A Positive Case for the Just Cause Termination of a Fiduciary Employee
By Nicole A. McAuley
It is well established in Canada that termination for just cause is considered “capital punishment” in employment law. It is reserved for significant incidents of employee misconduct. In order to establish sufficient justification of a for cause dismissal, the evidence must be steadfast. Often this requires a clear record of progressive discipline; although, in rare circumstances one incident of misconduct may be sufficiently severe to establish just cause.
Goruk v. Greater Barrie Chamber of Commerce, 2021 ONSC 5005 involved the termination for cause of a long-term employee of the Greater Barrie Chamber of Commerce (the Chamber); a not-for-profit organization governed by a volunteer Board of Directors. The employee, Sybil Goruk (Ms. Goruk), had been the executive director of the Chamber for the vast majority of her 17-year tenure with the Chamber. In her role, Ms. Goruk owed fiduciary duties to the Chamber and its Board, including the duties of loyalty, trust, and good faith.
In early 2014, Ms. Goruk was placed on a paid suspension pending the outcome of an investigation into financial abnormalities, which had recently come to the attention of the Board, as well as an allegation of misconduct.
Upon completion of the investigation, the Board determined that Ms. Goruk had been involved in the following acts: (1) uttering a forged document to the Chamber’s bank; (2) taking unauthorized accrued vacation pay; (3) granting herself an unauthorized pay raise; (4) awarding service contracts to her children’s companies without following the established protocol or disclosing the relationship to the Chamber’s auditor; (5) suppressing a letter from the Chamber’s auditor which expressed concerns regarding their financial statements; and (6) reimbursing herself for charges to her personal credit card without supplying proper supporting documentation. Additionally, Ms. Goruk had impeded the treasurer’s access to the Chamber’s books and records for a significant period of time, and had permitted the use of the Chamber’s internal broadcast system to members to send out an e-broadcast that was critical of the Board. Ms. Goruk was terminated for just cause. At the time of termination, Ms. Goruk had no documented performance issues and no history of progressive discipline.
Thereafter, she commenced the within action, seeking pay and benefits in lieu of notice for two years, in addition to aggravated and punitive damages. The matter proceeded to a virtual trial with Justice Boswell presiding.
In examining the facts relied upon by the Chamber in support of the just cause termination, Justice Boswell found that the independent acts of misconduct were not in and of themselves sufficient to amount to just cause. However, his Honour found that when the totality of the events was considered, they clearly demonstrated a lack of honesty and integrity, as well as the exercise of poor judgment. It was determined that Ms. Goruk’s conduct was incompatible with the fundamental terms of her employment relationship and that the Chamber had just cause for termination.
In his analysis, Justice Boswell highlighted the fact that the Chamber is a not-for-profit organization that has a high profile within the community and a strong reputation for integrity and honesty. As such, the volunteer Board’s loss of faith and trust in Ms. Goruk’s ability to carry out her role as executive director was significant.
The timing of the discovery of these issues was also an important factor in this decision. It was noted by Justice Boswell that “all of the issues that led to the termination of Ms. Goruk came to a head at or around the same time period.” It was the culmination of the incidents, which were discovered over a fairly short period of time, that amounted to a repudiation of the contract. As such, Justice Boswell found that in the circumstances, it was unnecessary for the Chamber to provide warnings or implement a progressive approach to discipline.
The issue of costs was recently addressed by the Court. Following seven years of this action and 13 days of trial, the Chamber was awarded roughly $143,000 in costs. The Chamber had sought significant costs due to the fact that they had made a Rule 49 offer to settle for $25,000 prior to trial, which the plaintiff never accepted. The plaintiff had advanced claims of impecuniosity and Justice Boswell was sympathetic to same; however, he noted that:
[I]t remains a difficult reality that litigation is an expensive business. It is not for the risk averse or faint of heart. There are winners and there are losers. And it is a well-established convention in our civil justice system that losers pay the winners a significant portion of their costs.
This is an important decision for employers when assessing whether an employee in a fiduciary position may be terminated for just cause without imposing a plan of progressive discipline. As aforementioned, the close proximity of the incidents of poor judgment and the discovery of the financial misfeasance played a significant role in the Court’s finding that progressive discipline was not required. We can also not disregard the impact of the fiduciary duties this employee owed to her employer. Had the fiduciary duties not been established, or if the same incidents been discovered over a number of years, the decision would most likely have been very different.
While this decision is helpful to employers, it remains the case that the burden to establish just cause is extremely high and the facts must be evaluated on a case by case basis. It remains extremely important for employers to seek legal advice prior to taking any steps to terminate an employee under any circumstances.