Botched investigation leads court to award employee $50,000 in bad faith damages

Sunira Chaudhri

Sunira Chaudhri

Toronto Employment Lawyer

Relying blindly on external investigators can be a safety net full of holes.

Laura Rutledge, an executive director for almost 21 years, was fired for alleged cause in the spring of 2016.

 

Markhaven Inc., the long-term care facility she worked for in Markham, managed 96 care beds with an annual operating budget of about $7 million. Markhaven used an external company, Marquise, to perform housekeeping and laundry services at its facility.

 

In the months leading up to Rutledge’s termination, Markhaven conducted an investigation into a romantic relationship between her and a Marquise employee she worked with. He ultimately received a promotion that Markhaven alleged was endorsed by Rutledge during the romantic relationship.

 

Following the investigation, Rutledge was put on a paid suspension for a number of weeks and then terminated for cause.

 

She sued for wrongful dismissal damages.

 

In throwing out the for cause allegations, Justice Dow found that Markhaven was aware of the romantic relationship all the way back to April of 2015 and that any complaints received about the relationship were condoned and not investigated.

 

The court also found the investigation started prior to informing Rutledge of it and that several meetings took place at a nearby Tim Hortons, often frequented by Markhaven employees, rather than in a confidential setting.

 

Justice Dow also found that despite telling Rutledge the investigation was being conducted by an “independent third party” that the investigator was actually a business associated with the employer’s defence counsel and that this investigator had access to information about Rutledge prior to investigating her.

 

In finding no cause, the court awarded Rutledge $214,500, representing 22 months of wrongful dismissal damages. She was also awarded a $5,000 bonus she claimed she would have received, her lost employer RRSP contributions for the 22-month period at $8,580, value of her lost benefits being $21,450, and the pay out of accrued sick days in the amount of $9,900, and float days in the amount of $3,300.

 

For those keeping score, the total court award for wrongful dismissal damages totaled $262,730.

 

And for the mishandling of the investigation, Rutledge was awarded an additional $50,000 in bad faith damages.

 

This decision is brimming with takeaways and lessons but I will highlight only a salient few.

 

First up, offshoring employee investigations to an external investigator can be a major misstep. External investigators don’t know your workplace culture, policies or the people. It is also difficult to establish neutrality, especially if employers use investigators recommended to them by their counsel.

 

Second, employee conduct cannot be condoned and then arbitrarily investigated at some later time. Markhaven couldn’t deny that it knew about the romantic relationship many moons before it launched an investigation into a potential conflict of interest.

 

Alleging cause for conduct that was previously known by and not acted upon by the employer is a recipe for disaster.

 

Lastly, employers and employees often mistakenly assume liability is limited to loss of salary only. At trial, Rutledge received damages flowing from the loss of all of her benefits as well, which amounted to almost $50,000 of the court award. This is a life changing amount of money.

 

Employers are using investigations more regularly to assert serious claims against employees, including levying allegations for cause. Investigator use will be amplified in remote workplaces.

 

But as Rutledge’s case illustrates, relying blindly on external investigators can be a safety net full of holes.

 

Have a workplace issue? Maybe I can help! Email me at sunira@worklylaw.com and your question may be featured in a future column.

 

The content of this article is general information only and is not legal advice.

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