Is Home Where the Work Is? Depends On Where Home Is: Ernst v Destiny Software Productions

With the advent of social media and technology in the professional world, workplaces have become far more flexible in terms of the physical location of the actual work done by employees. In Canada, the terms “work from home” and “telework” are often used interchangeably to reflect arrangements where an employee can set up and use his or her home as an office. The pros and cons of such agreements are fairly obvious – on the one hand, the employer can save investment on office space, paying for the employee’s commuting expenses, while ensuring predictable working hours, and maximization of productivity. On the other, accountability is a definite concern, especially since the employer cannot keep close tabs on the employee’s performance, though this issue can be circumvented through means such as the regular submission of duties and tasks performed. Even so, there are certain jobs that are simply not conducive to the work-from-home approach, especially those that involve high-level managerial duties; the expectation is that the executive, by virtue of the involvement needed in the company and because of the nature of the work that he or she performs, will conduct his or her duties in a transparent manner. Basic principles of business association have taught us this in law school.

Obviously then, when an employee abuses his work-from-home privileges, especially by not informing his employers that he has moved houses, and even countries, the issue of how and where the limits of “home” within the employment aspect can be placed must be drawn. This is what the British Columbia Supreme Court (“BCSC”) grappled with in the recent case of Ernst v Destiny Software Productions, 2012 BCSC 542 [Ernst]. Here, the appellant, Dean Ernst, decided to move from Calgary, Alberta to Cabo, Mexico, without informing his employer of the decision, and with the expectation that he could continue to work from home as per his initial contractual arrangement. Ernst’s expectation that the legal definition of “home” within the teleworking context could be stretched to include anywhere in the world where his “home” was situated was not accepted by the BCSC. While the court addressed the issue in the context of Ernst’s termination, and concluded that he was not wrongfully dismissed by Destiny Software for moving to Mexico, the decision has also set a precedent to allow employers so state specifics in teleworking employment contracts about the acceptability of such arrangements.

Facts

The detailed outlining of the facts by the BCSC involved the issues of Ernst’s employment with Destiny Software Productions, as its head of marketing, from March 2007 to November 2008. Ernst was the highest paid executive at the company during this time, and his involvement with one of the company’s most important products, the “MPE system” as well as the contacts he had made from years of working in the entertainment and software industries were the primary reasons why he was valued so highly by Destiny. However, as time went by, it became apparent that Ernst was misusing his entitlement to sick leave, as he took more time off than all of the other employees combined. While his reasons for doing so were of a personal nature, and included, among other things, the death of a family member, and the sickness and recovery of his mother, the BCSC was quick to point out that Ernst’s stories were inconsistent at the time of trial from when he initially gave his statement. The court also concluded that Ernst’s attempts to get his vacation leave approved by different executives of the company when one executive was giving him trouble for the approval, as well as his lack of willingness to share knowledge on his personal “troubles,” except when it was to his benefit, affected his credibility as a witness. As such, the Court preferred to go ahead with the evidence presented by Destiny, instead of Ernst.

Initially, Ernst was hired to work for the Vancouver-based Destiny from his home in Calgary, with the understanding that this was a temporary measure, until further terms of Ernst’s move to Vancouver could be discussed. This move never happened, because Ernst’s mother’s sickness and recovery were cited as the main reasons for Ernst not wanting to make the move to Vancouver. In the next year, however, Ernst took considerable liberties with his vacation entitlement, by taking time off to go to Cabo with his family, even as he misrepresented his exact whereabouts to his employers. The BCSC did not take this matter lightly, stating that Ernst had “demonstrated a fundamental misunderstanding of his obligations to his employer” (para  56). This point is especially important since Ernst’s case was based primarily on a plea of wrongful dismissal, and the BCSC pointed to the wrongs being on Ernst’s part, not on Destiny’s.

The final straw was in August 2008, when Ernst informed his boss at Destiny that he was moving to Mexico and that this decision had already been made, without seeking Destiny’s permission. During one of his vacations, Ernst had moved his entire family, lock, stock and barrel, to a house he owned in Mexico, and had set up telephone and internet lines there. Ernst was confident that he would be able to continue his duties in Mexico as per usual, since it was based on the understanding that he was still working from “home.” Even though the physical location of his home had changed, its legal nature, as far as working was concerned, had not. Ernst’s belief about this matter was reflected in an email exchange with his boss, who had asked for a revised proposal of Ernst’s duties in Mexico to present to Destiny’s board of directors. To this, Ernst had replied with the following: “There is no proposal to present.  I will do the same, as it has been outlined in my agreement.  Nothing  changes.  Writing something that where you want me to change my role or compensation is not something I [am] willing to do.  My responsibilities continue to the staff the same as they have been and outlined in my agreement” (para 94).

Further issues that Destiny faced had to do with the legality of Ernst’s working from Mexico, tax issues with having to pay an employee working from there, and whether Ernst’s visa let him work from Mexico in the first place. After concluding that this was all too much of a hassle, and given Ernst’s lack of consideration and honesty, Destiny finally terminated Ernst’s employment on November 28, 2008, without notice. Destiny also held back Ernst’s last month’s salary, which he later claimed in damages.

Issues and Analysis

Setting out the test for just cause termination of employment, the court deemed the employee being guilty of “willful disobedience to the employer’s orders in a matter of substance” to the extent that his or her dishonesty led to the breakdown of the employee relationship (paras 119-120). While this burden was placed on the employer, the court concluded that Ernst’s unilateral decision to move to Mexico, and his lack of honesty while requesting and using his vacation leave put his character in question, which ultimately led to a breach of the trust that was placed in him by Destiny. Additionally, the fact that Ernst had repeatedly tried to get his vacation approved by different people almost every time signaled to the court that he was attempting to circumvent the authority of his immediate boss, while also trying to avoid full disclosure to his boss. These activities, coupled with his contradictory evidence, and lack of credibility also led to the court’s conclusion that Ernst was not dismissed wrongfully, given the circumstances and the facts of the case. Even as it insisted that the test was being objectively, the court did not seem to have any problem finding Ernst’s conduct as unreasonable, and something quite far beyond that expected of a reasonable employee in the circumstances. Needless to say, Ernst’s blatant exploitation of his privileges, while almost comical at times, did seem to be a one-off instance in the teleworking industry in Canada.

Further, the BCSC did not accept Ernst’s argument that because the employment contract allowed him to work from home, the definition of home was to include wherever Ernst found fit. In the court’s words, the employment contract “[S]ays that ‘home’ must be interpreted to mean Mr. Ernst’s home at the time the Contract was made, and not wherever in the world Mr. Ernst might later choose to have a home.  Implicit in this argument is the proposition that Destiny, as the employer, has the right to determine the location where the employee will carry out his work for the company” (para 128).

The court then, placed a very strong emphasis on the interpretation of the contract, as well as the allocation of power in an employee-employer relationship. It was adamant in establishing that the one calling the shots was the Destiny, the employer, and not Ernst, the employee. In doing so, it seems to have recognized that teleworking arrangements have the potential to be abused by employees. The very fact that the employee is “out of sight” means an automatic loss of some degree of control over the work performed by the employee. While this may not necessarily be a bad thing always – after all, no one wants their employer breathing down their necks constantly – the court seems intent on righting the perceived imbalance created through teleworking, by giving the control of the working relationship back to the employer. Whether this means that employers will actually start enforcing stricter work-from-home policies in general remains to be seen however.