Code of Conduct that prohibits employees from accepting direct and indirect benefits from Board clients. In so concluding, I note that although Mr. Dowling paid the purchase price for the computers to Ms. Lazar, by the time he picked up the computers, he was fully aware that they were coming from MicroAge, a registered employer.
[63] Mr. Dowling was also guilty of misconduct when he accepted $1,000 from Ms. Lazar. I accept that there is no basis for disturbing the trial judge’s finding that Mr. Dowling had not entered into a “secret commission” arrangement with Ms. Lazar. Thus, I reject the Board’s continued assertion that dismissal was warranted due to receipt of secret commissions. That said, Mr. Dowling received the money, in part, for having helped Ms. Lazar understand how the Board worked in relation to her clients. That assistance was, by his own admission, part of his employment responsibilities. Given that Ms. Lazar represented employers registered with the Board, Mr. Dowling’s conduct in accepting money from Ms. Lazar and purchasing computers at substantial discounts through her, was a breach of his obligation to avoid conflicts of interest and situations in which any actual or perceived inconsistency existed between his personal interests and the best interests of the Board.
[64] Mr. Dowling’s next act of misconduct occurred when he was questioned in the initial interview about receipt of money and computers. He admitted to receiving the computers but prevaricated in respect of the money. He was asked if he had received $100 and he responded that he had not. A truthful response would have disclosed that he had, in fact, received the much larger sum of $1,000.
[65] Further, it was clear that Ms. Lazar was a key witness in the investigation. Mr. Dowling’s conduct in contacting her and concocting a false and misleading story for the Board amounts to improper interference in the investigation.
[66] Mr. Dowling prepared a false receipt to support the story that Ms. Lazar gave him the $1,000 cheque as repayment for a loan. This, too, was a dishonest act designed to mislead the Board.
[67] At the second interview, Mr. Dowling repeatedly lied to the Board. He lied about when he had last seen Ms. Lazar. He lied about the $1,000, saying it was repayment of a loan. And, as the trial judge rejected Mr. Dowling’s evidence that he had not noticed the notation on the cheque, it appears that he lied about that as well.
The Surrounding Circumstances
[68] As previously mentioned, the relevant circumstances of both the employee and the employer must be considered.
[69] Mr. Dowling:
• Was approximately 50 years old at the time his employment was terminated.
• Had about 25 years of dedicated service with the Board.
• Was within a few months of being able to bridge to early retirement.
• Was a manager with power and authority to make decisions with respect to the Board’s affairs.
• Administered substantial amounts of public funds.
• Could authorize refunds up to $25,000 and premium adjustments up to $100,000.
• Directly supervised 10 employees of whom 6 or 7 were CSRs, each of whom had authority to make account adjustments up to $5,000.
• Had an obligation to abide by the Board’s Code of Conduct and conflict of interest policy which precluded the acceptance of gifts from employers registered with the Board and required that he act with integrity and trustworthiness.
[70] The relevant considerations in respect of the Board are these.
• The Board is a statutory body administering public funds as part of a public insurance scheme.
• The Board reposed trust and authority in Mr. Dowling, as evidenced by the fact that he acted without immediate supervision.
• The public is entitled to expect honesty and impartiality on the part of the Board and its staff.
• The Board expected its employees to act with integrity and impartiality, as evidenced by its Code of Conduct and conflict of interest policy. These expectations were heightened in respect of Mr. Dowling, a manager who supervised staff and had significant discretionary power over substantial sums of public monies.
Proportionality
[71] In this stage of the assessment, it must be determined whether the misconduct was sufficiently serious that it warranted dismissal. McKinley, at para. 48, suggests three measures: did the dishonesty violate an essential term of the employment contract; did it breach the faith inherent to the work relationship; or, was it fundamentally inconsistent with Mr. Dowling’s obligations to the Board?
[72] In my view, on any of the three measures, the Board was justified in dismissing Mr. Dowling. His misconduct cannot be reconciled with his employment obligations. His actions were not mere errors in judgment; they were intentional, numerous, dishonest acts that occurred over a period of time. He accepted money that, at least in part, related to the discharge of his employment responsibilities. This was conduct which he knew or ought to have known was a conflict of interest and in breach of the implicit and explicit terms of his employment contract. He lied and he prepared a false and misleading document. These actions were committed in the face of his obligation to act with integrity and impartiality in the discharge of his employment duties. The Board’s Code of Conduct provided that violation of its terms could result in termination of employment. The trial judge found that the terms of Mr. Dowling’s employment incorporated the Board’s Code of Conduct and conflict of interest policy. He was in breach of both. Avoidance of a conflict of interest situation was a fundamental term of the employment contract. Mr. Dowling repudiated the employment contract by engaging in conduct incompatible with the obligations that he owed thereunder. This constituted a fundamental breach of his employment obligations.
[73] The misconduct in question was not isolated. It consisted of a number of acts committed over a period of time. The misconduct was neither insignificant nor trivial; it was serious. The Board could no longer repose trust in him and the Board’s trust is essential to the effective performance of the functions of the Manager, Small Business Services.
[74] It was indispensable to the parties’ employment relationship that Mr. Dowling exercise the powers of his position with honesty and impartiality, and exclusively in the interests of the Board and the public. The underpinnings of faith and confidence necessary to the parties’ employment relationship were destroyed by Mr. Dowling’s misconduct. When the various acts of misconduct are considered in the context of Mr. Dowling’s position, the degree of trust reposed in him and the public nature of the Board’s responsibility, it is clear that summary dismissal was a proportionate response.
[75] I have considered the fact that the Board did not follow its own policy on dismissal for cause in that it failed to give Mr. Dowling written notice of either the investigation or the fact that he might be subject to dismissal. It goes without saying that the Board should scrupulously follow its own procedures in such matters. However, Mr. Dowling knew that an investigation was going on and he had ample opportunity in and between the two interviews to explain his actions. The failure of the Board, in light of these considerations and when weighed against the misconduct, does not derogate from my view that that Mr. Dowling’s conduct was a sufficiently serious form of dishonesty to justify termination.
Issue #2: The Damage Calculation
[76] Having concluded that the Board was entitled to terminate Mr. Dowling’s employment, strictly speaking there is no need to address the question of whether the trial judge erred in his calculation of the damages award. However, the following observations may be useful.
[77] The trial judge was alive to the jurisprudence of this court expressing doubt about the propriety of grossing-up pension awards. However, after referring to the relevant passages in Peet v. Babcock (2001), 2001 24077 (ON CA), 53 O.R. (3d) 321 (C.A.), he rejected the notion that the disputed sum was a “gross-up”. He recognized the adverse tax consequences that would result from Mr. Dowling’s receipt of the damage award as a lump sum and, in my view, correctly included a “gross-up” to offset the additional tax liability occasioned by receipt of the funds all at once, as opposed to over time. To fail to take into account the adverse tax consequences occasioned by a change in the timing of their receipt would be to restrict a person from realizing the full benefit of the damages awarded in a wrongful dismissal case.
[78] The Board’s reliance on principles underlying the gross-up of future pecuniary losses in personal injury actions is misplaced, in my view, as it fails to recognize the important distinction between the income tax treatment of personal injury awards, being non-taxable on receipt, and damages resulting from a wrongful dismissal action which are subject to taxation when received.
[79] Consequently, I see no reason to interfere with the trial judge’s acceptance of the actuarial evidence that he found to be the most reasonable and that made appropriate allowance for tax consequences.
CONCLUSION
[80] Accordingly, I would allow the appeal, set aside the judgment below, dismiss the action, and award costs of the appeal to the Board fixed in the amount of $20,000, inclusive of GST and disbursements. The Board is entitled, as well, to its costs of the trial in the amount, if any, agreed between the parties or, failing agreement, to be assessed.
RELEASED: November 26, 2004 (“MAC”)
“E. E. Gillese J.A.”
“I agree M. A. Catzman J.A.”
“I agree S. E. Lang J.A.”