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Investigate or Litigate: Flawed Workplace Harassment Investigations Spell Liability for Employers
(the abbreviated version of this article originally appeared in the The Employment Bulletin, January 2012)
A thorough and impartial response to allegations of harassment can often pay dividends when an employer is required to address the legitimacy of its decision to terminate or preserve an employment relationship. However, when an employer approaches issues of harassment in a haphazard manner, without the machinery of an adequate investigation, liability for damages can arise. With recent amendments to occupational health and safety legislation requiring mandatory workplace anti-harassment policies and extraordinary remedies under the common law on the rise, employers have begun to reconsider the manner in which they address allegations of harassment, and conduct investigations.
In the 2008 case of Correia v. Canac Kitchens (2008), 294 D.L.R. (4th) 525, 67 C.C.E.L. (3d) 1, 2009 C.L.L.C. 210-001, 91 O.R. (3d) 353, 240 O.A.C. 153, 58 C.C.L.T. (3d) 29, [2008] O.J. No. 2497, 2008 ONCA 506, 24 D.E.L.D. 116, 167 A.C.W.S. (3d) 422 (Ont. C.A.), the Ontario Court of Appeal endorsed the tort of negligent investigation to enable employees to sue third party private investigators hired by their employers to conduct workplace investigations. The court, however, was reluctant to extend the reach of this tort to allow employees to sue employers themselves. This was consistent with the fact that traditional employment relationships governed by contract do not require an employer to conduct a hearing or investigation before terminating an employee. Furthermore, courts have equally made clear that the finding of a flawed investigation itself will not always render an employer’s decision to terminate an employee for just cause invalid. Despite this, in light of recent decisions evolving, employers need to be cognizant of their potential liability for extraordinary damages, including moral and punitive damages, that may result from a flawed workplace harassment investigation.
Investigations can become problematic when the investigator is inexperienced or biased, or when they are utilized by employers to support a decision to terminate an employment relationship for cause where none actually existed, a scenario recently revisited in the 2011 Alberta Court of Appeal case of Elgert v. Home Hardware Stores Ltd. (2011), 336 D.L.R. (4th) 313, 2011 ABCA 112, 25 D.E.L.D. 129, 204 A.C.W.S. (3d) 813, 201 A.C.W.S. (3d) 441, leave to appeal to S.C.C. refused 337 D.L.R. (4th) iv. Problems can also arise when employers fail to properly investigate allegations of harassment, prompting a claim of constructive dismissal or reprisal by the victim, a subject more recently canvassed in the Ontario Superior Court of Justice’s 2010 decision in Disotell v. Kraft Canada Inc. (2010), 86 C.C.E.L. (3d) 236, 2011 C.L.L.C. 210-008, 2010 ONSC 3793, 191 A.C.W.S. (3d) 842, and the Ontario Human Rights Tribunal’s 2010 decision in Chuvalo v. Toronto Police Services Board, 2010 HRTO 2037.
In Elgert v. Home Hardware Stores Ltd., supra, Peter Elgert commenced legal action against his employer for wrongful dismissal, as well as moral and punitive damages due to the termination of his employment for cause, subsequent to a workplace harassment investigation. At trial, the jury awarded 24 months’ pay in lieu of notice, $200,000 in aggravated damages and $300,000 in punitive damages for this 17 year employee. It did so given that it ultimately found that no acts of sexual harassment were committed by Mr. Elgert and that Home Hardware had conducted the investigation in bad faith.
In that regard, the jury found that the investigator had absolutely no experience in conducting sexual harassment investigations and was a friend of the female complainant’s father. The jury also determined that, for some time, Mr. Elgert was offered no particulars of his investigation. It found that no witness statements had been reduced to writing, and that the investigator had made comments that committed himself to the plaintiff’s guilt. He had also ignored a petition supporting the plaintiff’s innocence. The lack of neutrality in the investigation as evidenced by the involvement of the complainant’s father, and his friend, as well as the lack of consideration of ulterior motives, marred this investigation from the outset.
In its review of the trial decision, the Alberta Court of Appeal stated [at para. 87], that “there was sufficient evidence to permit a jury to conclude the manner of dismissal was unfair, in bad faith, misleading and unduly insensitive”. However, the court set aside the aggravated/moral damage award, as it concluded that there was no actual proof of damages flowing from the employers conduct in the manner of Mr. Elgert’s dismissal. It also reduced the punitive damage award from $300,000 to $75,000. In justifying the reduction the court noted that the highest recent punitive damage award for wrongful dismissal was $100,000, with other more modest awards of $15,000 and $25,000 for aggravated and punitive damages combined.
While the reduced damage awards may be a partial victory for employers, there are several principles both employees and employers need to take from this case. If an employee is going to make a claim for moral damages, it “must be grounded in proof of actual damages resulting from the unfair or bad faith conduct in the manner of dismissal” [at para. 75]. Therefore, employees may need to produce a body of evidence in order to be awarded moral damages. However, in the Alberta Court of Queen’s Bench 2011 decision in Williams v. TWU (2011), 90 C.C.E.L. (3d) 250, 44 Alta. L.R. (5th) 130, 201 A.C.W.S. (3d) 968, 2011 ABQB 314, the court stated that a lack of medical evidence is not necessarily determinative of a moral damages award. In fact, in the pinnacle case of Keays v. Honda Canada Inc. (2008), 294 D.L.R. (4th) 577, [2008] 2 S.C.R. 362, 66 C.C.E.L. (3d) 159, 63 C.H.R.R. D/247, 2008 C.L.L.C. 230-025, 92 O.R. (3d) 479n, 239 O.A.C. 299, 2008 CarswellOnt 3743, [2008] S.C.J. No. 40, 2008 SCC 39, 376 N.R. 196, 23 D.E.L.D. 122, 166 A.C.W.S. (3d) 685 (S.C.C.), there was no specific statement that medical evidence was required to support such a claim. Although more courts and tribunals suggest medical evidence of actual damages flowing from the manner of dismissal is not necessary, the Alberta Court of Appeal tells us there must still be more than a “scintilla of evidence” [at para. 84]. What that evidence is though, we do not know.
The Court of Appeal also strives to reiterate that the finding of a flawed investigation is not determinative of an employer’s liability, given its statement that an employer “cannot be faulted for honestly believing an allegation of sexual harassment (or any other wrongdoing) and should not be punished simply because an investigation was clumsy” [at para. 88]. The court does not provide an exhaustive criterion for a competent investigation, positing that there is no specific standard of investigation, and what is required, will vary depending on the facts. Nevertheless, the manner in which an employer reacts to an allegation of harassment is subject to “judicial scrutiny” when an investigation is fundamentally flawed and involves malicious, vindictive or outrageous behaviour by the employer [at para. 89].
Although the Court of Appeal maintained a portion of the damage award in its decision, it was reluctant to set the standard of competency too high, so as to avoid a chilling effect on the response of employers to allegations of harassment. If an employer has a reasonable basis on which to premise its belief that it may dismiss an employee for cause, “the employer ‘has the right to take that position without fear that failure to succeed on that point will automatically expose it to a finding of bad faith’” [at para. 77]. However, when bad faith rears its head as a result of a poor and biased investigation, as in this case, the possibility of a wrongful dismissal and a finding of moral and punitive damages is clearly ever present.
In Amaral (Litigation Guardian of) v. Canadian Musical Reproduction Rights Agency Ltd. (2009), 73 C.C.E.L. (3d) 1, 2009 C.L.L.C. 10-028, 67 C.C.L.T. (3d) 12, 2009 ONCA 399, 24 D.E.L.D. 107, 177 A.C.W.S. (3d) 1126 (Ont. C.A.), the Ontario Court of Appeal confirmed that an employer also owes a duty to its employees to ensure that its workplace is conducive to the well-being of its employees. The conducting of timely, impartial and competent investigations is a requirement of that duty in situations where an employer and its management are made aware of alleged harassment. To do otherwise, may run the risk of a finding of constructive dismissal (see Sheppard v. Sobeys Inc. (1997), 149 Nfld. & P.E.I.R. 328, 11 D.E.L.D. 169, 70 A.C.W.S. (3d) 1014 (Nfld. C.A.), at para. 25).
In Disotell v. Kraft Canada Inc., supra, Douglas Disotell alleged that he was the victim of harassment in the workplace and suffered a constructive dismissal as a result of the employer’s neglect of his situation. In 2006, Mr. Disotell went on short-term disability as a result of the harassment he suffered. He argued that he had been subjected to ongoing and repetitive harassment, which had created a poisoned work environment, and that by allowing it to continue to exist the employer had repudiated a fundamental term of his employment contract, to provide a work environment free of harassment. Ultimately, the court found Mr. Disotell had been constructively dismissed on the basis that the conduct was in direct contravention of the employer’s distributed, written zero-tolerance policy, prohibiting harassment. His supervisor had failed to act on several complaints of harassment, and misrepresented the gravity of the allegations. Furthermore, the employer conducted some very limited investigation of the plaintiff’s complaints of harassment, which did not include any of the four co-workers that the plaintiff had identified as the perpetrators. After 16 years of employment, the plaintiff was unable to return to work. However, the plaintiff was only awarded reasonable notice, which amounted to $34,034. There were no extraordinary damage awards in this case, as the Ontario Superior Court did not find elements of bad faith, apparent in the Elgert case. In Disotell, while the investigation was flawed, the employer was found to have honestly attempted to resolve an unsavoury situation. If an employer wishes to minimize its potential liability, it should attempt to conduct an investigation in good faith and with honest intentions.
With provincial legislation requiring formal anti-harassment policies, employers will be hard pressed not to incur difficulties in defending against claims of constructive dismissal if they fail to adequately investigate well-grounded allegations or fail to adhere to their own formal procedures. This pre-Bill 168 decision suggests that employers will need to rely on the proactive reporting of their supervisors in order to ensure the workplace is conducive to ongoing employment and avoid liability. As appellate courts across this country have maintained, an employer’s failure to prevent the harassment by co-employees is a breach of its duty to ensure the well-being of its employees.
In the human rights context, the 2010 decision in Chuvalo v. Toronto Police Services Board, supra, highlights the potential liability of employers for a flawed investigation under provincial human rights legislation. On September 24, 2007, Ivania Chuvalo, a Toronto police officer, filed an internal harassment complaint with the Toronto Police Services Board against one of her supervisors for sexually suggestive remarks. The detective assigned to head the harassment investigation had never dealt with an allegation of sexual harassment and lacked any special training. The investigator dismissed the complaint on the basis that there was no evidence to support the allegations, finding that the complainant was the one who behaved in “a most unprofessional manner”, despite witnesses reporting her supervisor had used degrading language. On June 10, 2008, Ms. Chuvalo’s probationary employment was terminated by the Staff Inspector on the basis of her alleged “ongoing attitudinal, conduct and performance issues, resulting in unprofessional, disrespectful and insubordinate conduct in interactions with her supervisor” [at para. 103].
Ultimately, the Ontario Human Rights Tribunal found that Ms. Chuvalo was subjected to harassment, a sexual advance and reprisal during her employment. The Tribunal specifically criticised the investigation and its conclusions. The Tribunal concluded that the investigator’s requirement for independent evidence in order to substantiate Ms. Chuvalo’s allegation was held to ignore the fact that many allegations of the discrimination and harassment had occurred in private and, often, there is no evidence independent of the two parties to the incident. Not only did the Tribunal find that the investigator committed an error by concluding Ms. Chuvalo did not substantiate her claim, but it also held that the faulty conclusions he reached formed the basis for the recommendation that her employment be terminated. The Tribunal awarded $20,000 for injury to her dignity as a result of the harassment and emotional damage resulting from the flawed investigation. The Tribunal also ordered the Police Services Board to retain a human rights expert to provide training with respect to investigating such complaints in the future.
These recent decisions illustrate that if an employer is to commence a workplace harassment investigation, it is imperative to consider the significance of maintaining impartiality, providing full disclosure, and allowing the accused and all witnesses an opportunity to be heard. While there is no catalogue of requirements for an adequate investigation, there are key considerations to which both the courts and tribunals have alluded to. In that regard such considerations include but are not limited to the following:
• notifying both employees of the complaint;
• conducting a timely investigation;
• providing a copy of the anti-harassment policy;
• providing adequate time for the accused to assess his or her position;
• providing an opportunity to respond;
• reducing all aspects of the investigation to writing; and
• utilizing an impartial third party investigator.
With the scope of human rights and anti-harassment legislation broadening, an employer’s duty to those under its employ grows ever more complex. While the duty to provide a fair hearing does not exist within the common law employment context, the potential for damages arising from an employer’s failure to address it properly does. The very nature of allegations surrounding the issue of harassment should compel employers to exercise a degree of care in addressing them, always striving to balance the rights of the accused employee with those of the alleged victim.