Suing an employee successfully
Originally published in the Canadian HR Reporter, August 26, 2019
In extreme situations, an employer can do more than just fire an employee.
A Calgary company fired its employee after it discovered he had been accepting what they called secret payments from their suppliers for several years. Shutterstock
If an employee is negligent and costs their employer money, can the employer sue them after they’ve been fired? Most of the time, the answer is no.
But sometimes, if an employee deliberately costs their employer money, the answer to that question is yes.
Take the case of M-I Drilling Fluids Canada, Inc v Cottle, for example. M-I Drilling (MID) is a Calgary company that successfully sued a senior-level employee it had fired for accepting kickbacks from suppliers, arguing the payments cost them money because the company ended up paying more than it should for those supplies.
MID fired Bruce Cottle after it discovered he had been accepting what they called secret payments from their suppliers for several years. Cottle had signed a code of ethics when he began working for the company where he agreed he wouldn’t accept money from suppliers without first getting approval from MID.
MID discovered he had received a single payment from a supplier in 2012 and reprimanded Cottle, but he failed to disclose other payments and continued accepting kickbacks. Cottle argued he was entitled to the payments because they were sales commissions, but the court disagreed.
After he was reprimanded, Cottle went on a leave of absence for an unrelated medical condition. His replacement found unmarked white binders in a credenza that contained evidence of further kickbacks. It showed that Cottle was invoicing MID suppliers through his consulting company and collecting kickbacks to the tune of more than $88,000.
He was fired in September 2013.
But the story didn’t end there.
MID took the unusual step of suing Cottle, asking the court for the total sum of the kickbacks he received. The company argued that the secret payments cost them because Cottle — who was a key employee in a position of trust — never sought out multiple suppliers that could have lowered their costs because he wanted to keep receiving kickbacks.
The court agreed, saying as a key employee in a fiduciary role, Cottle had an obligation to act in his employer’s interest rather than his own.
For his part, Cottle argued that his employer couldn’t sue him — their only course of action was to fire him, which they did.
But the court disagreed and ordered him to pay MID the kickbacks he received, and also awarded the company $12,000 in punitive damages. In all, Cottle’s behaviour cost him his job and more than $100,000.
A rare case
Cases such as these are rare indeed. It doesn’t mean that employers can sue employees for any losses they suffer because of the employee’s conduct or negligence. In fact, it is difficult, if not impossible, for an employer to receive compensation for an employee’s mistakes or negligent work.
But what the case does mean is that for the most extreme situations — where an employee deliberately engages in theft or fraud — a company can do more than fire the employee. They can sue them and know that the courts are not only willing to hear their case, but compensate them for their losses as well.
We want to thank Guest Blogger and RHBOT Member, Stuart Rudner, Employment Lawyer & Mediator at Rudner Law!
Stuart is the founder of Rudner Law. In 2016, 2017, 2018 and 2019 he was selected by his peers for inclusion in ‘The Best Lawyers in Canada’ in the area of Employment Law, and he has been repeatedly named in Canadian HR Reporter’s Employment Lawyers Directory (a comprehensive directory of the top employment law and immigration law practitioners in Canada). He was also named one of Canada’s top Legal Social Media Influencers and recognized as the only Legal Influencer in Canadian HR Law in the first Lexology Awards. Rudner Law was chosen as the winner of the 2019 International Advisory Experts Award - Employment Law within Canada and the winner of the Canadian Employment Law Firm of the Year for 2019 in the Global Law Experts Annual Awards. Rudner Law was selected as one of the Top Three Employment & Labour Boutiques in Canadian HR Reporter Readers’ Choice Awards for 2019.
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