The B.C. Court of Appeal in Shalagin v Mercer Celgar Limited, 2023 BCCA 373 (“Shalagin”) upheld a decision finding that an employee’s conduct of surreptitiously recording meetings and conversations with other employees, which was discovered post-termination, constituted just cause for dismissal. In the circumstances, the recordings struck at the root of the employment relationship, such that mutual trust between the parties was broken.
Factual Background
The employee, Mr. Shalagin, worked for Mercer Celgar Limited Partnership (“Mercer”) from January 6, 2010, until he was terminated without cause on March 25, 2020. Upon termination, the employee was paid in lieu of notice pursuant to the B.C. Employment Standards Act (“ESA”).
At the time of his termination, the employee was a senior financial analyst with access to Mercer’s sensitive financial information. While his employment was not governed by a written employment agreement, the employee was bound by Mercer’s policies, including a code of business conduct and ethics, a confidentiality policy, as well as the Chartered Professional Accountants of B.C.’s Code of Conduct.
After he was terminated, the employee filed a complaint under both the ESA and the Human Rights Tribunal and commenced an action for wrongful dismissal.
As part of his human rights proceeding, the employee disclosed that over the course of his 10 years of employment, he had made numerous secret recordings of meetings and conversations with his co-workers, including with supervisors and HR personnel. The employee submitted that he made the recordings because he thought they related to his rights and alleged discriminatory or bullying treatment of him and his colleagues.
Mercer, upon learning of these recordings, asserted that the employee’s conduct constituted cause for his dismissal, and that he had no entitlement to reasonable notice or pay in lieu of notice, in defence to the wrongful dismissal action.
Trial Decision
The trial judge considered whether there was cause for the employee’s termination, and specifically, whether the fact of the secret recordings went to the root of the employee’s contract and fundamentally struck at his employment relationship.
The trial judge found that the employee’s surreptitious recordings did constitute just cause for dismissal and dismissed his action. In his reasons, the trial judge found that the employee knew his conduct was wrong and unethical, and that he had not established a legitimate basis for making the recordings based on a fear of discrimination.
Court of Appeal Upholds Finding of Just Cause
On appeal, the B.C. Court of Appeal affirmed the test from McKinley v BC Tel, 2001 SCC 38 (“McKinley”) that the question of whether an employer is justified in dismissing an employee on grounds of dishonesty requires an assessment of the context of the alleged misconduct. The Court held that the trial judge appropriately applied the contextual approach as set out in McKinley to determine whether the nature and degree of the dishonesty warranted dismissal.
In particular, the Court highlighted the trial judge’s review of the “difficulties” experienced by the employee in his relationship with his supervisor (who the employee alleged was discriminating against him); the employee’s acknowledgement that he knew his recordings would make people uncomfortable, and were unethical, if not illegal; and the employee’s evolving purpose in making the recordings.
The Court also affirmed the trial judge’s conclusion that the employee’s evidence did not support the allegation of discrimination, and that in any event, there was no rational connection between the alleged incidents of discrimination and the employee’s recordings; in particular, because the recordings continued for a period of almost 10 years and the employee admitted it became his practice to record conversation with his co-workers.
Key Takeaways
This case re-affirms an important principle from McKinley – an employee’s dishonest conduct is not always just cause for dismissal, but the analysis does not end there. The court must also consider whether the employer was justified in dismissing an employee on the grounds of dishonesty in the context of the alleged misconduct, which requires an analysis of whether the nature and degree of dishonesty warranted dismissal.
In Shalagin, the Court confirmed that an employee’s surreptitious recording of their colleagues and supervisors would be regarded by most employers as misconduct undermining the trust relationship between employer and employee. However, as part of the “contextual approach” other relevant factors must be considered, including the purpose of the recordings, the nature of the recordings, whether the employee was acting in malice, whether the recordings were made public, the volume of recordings, the length of time over which they occurred, the effect of the recordings, and any medical explanation for the conduct.
This decision also confirms that conduct discovered post-termination may constitute just cause, though such allegations should be approached with caution. An employer must establish that, at the time of the dismissal, there were facts sufficient in law to warrant a dismissal, and that there was no condonation of the misconduct, if known by the employer. The circumstances of secret recordings, where an employer had no ability to discover their existence until after termination, is an example where the fact of after-acquired grounds for dismissal is more easily established.
About the authors
Irfan Kara is an employment lawyer and litigator at Torys LLP. He regularly acts for and advises employers on employment class actions, employment contracts, restrictive covenants, terminations, wrongful dismissal claims, human rights, reprisal and harassment complaints, workplace investigations and employment privacy issues. Irfan also regularly provides advice related to diversity, equity and inclusion obligations to employers and organizations across Canada.
Alexandra Lawrence is a litigation lawyer at Torys LLP. Alexandra’s practice focuses on litigation and dispute resolution in a number of areas, including corporate/commercial disputes, class actions, and employment law. She has appeared as counsel in domestic arbitrations and at various levels of court, including before the Ontario Superior Court of Justice and Human Rights Tribunal of Ontario.
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