Employer Wins Damages for Time Theft and Unpaid Debt

Written by Lewis Waring, Paralegal, LL.B., Articled Clerk, Editor, First Reference Inc.

In a recent British Columbia ruling, an employee who engaged in a pattern of time theft was found to have been rightfully dismissed for cause. As a result of the dismissal being upheld, the employee was forced to repay a debt she owed to the employer due to an advance agreement that funded her home office supplies and her pursuit of professional credentials.

Background

The employee worked remotely for the employer as an accountant from October 2021 until her dismissal for cause in March 2022. Under her employment agreement, the employee had agreed to work a minimum of 2,000 hours a year. Soon after her hire, the employer and employee entered an agreement under which the employer would give the employee an advance with which she could purchase home office equipment and pay professional education fees in the amount of $3,666.95. The employee and employer had signed an advance agreement that stated the employer would forgive 1/24 of the advance for every month the employee was employed. The agreement stated that, were the employee to be dismissed before the advance was fully forgiven, she would be required to repay the employer first using her last paycheque and then by “any other means.”

In February 2022, the employee initiated weekly meetings with her manager because she felt she was underperforming. She hoped the meetings would help her manage her time, and, soon thereafter, the employer installed a time-tracking program on her laptop. After analyzing data from the program, the employer concluded the employee had rendered timesheet entries for files she had not worked on, totalling 50.76 unaccounted hours.

In March, the employee met with a manager to discuss projects that were behind schedule and over budget. In that meeting, the manager discussed the discrepancies in her timesheet. The manager stated the employee was not expected to respond immediately and offered her time to consider her response. The employee declined this offer, admitting to claiming time for work she had not performed. Later that day, the employer dismissed her for cause. At the time of her dismissal, the unforgiven part of her advance was $2,903. The employer withheld the employee’s last paycheque and the employee was left with a remaining debt of $1,096.73.

The employee claimed wrongful dismissal and unpaid wages, and the employer responded with a counterclaim to recoup the wages paid while the employee was not working-described as “time theft.” The tribunal dismissed the employee’s claim for wrongful dismissal and unpaid wages while granting the employer’s claim for time theft as well as the debt from the advance agreement.

Although the employee’s annual salary was $50,000, her final two paystubs showed that her actual salary was $55,000. As a result, the employer was awarded $1,506.34 in stolen wages for 50.75 of unaccounted hours of work. Regarding the advance agreement, the employer was awarded the remaining $1,096.73 left unpaid by the employee. In total, the tribunal awarded the employer $2,603.07.

Analysis

The employer’s right to dismiss the employee for cause was based on the key concept of trust in employment relationships, particularly within remote working arrangements. Given the absence of supervision in remote environments, the need for employees to be honest and trustworthy is paramount. The employee’s time theft demonstrated serious dishonesty and untrustworthiness, leading to an irreparable breakdown in the employment relationship. Time theft in an employment context is recognized as a very serious form of misconduct, one that merits a severe disciplinary response. In this case, the employee’s time theft was so serious that dismissal for cause was found to be a proportionate disciplinary response. As the employer had rightfully dismissed the employee for cause, it also had a right to recover the wages it had paid the employee for time she had not spent working.

The advance agreement was upheld because it was found to be an amendment to the employee’s original employment agreement. While the advance agreement was signed after the original employment agreement, the general bargain was discussed during the employee’s interview. As such, the written advance agreement was found to be an extension of the agreement that had been struck during the hiring process.

Takeaways

This ruling has two significant takeaways for employers, particularly those who employ workers remotely. Firstly, when an employer establishes through a thorough and unbiased investigation that an employee has engaged in time theft, disciplinary action is justified. This ruling demonstrates that such time theft can justify dismissal for cause, particularly in a remote working environment where the need for honesty and trustworthiness is so great.

This ruling also demonstrates that time theft can justify a claim for damages to recoup the money stolen by an employee who engages in time theft. In other words, while it is well understood that an employee who falsely claims to be at work should be disciplined, it should also be understood that such an employee has stolen money that can be recovered in court.

Employers recovering money from dismissed employees is a dynamic less frequently seen in employment disputes. Employment law is a unique area because of the explicit recognition that the rights of employees must be protected from the power of employers. The legal system’s recognition of a power imbalance that favours employers is reflected in many ways, whether by courts explicitly interpreting employment contracts to favour employees or by the practice of requiring employers to pay lost wages before being allowed to challenge claims of lost wages.

A second takeaway relates to the lending of funds to employees. The employer, in this case, loaned funds to its employee to assist her in setting up her home office and to assist her in obtaining professional credentials. One can easily see why such an arrangement can be beneficial not only to the employee but also to the employer. This ruling demonstrates that such arrangements can be functional and can ultimately be upheld in court. As such, employers may take some degree of confidence in their ability to loan money to employees when doing so is reasonable. However, employers are recommended to approach such arrangements with caution and never to engage in lending to employees without first consulting counsel.