Mr. Cotter, a chartered accountant, was a controller with 16.5 years of service at the time of his dismissal. His duties as the controller for the employer included tracking and reporting on company finances, assisting with audits and signing management representation letters to the auditors.

In 2010, it was discovered that the employer has neglected to include information about its new pro shop in its annual update to BC Assessment in 2008 and 2009, which could have impacted its property taxes. The employer immediately took steps to resolve the issue by notifying BC Assessment and its auditors of the oversight. BC Assessment subsequently informed the employer that there would be no changes to its tax assessments as a result of the overdue filing of information returns. Accordingly, the employer viewed the issue as resolved.

Mr. Cotter, however, did not see the issue as resolved and took the position that there was an outstanding liability for property taxes that should be reflected in the employer's audited financial statements and management representation letters. He also spoke with a number of other parties about the issue, breaching his duty of confidentiality to his employer. On four separate occasions, Mr. Cotter was warned by his employer to refrain from pursuing or discussing the matter further. Despite these warnings, Mr. Cotter continued to pursue the matter and refused to sign the 2013 management representation letter to the auditors. As a result of his disobedient conduct, he was terminated for just cause.

Mr. Cotter sued his former employer claiming damages for wrongful dismissal. The employer took the position that it had grounds to terminate Mr. Cotter for cause due to his repeated insubordinate behaviour.

In the Court's decision, the law on disobedience was summarized: where an employer has issued directions that are lawful and not dishonest, it will amount to insubordination if those directions are disobeyed. The Court also noted that an employer will have just cause to dismiss an employee where the employee has been insubordinate and willfully disobedient to the employer's orders in a matter of substance, to the extent that the employer loses trust in the employee.

The Court concluded that Mr. Cotter was wilfully disobedient and insubordinate in defying "clear and unequivocal" directions from his direct supervisor and in ignoring repeated warnings that were given to him by his employer. The Court held that these actions, coupled with Mr. Cotter's disclosure of confidential information to other individuals, were incompatible with an employer-employee relationship, justifying Mr. Cotter's termination for cause. As a result, Mr. Cotter's claims were dismissed.

Lesson for Employers

Not every incident of disobedience by an employee will give an employer just cause to terminate an employee's employment. Whether an employee's disobedience at work will justify a dismissal for cause will depend on the circumstances of each case, including the nature and seriousness of the conduct. However, the decision in Cotter demonstrates that termination for cause may be justified where an employee's disobedience or insubordination is so serious that the result is a fundamental breakdown in the employer-employee relationship.

Note: This a reprint of an article by M. Ashley Mitchell of Miller Thomson LLP.