Can an employer sue their employee for compensation if they made an error on the job?

In many respects, an employment contract is a contract like any other. However, in the employment context, there are other legal considerations, principles and legislation that impact the contractual relationship between an employer and employee.

For example, in a non-employment contract, if one party does something to breach the contract, the other party will likely be able to sue them for damages arising from the breach of contract. Based on this, it would seem logical to think that because an employment contract is a contract like any other, an employer can sue an employee if the employee does something to breach the contract and cause financial loss for the employer.

You may be surprised to learn that this is not necessarily the case with employment contracts. In fact, if you are an employer, you may be surprised to learn that the ability to sue an employee who does something to cause financial loss is quite rare.

There are cases in BC and other provinces across Canada where courts have considered the issue of an employer suing an employee for negligent errors made while working, for example. One of the principles that we can take from many of these cases is that mere error, incompetence or negligence on the part of the employee is not normally enough to entitle an employer to claim compensation from the employee.

There is a suggestion in some cases that an employee may be liable to compensate an employer in situations where there is willful misconduct. Generally speaking, however, the law suggests that there needs to be what is called a ‘fundamental breach’ by the employee before they will become liable to an employer.

So what is a ‘fundamental breach? The crux of this principle is that the employee must do something (or fail to do something) that is so fundamental and critical to the work the employee does for the employer that doing the particular action (or failing to do a particular action) deprives the employer of the whole benefit of the employment relationship that was intended with that employee.

In short, the action or inaction is so critically important to the employment relationship that the failure by the employee leads to a complete breakdown of the relationship. As you might expect, this is a high threshold, and this is why it is rare for an employer to successfully sue an employee.

If employees make errors, employers may still have recourse to other means of holding the employee accountable, including discipline and potential termination of employment. These issues can often be complex and legal advice should be sought when dealing, either as an employer or employee, with these types of circumstances.

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Greg Pratch is a lawyer and partner with Pushor Mitchell LLP. He practices in civil litigation with a particular focus of personal injury matters and employment law. In his personal injury practice, he has helped individuals injured in both BC and Alberta recover compensation for all types of injuries including whiplash, soft tissue injuries, chronic pain, broken bones, spinal injuries and brain injuries. In his employment law practice, Greg advises both employers and employees on all matters relating to employment, including wrongful dismissal, human rights issues and employment standards legislation. Greg also advises clients on general commercial disputes and tax disputes with the Canada Revenue Agency. Be sure to connect with Greg Pratch on Twitter @OkanaganLawyer.