Breach of Trust — Ontario Employment Law
Related Keywords
About Breach of Trust
In Ontario employment law, every employment contract contains an implied duty of mutual trust, confidence, and good faith. When an employee acts in a way that fundamentally shatters this bond, employers will often allege a "breach of trust." This concept is frequently the underlying foundation for a termination for just cause. Unlike mere poor performance or a lack of skill, a breach of trust involves dishonesty, disloyalty, or deliberate misconduct that makes it impossible for the employer to continue relying on the employee.
Historically, any act of dishonesty was viewed as an automatic justification for termination. However, modern Ontario law applies the contextual approach established by the Supreme Court of Canada in McKinley v. BC Tel. Under this framework, courts will not automatically agree that any lie or minor theft destroys the employment relationship. Instead, they examine the core circumstances: the severity of the misconduct, the employee's role, their length of service, and whether the penalty of termination is proportionate to the offense.
Job titles hold significant weight in these assessments. Employees in managerial roles, fiduciaries, or those handling sensitive financial and proprietary data are held to a much higher standard of trust. Misconduct by a senior accountant or a director is far more likely to irreparably break the employment bond than a similar misstep by an entry-level worker.
It is also critical to distinguish between common law just cause and statutory entitlements. Under the Ontario Employment Standards Act, 2000 (ESA), an employer can only withhold minimum notice and severance pay if the breach of trust amounts to "wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned." This is a notoriously high standard. An employee might lose their common law right to reasonable notice because of a breach of trust, yet still be entitled to their baseline ESA severance if the act was impulsive or lacked deliberate intent. Because determining whether a bond has been irreparably shattered involves complex, fact-specific analysis, having an employment law practitioner evaluate the exact circumstances is the most reliable way to understand your legal standing.
Frequently Asked Questions
What kind of actions are considered a breach of trust in the workplace?
A breach of trust typically involves acts of outright dishonesty, such as theft, expense fraud, falsifying company records, secretly competing with the employer, or lying during an internal investigation. It encompasses behaviors that destroy the foundation of reliance between an employer and an employee.
Can I be fired for cause over a single lie?
Not necessarily. Ontario courts apply a contextual approach, meaning they look at the nature of the lie, your position, and whether it fundamentally destroyed the employment relationship. An intentional lie to cover up financial theft usually results in termination, whereas a minor panicked falsehood about being late might only warrant a warning.
If I am fired for a breach of trust, do I lose all my severance pay?
It depends on the severity of the conduct. While a serious breach of trust may eliminate your right to common law reasonable notice, stripping your minimum entitlements under the Employment Standards Act (ESA) requires the employer to prove deliberate "wilful misconduct." Many breach of trust allegations fail to meet this higher statutory threshold.
Does my job title matter when an employer alleges my trust has been broken?
Yes, your position is heavily scrutinized. Managers, supervisors, and those with access to corporate funds or confidential client data are subject to a much stricter standard of trust. Conduct that might be deemed a fixable mistake for a junior employee could be a fatal breach of trust for a senior executive.
What should I do if my employer accuses me of dishonesty during an investigation?
Proceed with extreme caution, as lying to a workplace investigator is often considered a worse breach of trust than the original alleged offense and is frequently used to justify termination. Before providing formal statements or participating in disciplinary meetings, taking the time to consult an employment lawyer can prevent you from inadvertently compromising your rights.
Common Scenarios
- An employee falsifies their health and dental receipts, submitting claims to the company's benefits provider for physiotherapy sessions they never actually attended.
- A certified automotive technician intentionally misrepresents to management and customers that critical safety components, like brake pads, were replaced when they were not, severely endangering the public and destroying the employer's reputation.
- A key sales employee secretly incorporates their own side business and actively solicits the employer's current clients and diverts contracts while still collecting their regular salary.
- During an internal review of a workplace accident, a warehouse supervisor lies about safety protocols being followed in order to protect their own job, severely compromising the integrity of the investigation.
What You Should Know
- Never attempt to cover up a mistake or lapse in judgment; Ontario adjudicators consistently rule that lying to an employer during an internal investigation irreparably fractures the trust relationship.
- Understand the difference between a genuine error (like sloppy math on a timesheet) and deliberate deceit; document your processes so that an honest mistake cannot be easily mischaracterized as theft or fraud.
- If you hold a senior or financial role, recognize that you are likely held to an elevated duty of good faith; exercise extreme caution regarding conflicts of interest or the use of company property.
- Do not assume a termination letter alleging "breach of trust" automatically voids your statutory termination pay. Challenging the employer's characterization of the event through legal channels can often secure your minimum statutory entitlements.
Featured Cases
T. v. D.
2025 ONSC 5104 (CanLII) · 2025-09-29Termination for Cause: Fraud and Fiduciary Breach
This case addresses whether an employee's termination for cause was justified following a fraudulent invoicing scheme and breach of fiduciary duties. The court applied the McKinley test to determine if the dishonest conduct warranted dismissal, ultimately upholding the termination as a proportionate response to the breach of trust.
S. v. C.J. and Beach Sales Ltd.
2018 ONSC 7216 (CanLII) · 2018-12-03Wrongful Dismissal: Just Cause for Spyware Installation
This wrongful dismissal case addressed whether the employer had just cause to terminate an employee accused of installing spyware on the employer's computer. The court applied the McKinley v. BC Tel framework to assess the misconduct within the context of the employment relationship and found the dismissal justified due to a breach of trust. Ancillary claims for inducing breach of contract and various torts were dismissed due to lack of evidence.
Northwestern Veterinary Professional Corporation v. B.
2018 ONSC 4624 (CanLII) · 2018-07-30Employee Misappropriation: Non-Dischargeable Debt in Bankruptcy
This case addresses whether a former employee breached fiduciary duties by misappropriating $37,643.99 in unauthorized refunds. The court established fiduciary liability and declared the resulting debt non-dischargeable in bankruptcy under s. 178(1)(d) of the Bankruptcy and Insolvency Act. Punitive damages were denied to avoid prejudice to potential criminal proceedings, but costs were awarded and also declared non-dischargeable.
Mi5 Print & Digital Communications Inc. v L.
2017 ONSC 3112 (CanLII) · 2017-05-23Fiduciary Duties: Key Employee Solicitation Injunction
This interlocutory proceeding addresses whether a key employee breached fiduciary duties by soliciting clients and diverting business while still employed. The court applied the RJR MacDonald test to determine if an injunction should be granted to restrain the defendant from competing with the employer.
C. v Quantum Automotive Group Inc.
2017 ONSC 1785 (CanLII) · 2017-04-06Dismissal for Cause: Automotive Technician Misrepresentation
This is a merits decision regarding a wrongful dismissal claim where an automotive technician alleged unjust termination. The court examined whether the employee's intentional misrepresentation of brake pad conditions constituted just cause for dismissal under common law and statutory standards. The court found the dismissal warranted due to the breach of trust and wilful misconduct, resulting in the plaintiff being disentitled to statutory termination and severance pay.
F. v. Peel Educational & Tutorial Services Limited (Mississauga Private School)
2016 ONCA 468 (CanLII) · 2016-06-14Appeal Allowed: Just Cause Found for Falsifying Grades
This is an appeal from a wrongful dismissal trial involving a teacher dismissed for falsifying student grades and lying to the employer. The trial judge originally awarded the employee one year's salary and disability benefits, finding no just cause. A majority of the Court of Appeal allowed the employer's appeal, applying the McKinley principles to conclude that the severe misconduct and breach of trust constituted just cause for dismissal without notice.
H. v. Northern Trust Company, Canada
2014 ONCA 719 (CanLII) · 2014-10-21Class Action: Limitation Periods in CCAA Trust Claims
This is an appeal from a motion judge's decision dismissing a proposed class action claim as statute-barred. The appellant argued that the limitation period began upon the release of the Monitor’s 51st report, while the court held it began in March 2010 based on the 39th report. The underlying dispute involves allegations of breach of trust and constructive fraud by Northern Trust Company in the context of Nortel’s CCAA proceedings and the Health and Welfare Trust.
M.C. v. Costco wholesale Canada Limited
2012 ONSC 5307 (CanLII) · 2012-10-01Termination for Cause: Falsification of Benefits Claims
This is a merits decision regarding a wrongful dismissal claim where the employer terminated a managerial employee for cause due to the falsification of medical benefits claims and providing false information during an investigation. The court applied the McKinley test to determine if the conduct undermined the essential trust in the employment relationship, finding that just cause for termination was established. The plaintiff's additional claims for human rights damages and bad faith related to a workplace injury were dismissed due to lack of evidence.
C. v. Cornerstone Properties Inc.
2008 CanLII 66139 (ON SC) · 2008-12-15Constructive Dismissal: Secret Surveillance Leads to Damages Award
A constructive dismissal case where the employer installed a secret camera in the plaintiff’s office without her knowledge, leading to a finding of a poisoned workplace environment. The court awarded the plaintiff seven months’ notice period in damages, and determined that she fulfilled her duty to mitigate by seeking alternative employment without returning to the hostile work environment.
B. v. Hudson's Bay Company
2008 ONCA 394 (CanLII) · 2008-05-20B. v. Hudson's Bay Company - Pension Surplus
This was an appeal to the Court of Appeal from a trial decision regarding pension plan surplus and expenses. The plaintiffs were representative transferred employees who alleged the employer committed a breach of trust by transferring pension assets without an actuarial surplus when selling a business division, and improperly paid pension plan expenses from the fund. The trial judge found a breach of trust regarding the surplus transfer but allowed the payment of plan expenses. The Court of Appeal allowed the employer's appeal and dismissed the plaintiffs' cross-appeal, finding that the plan members had no entitlement to the surplus under the plan text and the trust agreements, and that the employer was permitted to pay expenses from the fund.
Bell v. Computer Sciences Corporation
2007 ONCA 466 (CanLII) · 2007-06-26Wrongful Dismissal Appeal: Dishonesty Upheld Under McKinley Test
This is an appeal from a wrongful dismissal action where the appellant was terminated for dishonesty and collusion with a subordinate. The Court of Appeal upheld the termination, applying the McKinley proportionality test and deferring to the trial judge's findings that the misconduct justified dismissal despite procedural irregularities and the employer's failure to follow internal policies.
P. v. Bank of Canada
2007 ONCA 234 (CanLII) · 2007-03-30Pension Plan Breach of Trust: Class Action Strike
This is a procedural ruling on a motion to strike in a proposed class action concerning an employee pension plan. The plaintiffs alleged breach of contract and breach of trust by the Bank of Canada for extracting funds from the plan to cover administrative costs. The court determined that direct distribution of funds to class members was an unsustainable remedy, as restitution to the pension plan was the appropriate remedy to restore beneficiaries to their original position.
A. v. Longo Brothers Fruit Markets Inc.
2006 CanLII 16843 (ON SC) · 2006-05-23Wrongful Dismissal: Termination for Cause and Fiduciary Breach in Retail
A wrongful dismissal case involving an employee dismissed for unauthorized removal of store products and failure to follow store closing protocols. The court examined whether the employer's termination for cause was justified under its zero-tolerance honesty policy and whether the investigation met reasonable standards, applying the McKinley v. B.C. Tel framework.
B. v. Hudson's Bay Company
2005 CanLII 47086 (ON SC) · 2005-12-16Pension Surplus: Breach of Trust in Transfer
This case addresses whether an employer breached its fiduciary and trust obligations by failing to transfer a proportional share of pension surplus to a new plan upon the transfer of employees. The court found a breach of trust and ordered a restitutionary remedy to reflect the reasonable expectations of the transferred employees, while also validating certain administrative deductions permitted by plan amendments. The case later reached the Supreme Court of Canada (B. v. Hudson's Bay Co., 2010 SCC 34). The Supreme Court affirmed the Court of Appeal's decision, finding that the Hudson's Bay Company was not obligated to transfer a portion of the pension plan's actuarial surplus to the transferred employees, and that it properly charged plan administration expenses to the pension fund. The transferred employees' rights were limited to their defined benefits, which were adequately protected in the transfer to the new employer's pension plan.
P. v. BMO Nesbitt Burns Inc.
2005 CanLII 18720 (ON SC) · 2005-06-01Wrongful Dismissal: Investment Advisor Dismissed for Unauthorized Trading and Dishonesty
A wrongful dismissal case involving an investment advisor dismissed for unauthorized discretionary trading, dishonesty, and fabrication of evidence. The court assessed whether the dismissal for cause was justified under the McKinley v. BC Tel framework and examined the applicability of a repayment clause in the employment contract, as well as the employer's right to indemnification for damages caused by the employee's misconduct.
N. v. Canadian Imperial Bank of Commerce
2003 CanLII 21054 (ON SC) · 2003-10-09Wrongful Dismissal: Cause Upheld for 22-Year Employee
A wrongful dismissal case involving an employee with 22 years of service who was dismissed for facilitating improper transactions involving a common-law partner and nephew. The court determined that the conduct justified dismissal for cause. All claims, including those for mental distress and punitive damages, were dismissed, with 18 months’ notice assessed only in the alternative.
T. v. Boise Cascade Canada Ltd.
1994 CanLII 7385 (ON SC) · 1994-06-03Wrongful Dismissal: Employee Accused of Falsifying Expense Reports
A wrongful dismissal case involving an employee accused of falsifying expense reports and breaching the implied duty of honesty in the employer-employee relationship. The court examined whether the employee's actions constituted just cause for termination, the adequacy of the employer's process in addressing discrepancies, and the application of Bardal factors to determine reasonable notice periods if just cause was not established.