Few workplace issues put employers in a more difficult position than suspected employee theft. Act too slowly and you risk further losses and a message to staff that dishonesty is tolerated. Act too quickly and you risk a wrongful dismissal claim, aggravated damages, and in some cases a judgment worth years of the employee’s salary.
The good news for employers is that Canadian courts take theft seriously. Dishonesty that strikes at the heart of the employment relationship can justify termination for cause, even for a long-service employee. The bad news is that courts hold employers to a high standard when they make that call. This post walks through five lessons from the case law that every employer should understand before responding to suspected theft.
Table of Contents
Your Situation
Maybe the numbers stopped adding up. Inventory counts that keep coming in short. A cash drawer that never quite balances on certain shifts. Expense claims that do not match the receipts. Or maybe it was more direct: a coworker came to you quietly and said they saw something, or your security footage shows an employee walking out with product that was never paid for.
Whatever brought it to your attention, you are now in a difficult spot. You feel betrayed, especially if the person under suspicion is someone you hired, trained, and trusted, perhaps for years. You are angry about the loss, and you are worried about what it means if other staff know it is happening and see nothing done about it. Part of you wants to walk them out the door today.
At the same time, doubt creeps in. What if there is an innocent explanation? What if the evidence you have is thinner than it feels right now? You have heard that firing someone for cause is legally risky, and you do not want a moment of decisiveness to turn into years of litigation. You may also be wondering about the practical questions: Should you call the police? Should you suspend the employee while you look into it? Who do you talk to first, and what do you put in writing?
If this sounds like where you are, you are asking the right questions. How you handle the next few days matters far more than most employers realize. The five lessons below, drawn from decades of Canadian case law, show what separates a defensible termination from an expensive mistake.
Even the Smallest Case of Theft Can Be Just Cause
Employers sometimes assume that low-value theft cannot justify dismissal, especially for a long-tenured employee. The case law says otherwise.
In one court decision, an employee with over 30 years of service was dismissed after removing roughly $278 worth of merchandise from her employer’s store without authorization. Despite her long tenure, the court upheld the dismissal for cause. What mattered was not the dollar value but the breach of trust. The employee had a documented history of policy violations and warnings, and the court found the employment relationship had irreparably broken down. As the court noted, in a retail environment honesty and trustworthiness are essential, and the small value of goods does not excuse a breach of trust by an employee in a position of responsibility.
The takeaway for employers: the value of what was taken is rarely the deciding factor. Courts focus on whether the conduct is fundamentally inconsistent with the trust the role requires. A documented history of prior warnings can also be decisive, which is why consistent, contemporaneous record keeping matters long before any incident occurs.
Consistent Internal Standards Matter
Just cause depends heavily on the standards you actually enforce, not just the ones written in your policy manual.
An Alberta decision makes this point sharply. An employee was dismissed for having personal items fabricated in the company shop using company time and materials. The written policy clearly prohibited this. The problem was that the evidence showed the practice was widespread, long-standing, and involved management at levels well above the dismissed employee. The court found the employer had condoned the practice for years, that the employee honestly believed it was permitted, and that the dismissal was therefore wrongful.
The court put it plainly: employers retain the right to dismiss for dishonesty, but their policies must be unequivocal and applied consistently. A rule buried on page 59 of a 242 page handbook, contradicted by daily practice, will not support a for cause termination. If your workplace has informal practices that drift from written policy, the time to correct them is now, through clear communication and even-handed enforcement, not through a surprise termination of one employee for conduct everyone else engages in.
Conduct a Proper Investigation
Courts expect employers to investigate before they conclude. Two decisions illustrate what happens when they do not.
For example, consider this case where a warehouse employee was captured on video moving goods that later went missing. The employer concluded he was the thief, called the police, and dismissed him. But the video showed only that he moved the goods a short distance, which was part of his ordinary duties. The employer never interviewed the coworker actually working on the shipping dock, never questioned the following shift, and never tested the employee’s explanation. The court found the dismissal wrongful and stated the principle directly: there is an onus on an employer to conduct a full investigation before reaching conclusions that are devastating to an employee. Without a reasonable investigation, an employer cannot claim its suspicion was reasonably based.
Another Court decision reinforces the point. A mechanic took two items he believed were garbage during a store decommissioning. Management decided he had lied and had already settled on discipline before even meeting with him. Senior management then escalated a two day suspension to termination, apparently to make an example of him, without considering his work history or circumstances. The court found no just cause and awarded aggravated damages of $25,000 for the unfair, bad faith manner of dismissal.
A proper investigation means gathering evidence from all relevant sources, giving the employee a genuine opportunity to respond before any decision is made, and keeping an open mind about innocent explanations. A meeting held only to confirm a conclusion already reached is not an investigation.
You Need to Prove Intent, Not Just Suspicion
Theft requires dishonest intent. Suspicion, even reasonable suspicion, is not enough to establish just cause.
When suspicion is confirmed by cogent evidence, it becomes proof on the balance of probabilities. Nothing short of that suffices. Employers who distrust an employee but cannot prove misconduct always retain the option of terminating on reasonable notice or with pay in lieu.
This Court decision shows the intent requirement in action. The employer had to prove not only that the employee took the items but that he did so with the intent required for theft. The court accepted that the employee honestly believed the items were garbage, noting he had asked about them openly, made no attempt to hide what he was doing, and had even been permitted by his supervisor to remove one item. An honest but mistaken belief is not dishonesty, and it is not just cause.
The Consequences of an Improper Allegation Can Be Severe
Getting this wrong is expensive, and a recent Court decision shows just how expensive.
A night shift supervisor with 17 years of service was terminated for cause and accused of fraudulent activity and time theft after topping up employees’ hours. The evidence showed the practice was a long-standing, transparent norm followed by every supervisor before and after him, and that the employer’s investigation targeted him alone, without interviewing other supervisors or auditing anyone else’s records. The court found no just cause and awarded 19 months of pay in lieu of notice. It then extended the notice period by a further 14 months because of the employer’s bad faith conduct, including the ambush-style interrogation, the unsupported fraud allegation in the termination letter, and the damage to the employee’s ability to find new work. The total award: 33 months of notice.
An unproven theft allegation does more than lose the just cause argument. It can transform an ordinary wrongful dismissal claim into one with significant additional damages, because branding someone a thief without proof causes exactly the kind of harm courts are prepared to compensate. Learn more about wrongful dismissal here.
What Alberta Employers Should Do
Suspected theft calls for a measured, documented response:
- Preserve the evidence first: secure video footage, records, and physical items before memories fade or materials disappear.
- Investigate before deciding: interview all relevant witnesses, not just the ones who support your initial theory, and give the employee a fair chance to explain.
- Assess intent honestly: ask whether the conduct could reflect a misunderstanding, a condoned practice, or an honest mistake rather than dishonesty.
- Check your own house: if the conduct reflects a tolerated workplace practice, address the practice through communication and consistent enforcement rather than singling one person out.
- Consider proportionality: Even proven misconduct must be weighed against the employee’s record, tenure, and the seriousness of the breach. Termination for cause is reserved for conduct that destroys the employment relationship.
Get advice before you act
The Employment Standards Code and the common law both shape what a defensible termination looks like in Alberta, and the cost of a misstep can dwarf the cost of the theft itself.
If you are dealing with suspected employee theft, our team of Calgary employment lawyers can help you investigate properly, assess whether just cause exists, and manage the termination in a way that protects your business. Clarity. Strategy. Peace of Mind.
Is employee theft always just cause for termination?
Almost, but not always. Theft can be just cause, and courts have upheld terminations even where the value taken was small, but the analysis is always contextual. Courts look at whether the dishonesty caused a breakdown in the employment relationship, considering the nature of the misconduct, the employee’s role and history, and whether dismissal is a proportionate response. Proven theft by an employee in a position of trust will usually meet that standard. Suspected theft, or conduct with an innocent explanation, will not.
What is the difference between suspicion and proof?
Just cause requires proof of misconduct on a balance of probabilities, meaning it is more likely than not that the employee acted dishonestly. Suspicion, even reasonable suspicion supported by some evidence, is not enough. If you cannot prove dishonest intent, your options are to terminate without cause on notice or pay in lieu, or to keep investigating until the evidence supports a conclusion.
Should I call the police?
That depends on the strength of your evidence and your objectives. A criminal charge is a separate process with a much higher standard of proof, and an acquittal does not decide the employment question either way. Be aware that involving the police on weak evidence can increase your exposure if the allegation turns out to be wrong. It is usually wise to get legal advice before involving law enforcement.
Can I suspend the employee while I investigate?
A short paid suspension pending investigation is generally the safer approach and is common practice. An unpaid suspension without clear contractual authority can itself create liability and, in some circumstances, may amount to constructive dismissal. Keep any suspension brief, communicate that no conclusion has been reached, and complete the investigation promptly.
What does a proper investigation look like?
At minimum: preserve the evidence, interview all relevant witnesses rather than only those who support your theory, review records objectively, give the employee a genuine chance to respond to the specific allegations before any decision is made, and document each step. Courts have repeatedly criticized employers who decided the outcome first and treated the meeting with the employee as a formality.
What if the conduct was a common workplace practice?
If the conduct was widely tolerated, engaged in by others, or known to management without consequence, courts may find the employer condoned it. Condonation can defeat a just cause termination even where a written policy prohibits the conduct, because what matters is the standard you actually enforced. If you discover a problematic practice, the correct response is usually to clearly communicate that it must stop and then enforce that standard consistently, rather than terminating one person for cause.
What happens if I get it wrong?
The employee can sue for wrongful dismissal and recover pay in lieu of reasonable notice, which for a long-service employee can run well over a year of compensation. Where the employer acted in bad faith, such as making unproven theft allegations, running a one-sided investigation, or damaging the employee’s ability to find new work, courts can add substantial further damages. In one recent decision, the combination produced a total award equivalent to 33 months of notice.
Do I need a written policy on theft?
You do not need a written policy to dismiss for theft, since honesty is a fundamental term of every employment relationship. But clear, well-communicated, and consistently enforced policies on company property, discounts, expenses, and timekeeping make just cause far easier to establish and help prevent condonation arguments. A policy that exists only on paper while daily practice contradicts it will carry little weight.