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Senior employee's refusal to submit budget with head office's desired profit projections not cause for dismissal

Jurisdiction: - British Columbia

In Adams v. Fairmont Hotels & Resorts Inc., 2009 BCSC 681, the BC Supreme Court found that the employer did not have cause to dismiss a senior employee because of her refusal to prepare an annual budget that that included the employer's desired profit projections.

In doing so, the court reviewed the law on insubordination, and when it can amount to cause for dismissal in light of the "contextual approach" that was mandated by the Supreme Court of Canada in McKinley v. BC Tel, 2001 SCC 38.

Background

The plaintiff was the General Manager of a hotel that was part of a luxury chain. At the time her employment was terminated she was 41, had 12 years of service and was earning approximately $150,000 per year (exclusive of bonuses and benefits).

The hotel chain's corporate office (the "employer") alleged that it had cause to dismiss the plaintiff for insubordination because:

  1. it had issued repeated directives to her concerning the preparation of her hotel's 2007 budget, including directives regarding its expected profit projections;
  2. the plaintiff repeatedly refused to implement those directives; and
  3. the directives were lawful and reasonable. 

The plaintiff's position was that the profit projections for the hotel dictated by the employer were neither reasonable nor achievable, and that the unilateral directive of the employer  to change the budget numbers was contrary to the budgeting process required by the employer's own accounting policy.

The Law on Insubordination

Based on the court's review of the case, the law regarding dismissal for insuboridnation is as follows:

  • The employer has the right to determine how his business will be conducted.
  • The employer is the boss and it is an essential term of every employment contract that the employee must obey the orders given to him so long as they are not: (1) contrary to law, dishonest or dangerous to the health of the employees; and (2) they are within the ambit of the job for which the employee was hired.
  • Insubordination will not constitute cause for dismisal unless the employer establishes that the employee breached an essential term or condition of the employment contract. This may occur where the employee has (1) willfully defied a clear and unequivocal instruction or (2) refused to carry out a policy or procedure well know to the employee to be central to the fulfillment of the employer's objectives.
  • In considering whether, and in what circumstances, a single incident of misconduct will amount to cause, the court will rely on the principles set out in McKinley,
  • In that case, the Supreme Court of Canada stated that in order to establish just cause based on an isolated incident of misconduct, the employer must demonstrate that the employee has, by reason of the misconduct, repudiated the employment contract or one of its essential conditions. 
  • In order to determine whether repudiation has occurred, both the circumstances surrounding the alleged misconduct and the degree of the misconduct must be carefully examined. This is referred to as the "contextual approach".

Workplace Policies - The Context

The court stated in Adams that the contextual approach requires an examination of the policies and procedures, if any, that have been put in place by the employer. On the issue of workplace policies, the court stated the following:

  • "Where an employer chooses to set policies that govern its conduct, as well as that of its employees, the employer can expect to be held to those policies.  In such a case, the policies create legitimate expectations on the part of the employee as well as the employer" (para. 300); and
  • "An employer is entitled to demand an employee's loyalty and commitment, and to require an employee to carry out the employer's policies.  An employee who does not agree with an employer policy has the option of leaving the employment relationship or declining the offer of employment in the first place.  However, an employee is as entitled as the employer to rely on policies governing the employment relationship.  The employer is not entitled to ignore its own policies when it suits its purposes" (para. 356). 

The court then noted that the employer had established detailed policies and procedures for the drafting of annual budgets for its hotels. Among other things, the polices and procedures provided that:

  • the [hotel] General Manager and Controller are responsible for the preparation, content and adherence to the budget, and must ultimately sign off the budget to signify their agreement with it;
  • the budget must be "prepared and approved conjointly" by the Hotel's Executive Team and the Corporate Executive (emphasis added).

Based on these and other provisions, the court concluded that the employer was not allowed to unilaterally dictate the budget's bottom line from the outset of the budgeting process, or demand that the plaintiff prepare and approve a budget she did not agree with. As such, the plaintiff's refusal to comply with the employer's directive was not insubordination because it was a directive that the employer was not entitled to issue pursuant to its own policies.

Notice Period

In its assessment of the the notice period, the court noted that the plaintiff had, despite an exhaustive search, found only four months of contract work in the 26 months since her her dismissal. On this point, the court stated that: "Evidence of the actual time required to secure alternative employment is a factor the Court may take into account when assessing reasonable notice." (para 369).

Based on this factor - and the plaintiff's age, length of service, and position held - the court concluded that she was entitled to a 15 month notice period.