Wrongful dismissal claims often spotlight the delicate balance between workers’ rights and employers’ requirements. However, the narrative takes a compelling twist when an employer commences proceedings against a former senior executive employee, and the employee finds themself personally liable to their employer. Although holding a senior position comes with extensive autonomy and authority, it also comes with significant responsibility and trust, which can be abused. 

This blog will navigate the legal labyrinth of wrongful dismissal claims and the accountability of current and former employees regarding misconduct in consideration of a recent decision from the Alberta Court of King’s Bench. The matter before the Court dealt with a situation where an employee sued the employer for wrongful dismissal. However, the employer counterclaimed against the employee for dishonest acts and fiduciary and employee duty breaches.

Executive Employee Enters Into Employment Agreement

In the matter of Breen v Foremost Industries Ltdthe plaintiff employee (the “employee”) was named President and Chief Executive Officer of the corporate defendant, responsible for Foremost Industries Ltd. and numerous other entities operating under the same fund (the “Defendants”) in 2001. For the purpose of this matter, the employee’s employer was Foremost Group (the “employer”), and the company operated as an industrial manufacturer in the energy industry. 

After holding his position for over ten years, the employee entered into an employment agreement with the employer in 2011. The employment contract outlined that the executive would be responsible for complying with the company’s policies, practices, and procedures and must avoid and disclose potential conflicts of interest. The employee was also required to consult with the company’s board of directors (the “board”) and obtain prior approval on matters outside of his scope of authority, such as contracts with “red flags” and certain expenditures. 

Employee Sues for Wrongful Dismissal; Employer Counterclaims

Contrary to the employment agreement, the employee engaged in various questionable transactions on behalf of the company, many of which the company was unaware of. He often failed to obtain prior approval from the board and deposited misappropriated funds into his numbered company. 

The board warned the employee about his poor performance and conduct. However, he did not stop. Ultimately, the employer terminated the employee for just cause, and the employee sued the employer for wrongful dismissal. In response, the employer commenced a counterclaim against the employee, alleging that the employee was negligent and breached both his employee and fiduciary duty when he misappropriated company funds. 

Employee Ordered to Pay Over $500,000 to Employer

Reviewing the evidence before it, the Court determined that the employer appropriately terminated the employee’s employment and had just cause for doing so. Accordingly, the employee’s claim for wrongful dismissal was dismissed. The employee was only accountable to the company’s board in his role. However, he abused this position. Beyond violations of restrictions in his authority, the employee constantly exceeded his spending authorization allowance and entered into transactions that had “red flags” without the board’s approval. The Court also found that the employee had benefitted from various gifts obtained “through embezzlement, misappropriation, or defalcation.”  

As a result, the Court found that the employee was personally liable to the employer for the various gifts and $200,000 for damages that the employer suffered due to the employee’s breaches of his fiduciary duty and employment agreement, totalling approximately $450,000. The Court also ordered the employee to pay $50,000 in punitive damages and awarded costs in favour of the employer. 

Employees May be Held Personally Liable for Misappropriated Funds

This case reaffirms several key employment-law principles and serves as a reminder to employees and employers of the consequences of failing to adhere to the applicable policies and obligations outlined in an employment agreement. An employer’s failure to comply with statutory and contractual procedures may result in a claim for wrongful dismissal. On the other hand, an employee’s breach of contract or fiduciary duty can find them personally liable for damages even after their time with the company has concluded. 

Beyond the parties’ contractual obligations, employees contribute to an organization’s overall success and functioning. Central to this dynamic is the employee’s duty to their employer and fiduciary duty in certain cases. A breach of such duty can result in serious legal and financial consequences.

The Employment Lawyers at Getz Collins and Associates Provide Comprehensive Legal Advice Regarding Employee Terminations 

With offices in Calgary and Strathmore, Getz Collins and Associates’ skilled labour and employment lawyersregularly provide individual and corporate clients with practical, tailored legal advice regarding various employment-related matters. Whether you are an employer seeking proactive advice on navigating a termination or an employee looking to learn more about your rights, our team is ready to help. 

Our lawyers proudly serve clients throughout the province, including Airdrie, Cochrane, Okotoks, Drumheller, Chestermere, Hussar, and the surrounding areas. To speak with a team member regarding your employment lawquestions, contact us by phone at 587-391-5600 or contact us online to schedule an initial consultation.