Howard Levitt: ArriveCan imbroglio a reminder of duty owed to employers

Howard Levitt: ArriveCan imbroglio a reminder of duty owed to employers

Two public servants fired for making money on the side from government contracts

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Two public servants in the Office of the Auditor General of Canada were just fired for making money on the side from government contracts.

Separately, David Yeo, the president and founder of a company called Dalian Enterprises, testified in October in the House of Commons on his company’s behalf while employed as a civil servant at the Department of National Defence. Dalian has received over $200 million in government contracts, including one for the troubled ArriveCan app, but has said work was completed before Yeo went to work for the government. Yeo has been suspended, pending an investigation.

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In other recent ArriveCan news, GC Strategies, the recipient of the contract to create the ArriveCan app was found to have wined and dined civil servants. GC has been awarded 129 contracts worth $239 million, 28 of those awarded without any competition. It is alleged that it performed little work for its government money.

The auditor general, Karen Hogan, expressed puzzlement at how this small consulting firm, with no demonstrated competence or expertise in the area was awarded the contract to create the ArriveCan app. As opposition leader Pierre Polievre put it, how did this company with four employees working out of the basement of a cottage which admits it does not do IT, get $250 million in IT contracts?

All of this news has put Canadians and our federal government into a tizzy.

What is the appurtenant law?

Every employee owes an obligation of fidelity or faithfulness to their employers, a duty to place its interest first, ahead of their own.

Doing otherwise is a conflict of interest which is presumptively cause for discharge. An employee cannot make undisclosed money on the side from their employer, say, through a consulting contract through a company which they have an interest in and to do so is similarly cause for dismissal without severance.

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If employees are going to, through a company or consulting firm, bid on contracts with their employers, they cannot do so without fully revealing their involvement and economic interest. Companies would invariably refuse to enter into such a contracts if they were disclosed since, among other things, they are entitled to their employees’ full-time devotion. Employees cannot be in positions where they can be motivated to direct their employer’s business in a manner from which they personally benefit.

For the same reasons, employees cannot use inside corporate information to personally profit.

What about the government employees who were wined and dined without their employer’s knowledge? Most employers do not permit employees to accept gifts from a supplier and make it cause for discharge if they do, in order that decisions as to what suppliers to purchase from will not be influenced by any potential bribe or even personal friendship. For that reason, an employee in a position to purchase supplies or award contracts, must disclose any personal relationships with or gifts received from that supplier or contractor.

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Even if there is not such a written policy, an employee in a position to award or influence the awarding of contracts has a duty to their employer to inform it if they are receiving gifts or benefits from any supplier or has any relationship with it. Failure to do so is cause for discharge.

What about a company that is awarded a contract as result of improper influence or a bribe? That contract can be set aside for fraud, and if the parliamentary investigation finds that that is what occurred with GC Strategies the government should sue, at least for the amount of the monies paid above the fair market value of the work performed.

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What is true in government is true in employment generally. The question now is whether, after making the appropriate findings, government will fire employees, or sue to recover the amount of awarded contracts in the same way one would expect in private industry.

Howard Levitt is senior partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practices employment law in eight provinces. He is the author of six books including the Law of Dismissal in Canada.

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