If you cheat on your expenses and resume, you can get fired

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What is old is new again.

When I first started, I told employers that if they wanted to terminate an employee and avoid severance pay, they only needed to do two things: review their resume and other application materials, and review their expenses. Most likely, I preached, they would find fraud in one or the other, perhaps both.

Funnily enough, two surveys last month found that many employees in both areas still cheat. A study conducted by Maru Blue found that last year, 31 percent of Canadian workers who filled out expense reports claimed personal expenses, such as supplies or lunch, as business expenses, and that 24 percent of workers admitted to overstating their personal expenses for reimbursement by their employer. Please note that these results are self-reported. Since most Canadians don’t want to report themselves as fraudulent, even anonymously, the actual numbers are almost certainly much higher.

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In Harris Poll’s other recent study, 29 percent of Canadian workers reported working at another job during regular working hours, and in more than a third of cases, the second job was a full-time job. 87 percent of the employees surveyed had had such a part-time job at some point in their career. Nearly 40 percent said they would work part-time during work hours if they thought they could get away with it.

Not surprisingly, there is a generational gap on this issue: 40 percent of Millennials versus 28 percent of Baby Boomers say they would take advantage of such an opportunity. Of those who had never held a second job while working, 23 percent said they were likely to do so in the future.

Interestingly, according to the Harris Poll, 49 percent of Canadian companies do not have policies prohibiting this behavior, and only 11 percent of companies that caught their employees double-dealing have fired them. Five percent reduced the employee’s salary and four percent implemented a demotion.

What does the law say about this?

As you have learned from these columns, it has become increasingly difficult in recent years to fire employees for cause without severance pay. However, courts are most likely to find cause when dishonesty is involved.

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Expense claim fraud is of course theft, and although the police generally refuse to press charges because it is instead a “civil matter” that must be sued, it is criminal behavior and employers could try to press charges and to demand that monies be repaid and to sue if this is not the case. And the amount stolen through fraudulent spending is not legally significant because once an employee intentionally cheats, employers should ask themselves in what other areas they are cheating. The only possible legal defense would be that the employee did not know it was a personal expense or you made an administrative error when filling out the expense forms. Employers can rule out this by thoroughly reviewing all past expenses and proving that the theft is a pattern. Few employees who steal only do it once.

A “secondary job” during the company’s working hours generally makes no difference legally, as it is a case of theft of time in which the employee is paid for their work. Employers have the same right to sue for excessive wages, and recently an employer in British Columbia, whose case was discussed in a previous column, successfully did just that. However, the actual proof of a reason for working for another company during working hours is more unclear, as the employee can argue that they thought it was permissible or that they made up the time, unless the employer provides a policy informing the employee of hours. If this is argued, the employer should request evidence (e.g. phone records, emails, etc.) to prove that the time was in fact made up. But even if not, especially if the time is relatively short, the employee could argue that the misconduct was permissible in the manner, such as making a few personal phone calls or searching the Internet for sports scores or stock prices, that affects the misconduct The employer is de minimis and it is therefore not a dismissal offense. Such an argument may be made even if the employer has a policy prohibiting it, particularly if the policy does not clearly state that it is grounds for dismissal.

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What’s interesting is how few employers (only 11 percent) actually fire employees if they’re caught. This suggests that the employer is either unsure whether the law allows dismissal for cause or that the employer believes that the employee is too valuable to lose and that a warning is sufficient.

Why is that? Is the job market so tight that employers are worried they won’t be able to find a replacement or don’t want to take the time to replace, recruit, train and onboard a new employee? Since the costs are high, the concern is not unfounded. Or do employers have a misunderstanding of the law and, like many employers, believe that termination for cause is a near-impossible task, regardless of their policies and the misconduct?

In recent years the paradigm has changed. Employers used to believe they could fire people for cause more easily than was the case. Now they believe that shooting is more difficult than it actually is.

It’s also true that most employers play favorites. There are employees who simply don’t like them and are happy to get rid of them after making excuses. Other employees like her very much, and when they catch her misbehaving like this, they are more likely to be lenient. Not only is this bad HR practice, it also has legal implications. Such disparate treatment allows a perpetrator to point to the other employee who committed the same misconduct and was not fired and say that he therefore reasonably believes that the company condoned or permitted the misconduct. This is actually a legal defense.

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What does it all mean? Review expenses more closely and establish clear policies that provide that “side hustles,” at least without written consent, will result in relief and then be terminated for cause if both occur.

Howard Levitt is a senior partner at Levitt LLP, an employment law firm with offices in Ontario, Alberta and British Columbia. He practices employment law in eight provinces and is the author of six books, including Law of Dismissal in Canada.

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