Alberta Court Of Appeal Reverses The Burden Of Proof For Employee Theft

more+
less-

The Alberta Court of Appeal recently considered and clarified the nature of the relationship between employers and the employees they entrust with handling funds. As a result of the decision in 581257 Alberta Ltd. v Aujla, 2013 ABCA 16, employers may more easily recover assets stolen, converted or misappropriated by dishonest employees using a civil cause of action. The Alberta Court of Appeal found that, in cases of theft, an employee owes fiduciary obligations to its employer. In addition, the Court overturned the lower court’s decision that the plaintiff employer was responsible not only for demonstrating that a fraud or theft had occurred, but also for showing that all of the discovered loss was a result of the employee’s theft or fraudulent acts.

According to the Alberta Court of Appeal, where an employer gives an employee the responsibility for handling the employer’s funds, that employee has fiduciary obligations with respect to those funds. Employers have a strong argument that a similar fiduciary relationship exists where:

• Employees handle inventory or valuable assets.

• Employees handle cheques or transfers and have signing authority.

The fiduciary obligation does not impose obligations of non-competition or fidelity, but it shifts the evidentiary burden respecting dealings with those funds.

The Court of Appeal held that once the employer proves fraud or breach of fiduciary duty, the employer only needs to establish reasonable efforts to determine the amount taken by the thieving employee. At that point, the evidentiary burden shifts to the employee to disprove the amount and the cause of the loss. This shifting burden of proof enforces the policy that an employer should not be precluded from recovery where the employee has covered his tracks and compromised the ability of the employer to prove the quantum of loss.

In Aujla, the defendants were cashiers and shelf stockers at the plaintiff’s liquor store. The plaintiffs became suspicious that funds were going missing, but did not have sufficient evidence because their inventory system was unsophisticated and their surveillance was inadequate. The employer later installed a hidden camera, which showed the employees stealing some money from the till. This evidence established fraudulent behavior and breach of fiduciary obligations, but only proved a small quantum of thefts. However, the employee’s bank records disclosed $116,000 in funds that were not accounted for.

The shifting burden of proof of quantum of losses for breach of fiduciary or fraud dramatically reduces the difficulty faced by employers, who can only prove a few incidences of theft, but fairly believe this theft represents part of a larger pattern. Employers may be able to rely on the employee’s lifestyle, habits (such as gambling or shopping), or bank records to prove the loss.

While employers previously considered recovery impossible because of insufficient proof of the full quantum of the loss, the Alberta Court of Appeal has now leveled the playing field and provided significant recourse for employers.

581257 Alberta Ltd v Aujla, 2013 ABCA 16

Topics:  Burden of Proof, Canada, Conversion, Embezzlement, Misappropriation, Theft

Published In: Business Torts Updates, Civil Procedure Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »