One of the least understood mechanisms of Li-ion batteries is the development of internal short circuits under mechanical loads. In this study, a micro mechanical model is developed and subjected to various loading scenarios to understand the sequence of failure in the multi-layer, multi-material structure of a Li-ion battery jellyroll. The constitutive response of each component of the electrode stack is obtained by comprehensive experimental tests using uniaxial and biaxial tensile and compressive loads. The homogenized response of the model is recovered through the computational homogenization theory. The model is validated by comparing the results of a macroscale simulation against experimental data. The study focuses next on the development of a failure criterion for the electrode stack based on the microstructural observations. Results show distinct failure mechanisms when the loading is predominantly tensile versus when it is compressive or combined tensile/compressive. A failure locus is plotted from the results of the simulations as a criterion to detect the onset of short circuit under complex multi-axial loading scenarios.