Impact of Workplace Investigation on Wrongful Dismissal Claim

When dealing with wrongful dismissal claims, the typical issue is an employer who terminates an employee’s job without cause and fails to provide them with an appropriate severance package. However, a common issue resulting in a wrongful dismissal claim or an employee negotiating a severance package involves an employer who terminates an employee’s job arguing just cause for termination. In these cases, an employer is legally required to justify their decision was valid and warranted since it would deprive an employee from receiving a severance package, such as by conducting a workplace investigation in situations where the employer’s claim for just cause was an employee committing workplace harassment or some other form of misconduct.

In Ontario, employers are legally required to conduct workplace investigations in many circumstances, especially involving allegations of workplace harassment under the Occupational Health and Safety Act. In other circumstances it is a best practice for an employer to investigate, like in Rutledge, where suspected misconduct arises that may result in discipline or termination.

Where done correctly, workplace investigations can help employers uncover all of the details required about an employee’s misconduct or failure to follow workplace policies to respond with appropriate action in response. When done improperly, it can lead to significant awards against an employee. A recent decision of the Ontario Superior Court of Justice serves as a cautionary tale for employers on the importance of conducting a proper and fair workplace investigation.

Rutledge v Markhaven Inc.

In Rutledge v Markhaven Inc., 2022 ONSC 3183, the court awarded a terminated employee $50,000 in bad faith and moral damages in part due to an employer’s improper workplace investigation. The employer started a workplace investigation after it received allegations that the wrongfully dismissed employee, a 43-year-old Executive Director who had worked for the employee for 21 years, was alleged to have been in a workplace relationship with another employee. Specifically, the employer argued that the employee was in a potential conflict of interest given that she was the highest-ranking employee, a member of senior management and had authority over all employees and contractors of the facility.

At some point during her employment, the employee began a romantic relationship with another colleague, and she disclosed their relationship to Human Resources. A key issue was the timing of the relationship, as the employer alleged that the employee used her management position to promote the colleague with whom she was in a romantic relationship. At some point, the company’s Board of Directors received three complaints about the relationship (most of which were anonymous complainants regarding the promotion and relationship). As a result, the employer commenced a workplace investigation into these allegations.

At trial, the court took issue with several aspects of the workplace investigation that resulted in an award of $50,000 against the company for acting in bad faith and fair dealing based on the following:

The Employer made False Representations about the Investigation Process

At the beginning of the workplace investigation, the company’s board advised the employee that the investigation would be conducted by an independent third party, but it was actually conducted by a business associated with the company’s legal counsel. Further, the workplace investigation was undertaken surreptitiously before the employee was told that the investigation would be taking place, and the investigator secured information from her without her prior knowledge by accessing and analyzing her email account weeks before.

The Board requested that Ms. Rutledge keep the investigation process confidential. Ms. Rutledge subsequently ended her romantic relationship with Mr. Sathyaseelan because she believed she was restricted from discussing the investigation with him.

The Workplace Investigation was not Confidential

Despite understanding the need to ensure confidentiality, the court found that the investigation was not conducted in a confidential manner. For example, the investigators arranged to interview the employee and another witness in an open and public seating area at a nearby Tim Hortons shop, which was frequented by many other employees (including near the main entrance).

The Scope of the Investigation was Expanded to Irrelevant Matters

The employer’s original stated scope of the investigation was to inquire into the employee’s romantic relationship. In particular, the focus was on whether the romantic relationship between her and the co-worker influenced his promotion, and her conduct after he was promoted.

However, well into the investigation process, the company expanded the investigation beyond the originally stated mandate. The investigation shifted to review how the she was performing as a manager and whether she was being honest given her fiduciary relationship with the company. Both the employee and the company’s Director of Human Resources expressed concern to the Board regarding the expanded scope of investigation.

In holding that there was no just cause for the employee’s wrongful dismissal, the court also noted that the employer failed to produce portions of the investigation file to support its termination decision under the guise of solicitor-client privilege. The court found in this context that the Board had not acted reasonably in assessing the wrongfully terminated employee’s conduct and whether it amounted to just cause.

The Wrongfully Dismissed Employee was subject to Coercion and Intimidation

The employee was interviewed and asked to answer questions about the nature of her relationship with the colleague prior to his promotion. She denied any romantic relationship prior to his appointment. However, the court found that efforts were made to coerce or intimidate her to change her answers. Specifically, during ensuing litigation, the employee walked into an examination for discovery where she was comforted with photographs of her home, and comments by the company’s lawyer regarding a pending motion for “security for costs”, which was never brought.

The Board subsequently suspended her without pay. The court took issue with this action because the Board failed to assess her interview responses and make an informed decision based on the information disclosed.

The employee eventually applied and was approved for long term disability benefits due the stress she endured throughout the course of the investigation.

Conclusion

As a result of the company’s conduct, the court concluded that employee suffered damages resulting from her wrongful dismissal. The actions taken by the employer during wrongful dismissal claim litigation and the workplace investigation was found to be bad faith conduct. The Court also accepted that the employee suffered damages beyond the ordinary psychological damage resulting from the company’s conduct in the dismissal. As a result, the Court awarded her $50,000 for bad faith and moral damages.

As the Rutledge decision shows, a workplace investigation must done in a manner that provides ensures full confidentiality and procedural fairness to all parties, including the complainant and perpetrator. Some of the primary considerations should always be:

the workplace investigator being neutral, impartial or independent. Otherwise, as in the Rutledge case, a perceived lack of fairness in the workplace investigation will be used by a court to determine there was no just cause for dismissal
the investigator must not have an actual or perceived conflict of interest or bias towards any of the parties, including the employer, complainant, perpetrator or witness. Where an investigator is seen as biased, the integrity of the investigation, and any outcome of that investigation may be seriously compromised

In this case, the procedural flaws of Markhaven’s investigation contributed to two negative findings against it. First, the lack of apparent fairness in the investigation process was a factor in the Court’s decision that just cause did not exist for Ms. Rutledge’s dismissal. Second, the flawed process also led to the Court awarding bad faith and moral damages of $50,000 in addition to Ms. Rutledge’s termination notice entitlements.

If you are an employee who believes you were wrongfully dismissed from your employment without a fair severance package, or believe you need an Ontario wrongful dismissal lawyer or a constructive dismissal lawyer to help negotiate a severance package, please call today to discuss your options and next steps on how to deal with a wrongful dismissal. As an employment law firm in Toronto, Bune Law has reviewed and negotiated improvements to many severance packages. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.

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