Honest Mistakes Cannot Lead to Termination for Cause

Palidwor v. Julian Ceramic Tile Inc. – British Columbia Court of Appeal – October 3, 2008

Absent any form of deceit, an employee’s actions made on the basis of a mistaken belief regarding the terms of their employment cannot justify termination for cause.

The October 3, 2008 decision of the British Columbia Court of Appeal in Palidwor v. Julian Ceramic Tile Inc. [2008] B.C.J. No. 1949 (“Palidwor”),  states that absent any form of deceit, an employee’s mistaken belief in regards to their terms of employment cannot be grounds for a termination for cause.

In Palidwor, the employee worked for the employer as a bookkeeper. The employee believed that her terms of employment were that she worked a thirty-five hour week. As a result, the employee paid herself overtime for any hours worked in excess of this amount. When this overtime pay was discovered by the employer, the employee had received a total of $10,678 in overtime pay. The employer’s position was that the employee’s terms of employment were that she was to work a forty hour week and therefore should not have received any of the overtime pay. Due to the employee wrongfully receiving such pay and given her position of bookkeeper, which required her to be responsible for keeping the records on overtime, the employer terminated the employee for cause. The employee sued for wrongful dismissal.

At trial, the judge found that the employee’s terms of employment did state that she was to have worked a forty hour week. However, the trial judge found that the employee had not acted deceitfully, but rather had made a mistake. Therefore, the trial judge concluded that the employer had no right to terminate the employee for cause. The employer then appealed this decision to the Court of Appeal.

The Court of Appeal dismissed the appeal. In reaching this conclusion, the Court stated, “[The employee] was found to have made a mistake. She did not know the overtime payments she received were contrary to the terms of her employment and there was evidence on which it was open to the judge to make the findings in this regard that he made. An employee, who in the complete absence of any dishonesty makes a mistake about an employment benefit she is entitled to receive, cannot be said to have fundamentally breached her employment contract by receiving the benefit. [The employee’s] position is not altered by the fact she may have a part in assembling and processing data or other information that bears on the benefit received.”

This decision is of great importance for both employers and employees. It establishes that an employer cannot terminate an employee for cause if an employee, absent any deceit, makes a mistake in regards to their terms of employment. Though an employee has no right to retain any benefit from such a mistake, the employee cannot be seen to have fundamentally breached their employment contract. This places employers in the position of having to keep a watchful eye on their employees for any mistakes that may hinder their business if not discovered earlier. Also, it provides a safeguard for employees who may otherwise be terminated for cause due to an honest mistake.

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