B.C. case highlights importance of investigations
By Stuart Rudner
As I said in my March 16, 2016, post, “Much has been written about the expanding role of investigations within the context of human resources and employment law. As has been expressed on many occasions (here and here for example), courts expect that workplace investigations will be conducted thoroughly, fairly and expeditiously”.
Courts and tribunals are becoming increasingly critical of employers that fail to respect procedural fairness and protect the rights of employees to be free of harassment and free from discipline that has not been properly justified.
Investigations are becoming more and more prevalent in the world of HR. They are necessary when there is a concern about harassment, important before discipline is imposed, and crucial when considering summary dismissal.
In a few weeks, Bill 132 will come into force in Ontario, increasing employer’s duties to investigate “incidents” of harassment. One of the notable aspects of Bill 132 is the right of the Ministry of Labour to order that an investigation be carried out by a third party, at the employer’s expense, in relation to concerns or incidents of harassment.
I have written and spoken extensively regarding the need to investigate allegations or suspicions of misconduct before imposing discipline or dismissal. If an employer fails to investigate, or purports to conduct an investigation of alleged misconduct but does so unfairly, they can face significant liability.
Several cases, including the British Columbia Supreme Court’s ruling in Lau v. Royal Bank of Canada, have overturned dismissals and ordered that the employer pay severance pay plus extraordinary damages and legal costs. This is the risk facing employers: If they are found to have dismissed without cause due to a failure to properly investigate, they may end up spending far more money than if they had simply packaged the employee out.
This can include severance, bad faith/moral damages, punitive damages, aggravated damages, damages for infliction of emotional distress, their own legal fees, and compensation for the individual’s legal fees. The stakes are high.
In Lau, the plaintiff worked with the bank and in his role as an account manager, met a client in his office on Jan. 27, 2012. The client directed Lau to make some changes to her investments. Lau processed the changes as “new money” rather than “retained money.” The client subsequently complained about this, and the bank’s corporate investigation team became involved.
In Lau’s defence, he asserted that while he had tracked the sale improperly, this was in accordance with the instructions of a colleague who had also attended the client meeting. Furthermore, the evidence showed this was a common practice within the branch.
Interestingly, Lau’s colleague initially indicated he had been present at the client meeting but later changed his story. There was purportedly video evidence, but it was not available at the hearing and there was some question regarding its reliability. Nevertheless, the bank dismissed Lau for cause and filed a report with the Securities Commission stating that the dismissal was due to falsification of bank records and failing to tell the truth when questioned regarding an alleged joint session with a client.
The B.C. Supreme Court did not find that there was just cause for dismissal. As often discussed, courts will take a contextual approach and consider all relevant factors. In this case, two factors in Lau’s favour were his immediate acknowledgment of wrongdoing and his previously clean record. The questionable investigation was also a significant factor.
The court identified a number of failings in the bank’s investigatory process, including the following:
- The video surveillance footage was inconclusive and, in any event, not available at trial.
- The client’s complaint was made verbally, and in Cantonese. A translator relayed the information to a representative of the bank, which accepted the representative’s report without investigating further.
- Lau was never given an opportunity to view the video, although he repeatedly asked to see it.
As the court held:
“It was impossible for Mr. Lau to deal with the allegations against him. It was impossible for him to properly defend himself, because from the outset the bank believed that the client told the truth and Mr. Lau did not. RBC… failed to meet their implied obligations of good faith and fair dealing.”
In addition to damages for pay in lieu of notice (severance), the court awarded Lau an additional $30,000 in aggravated damages. And, of course, the bank had to pay legal costs. As a result, this was a costly lesson and a reminder for all employers: Ensure that any alleged misconduct is investigated fairly before dismissal. Summary dismissal is not often “rubber stamped” by our courts; While I often assure employers that “just cause is not a lost cause”, the threshold for establishing it is high.