Dismissal for fraud not unduly harsh, arbitrator rules

Progressive discipline is a deeply rooted principle in Canadian labour relations. According to this principle, the most severe penalties should generally not be applied until an employee has been warned about his or her conduct through lesser disciplinary measures. (See “Overreaction to single act of insubordination costs employer 24 months’ notice” on our Publications page.) However, certain transgressions, such as theft or assault, may attract the sanction of dismissal for cause without any previous corrective action having been taken.

Fraudulent use of sick leave is an example of behaviour that, depending on the circumstances, may justify an employee’s termination even in the absence of prior misconduct. This was the issue in a recent case involving a part-time support worker with a community living association. In Madawaska Valley Association for Community Living v. Ontario Public Service Employees Union (December 31, 1997), the grievor, represented by OPSEU, reported that she had injured her back and was in too much pain to work. She collected Workers’ Compensation benefits, and declined offers of modified work.

The employer knew that the grievor had previously conducted a hairdressing business out of her home, and grew suspicious about the extent of her disability. About one month after the grievor went off work, the employer recruited a member of its volunteer board of directors to pose as a customer and arrange to have her hair cut by the grievor. Following this appointment, the grievor continued to maintain that she was totally disabled from performing any of her duties at work, and denied she had done any hairdressing. One month later, she was terminated, after failing to acknowledge during a meeting with the employer that she had in fact been operating as a hairdresser.


At arbitration, the employer explained that it felt compelled to terminate the grievor because she was employed in a position of trust. Her work was largely unsupervised and was with persons with developmental disabilities. Her duties included helping these vulnerable people with their banking and medications. In this context, it viewed her dishonesty concerning the severity of her symptoms and her work as a hairdresser as a gross breach of trust.

The grievor acknowledged that she had cut the board member’s hair while off work, but claimed that it was an exceptional circumstance, and that she was not running her business. She further claimed that she had simply forgotten about it when questioned by management. Her union argued that, even if some discipline were justified, the penalty imposed was unduly harsh. In this connection, the union pointed to the grievor’s prior good record, length of service and the hardship dismissal caused her, a divorced woman with two infant daughters. In addition, the union asserted that the employer was relying on a single act of misconduct: the haircut provided by the grievor.


Arbitrator Michael Bendel dismissed the grievance and upheld the discharge. He did so after rejecting the grievor’s evidence that she had provided the haircut only because the customer had arrived at her door unexpectedly in the middle of a snow storm. In accepting the evidence of the board member that she had arranged the appointment by telephone, the arbitrator found that the grievor was, in fact, running a business. She therefore had been dishonest about both the fact that she was open for business and her state of health.

The arbitrator agreed with the employer that, because of the grievor’s important role in the life of its clients, it could not be expected to retain her when it had lost confidence in her honesty and integrity. He held there were insufficient mitigating factors to cause him to reduce the penalty:

“I do not know whether the grievor had a previous good record, since [the collective agreement provision requiring removal of discipline reports from employees’ files after three years] prevents me from knowing the quality of her record earlier than three years preceding the discharge. Therefore, while the employer cannot point to prior discipline to bolster the discharge, the employee cannot point to a long period of discipline-free employment in mitigation. I also do not regard the grievor as having particularly long service to her credit. She was employed part-time for a period of five years, which, while not insubstantial, does not entitle her … to any special degree of protection from discharge for just cause.”

He concluded that, while economic hardship was involved in almost every discharge, this factor was not present to any unusual degree in the grievor’s case.

In Our View

This case demonstrates that it is possible to have a discharge for fraudulent use of sick leave upheld in circumstances where no prior discipline is relied on by the employer. It is also a reminder that provisions requiring the removal of adverse reports from employee files may have unintended consequences for employees in cases where they prevent an arbitrator from reviewing a discipline-free record.

For further information on this subject, please contact Lynn Harnden, who presented the case on behalf of the employer: (613) 563-7660, Extension 226.

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