For Employers

Suing an Employee for Damages

My employee has made a costly mistake.
Can I sue for damages?

You may think that an employment contract is like any other contract: if one party breaches that contract, they are liable to compensate the other party for the breach. That is not necessarily the case with employment contracts, however. Employers may be surprised to learn that the answer to the above question is most often “no”.

Take for example the case of Kirby v. Amalgamated Income Limited Partnership, 2009 BCSC 1044. In that case, the Court considered whether an employer could sue an employee and claim compensation from the employee. The court concluded that mere error, incompetence or negligence was not enough to entitle an employer to claim compensation from an employee.

In the case of Douglas v. Kinger, 2008 ONCA 452, The Ontario Court of Appeal suggested that an employee could be liable in situations where there is wilful misconduct on the part of an employee. Overall though, the case law suggests that for an employee to be liable to the employer, there must be a breach of a fundamental term of employment, specifically referred to as a “fundamental breach”.

What is a “fundamental breach”?

Numerous cases have considered the definition of fundamental breach. In Hunter Engineering Co. v. Syncrude Canada Ltd. [1989] 1 S.C.R. 426, the Supreme Court of Canada indicates that a fundamental breach occurs:

“Where the event resulting from the failure by one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the contract”.

To break that down in the employment context, a fundamental breach requires the following:

(a)          an employee must fail to perform a primary obligation of their employment; and

(b)          this failure on the part of the employee must, in turn, substantially deprive the employer of the whole benefit that the employer was to obtain from the employee.

Based on the above, fundamental breaches will not be common.

Employers should note that the above does not apply with respect to claims against independent contractors. Independent contractors may very well be liable for breaches of contract whether they are fundamental or not.

The above is not to say that employees are not responsible for their actions. Certainly, employees are responsible for their actions, and ought to be held accountable. However, employees are held responsible in different ways, most often through discipline, which can be administered even where breaches are not fundamental in nature.  Discipline can include warning letters, suspension, or even termination of employment.

If you have issues with a problem employee, and wish to find a solution to the matter, please do not hesitate to contact us for a consultation today.


This blog is produced by Waterstone Law Group LLP. This blog is intended for information purposes only and is not offered as legal advice for a specific claim. Subscription to or use of this site does not establish a solicitor – client relationship between the user and Waterstone Law Group LLP or any of the individual contributors. For advice relating to your employment law claim, please contact us to arrange for a consultation.

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