Employees required to prove what they didn’t steal

August 18, 2013 - by: Kyla Stott-Jess 0 COMMENTS

By Kyla Stott-Jess

A recent Alberta Court of Appeal case, 581257 Alberta Ltd. v. Aujla, is good news for employers. The court reversed the normal onus of proof, requiring the employees to prove that certain monies they deposited into their bank account were not stolen from their employer.

Background

From 2001 to 2008 an Edmonton liquor store called Crown Liquor North employed husband and wife team Balwinder and Harwinder Aujla as cashiers. Routine surveillance video in late 2007 suggested that the couple was failing to deposit all sale proceeds into the till. Additional security cameras were installed. More evidence of theft was obtained.

The biggest problem for Crown Liquor was proving how much money had been stolen. Not only did the thefts occur in small amounts over seven years, but they were done by the Aujlas while they were alone in the store. It was impossible to tell from Crown Liquor’s own records exactly how much money they had stolen.

Rather than relying on its own records, Crown Liquor relied on the records of the Aujlas. They were questioned under oath. Their bank records were obtained and analyzed. They ultimately failed to explain how $116,000 had been deposited into their accounts over the seven-year period. Crown Liquor used this $116,000 figure as the basis for its claim to recover stolen funds.

Trial decision

Although the trial judge readily accepted that theft had occurred, she didn’t accept Crown Liquor’s method of calculating the amount stolen. The employer argued that the Aujlas were fiduciaries, that is, employed in highly responsible positions of trust. That would have shifted the onus of proof onto them. Rather than the employer having to prove the amount stolen, Crown argued that the Aujlas should be required to prove that the $116,000 was not stolen.

The trial judge disagreed. She found that as cashiers, the Aujlas weren’t employed in fiduciary positions. This finding meant that Crown Liquor had to prove the amounts stolen. That was a problem. The trial judge awarded Crown Liquor only $15,000, based on what could be proven from the video surveillance records.

Appeal

The Alberta Court of Appeal overturned the trial judge’s finding on fiduciary duties. Although courts usually tend to limit the scope of fiduciary duties in employment situations, this is often where an employer is trying to restrict a former employee from competing. The court distinguished these cases from the situation at hand. The Aujlas were left alone in the store and responsible for the actual proceeds of the business, including cash. While a cashier position isn’t normally associated with fiduciary duties, the Aujlas were in a fiduciary position regarding the handling of money.

Once the court found that a fiduciary duty existed and that the employer had made all reasonable efforts to establish the amount stolen, the onus shifted to the Aujlas to disprove that the $116,000 was stolen from their employer.

The appeal court then sent the case back to the lower court for a retrial on the issue of the amount stolen.

Lessons for employers

The appeal court’s employer-friendly decision is important for several reasons. Most obviously, it confirms that in cases of employee theft, the burden of proof in a trial in Canada may sometimes shift to the employee to prove that the alleged funds were not stolen from the employer. Further, an employer doesn’t have to exhaust all avenues to determine how much might have been stolen before this burden shifts. Rather, the employer merely has to engage in reasonable efforts.

In addition to this reassuring finding, the decision is notable for its interpretation of fiduciary duties. The extension of fiduciary duties to employees who wouldn’t normally qualify as being employed in a fiduciary position (i.e., employees who aren’t senior officers or directors) is important. In this case, the finding of fiduciary duty was based on a specific employee duty—the handling of cash—rather than their overall roles and job descriptions. While this seems like a natural conclusion given the facts, the finding opens the door for future arguments that employees other than senior managers may have fiduciary obligations.

About Kyla Stott-Jess:
A 2010 LLB graduate of the University of Calgary, Kyla Stott-Jess is completing her articles with the firm's Calgary office. Once she is called to the Alberta bar in September of 2011, she will join the Commercial Litigation practice group. Kyla plans to develop a broad practice that includes work in corporate/commercial, employment, product liability, energy, privacy, transportation, negligence and contract disputes.
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