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How not to conduct an investigation and dismissal

B.C. employer’s termination of long-time worker results in $85,000 in punitive, aggravated damages

By Stuart Rudner

A recent decision of the British Columbia Supreme Court provides an excellent example of three different issues that I have addressed in the past:

•The importance of a proper investigation, and the consequences of failing to investigate properly.

•How to assess whether just cause for dismissal exists in a specific case.

•How an employer’s failure to carry out an investigation and dismissal properly and fairly will expose it to additional liability.

The case in question is Vernon v. British Columbia (Ministry of Housing and Social Development — Liquor Distribution Branch). The decision is quite lengthy, but I will try to summarize:

Vernon was a 30-year employee who started as an auxiliary clerk at a liquor store and was promoted repeatedly, to the point where she was a senior store manager. The employer alleged Vernon engaged in workplace misconduct, including bullying, harassing and intimidating subordinates, and it therefore had just cause to dismiss her. Vernon denied the majority of the allegations.

It was no secret within the organization Vernon had a “no nonsense” approach to management. In fact, she was known as the “Little General” throughout the organization. However, over a period of decades, there were no concerns or complaints regarding her conduct or management style, and in fact she was repeatedly promoted and praised.

One employee complained about her behaviour, prompting an investigation. During the course of the investigation, there were allegations made that Vernon routinely swore, called several employees “f***ing idiots” and made a comment about “f***ing Muslims.” On one occasion, she responded to a request for light duties due to a back problem by saying to her employee that “if you can f***k your husband, you can do a liquor load.”  

Unfortunately, the investigation was not carried out in a manner that was approved of by the court. According to the court:

“As a result of her interview of the complainant’s conduct, Ms. van der Boom appears to have been convinced of Ms. Vernon’s wrongdoing … The interview of Ms. Vernon was contrary to its intended purpose and unfair in the extreme. Ms. Vernon thought she was meeting with her labour relations advisor and area manager to discuss in an informal setting a complaint that had been made against her. Instead, she was the subject of an intense interrogation. The person whom she had relied on as her labour relations advisor was now her interrogator. Ms. Vernon was upset at the meeting. She had good reason to be.”

The court went on to question the conclusions drawn at the end of the investigation. In particular, the report suggested. Vernon had denied all of the allegations.

However, the notes taken during the investigation suggest that, while she denied certain specific allegations, she acknowledged and responded to a number of the other allegations. However, the report that was prepared, which was found to be inaccurate on a number of issues, was relied upon in the decision to dismiss Vernon for cause. In particular, the company relied upon the suggestion Vernon did not acknowledge any wrongdoing, when in fact she had done so.

The investigators were found to have chosen witnesses they expected would corroborate the complaints. With respect to the interviews, the court found that

“The interviews were not simple question and answers affairs. They were interrogations. They were not carried out in an impartial manner. Witnesses who spoke favourably about Ms. Vernon were accused of lying. I accept the evidence of Ms. Whynot and Ms. Rondeau that the interviewers chided and yelled at them when they gave answers that supported Ms. Vernon.”

As the court stated, the “investigation was flawed from beginning to end. It was neither objective nor fair.”

With respect to the decision to terminate, the court reviewed all of the principles regarding just cause for dismissal, including the requirement a contextual approach be adopted which considers all of the relevant circumstances, including the individual’s role within the company and employment history. According to the court,

“Ms. Vernon was a 30 year employee. She had been a store manager for almost 12 years. In all those years there had never been a single complaint made against her. Her performance reviews were glowing… The lack of any prior complaints against Ms. Vernon should have given them cause to stop and reflect.”

After the decision to dismiss had been made, representatives of the company met with Vernon. Apparently, they said her actions were “embarrassing and shameful.” The court found this “could not have been more insensitive.” The company advised Vernon it was going to dismiss her, but offered her the option of resigning, at which point she would be provided with a letter of reference. As the court stated,

“If Ms. Vernon’s conduct was sufficiently serious that the LDB had the right to summarily dismiss her without notice, it would have been improper for the LDB to give her a reference letter. To offer a reference letter as a carrot to resign, is, in my opinion, conduct which is properly the subject matter of retribution, deterrence and denunciation.

The court found that in light of Vernon’s employment history and untarnished record, “she was entitled to a warning that her conduct was not acceptable.”

As there was insufficient cause for dismissal, the court awarded damages representing 18 months’ notice. Furthermore, the court went on to consider other forms of damages that might be appropriate.

Aggravated damages

First, Vernon sought aggravated damages, which are to be compensatory in nature in light of the decision in Honda Canada Inc. v. Keays. The court agreed the investigation was unfair and a breach of the company’s duty to act in good faith. Furthermore, the court accepted evidence the manner of dismissal caused Vernon to suffer mental distress over and above the normal distress and hurt feelings that arise from dismissal itself. Ultimately, the court awarded $35,000 of “the damages formerly known as Wallace.

Punitive damages

Vernon also sought punitive damages, which are intended to be a form of punishment, and not compensatory like aggravated damages. While the court acknowledged there is a general reluctance to award both aggravated and punitive damages, the court found that, in this case, the fact the company offered Vernon a letter of reference in exchange for her resignation, when it was of the view that it had just cause to dismiss her, was deserving of punishment. As a result, the court awarded an additional $50,000 in punitive damages.

This case confirms several points:

1. When a complaint is made about an employee’s conduct, it is incumbent upon the employer to engage in a fair, impartial and objective investigation before taking disciplinary action.

2. In assessing whether or not just cause for dismissal exists, an employer must consider all relevant circumstances and ensure the punishment is proportionate to the egregiousness of the offence.

3. The “damages formerly known as Wallace” will be awarded in situations where employers act in bad faith in the course of dismissal and that bad faith causes actual damages or a loss. Employers should ensure that they carry out investigations and dismissals in good faith in order to avoid such damages.

4. Punitive damages will still be awarded in situations where the courts feel they are necessary in order to punish the entity in question and deter similar conduct. Referring to the situation in this case, employers that think they have just cause to dismiss an employee should not ask the employee to resign, and should especially not offer a positive reference in exchange for the employee’s resignation.

Stuart Rudner is a partner with Miller Thomson LLP in Ontario, specializing in employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at (905) 415-6767 or srudner@millerthomson.com. You can also follow him on Twitter @CanadianHRLaw, join his Canadian Employment Law Group on LinkedIn, and connect with him on Google+.

Stuart Rudner

Stuart Rudner is a founding partner of Rudner MacDonald LLP in Toronto. Follow him on Twitter @CanadianHRLaw. He can be reached at srudner@rudnermacdonald.com.
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