One aspect of the law relating to termination of employment that has developed in recent years is the obligation of an employer to fairly and thoroughly investigate alleged misconduct before taking disciplinary action. Several decisions over the past few years have made it clear that if an employer fails to investigate, or fails to investigate properly, before dismissing an employee for cause, they are likely to face damages for wrongful dismissal, as well as extraordinary damages relating to the matter of dismissal and the impact on the employee. In many situations, employers have concluded that the right to dismiss an employee for cause was not worth the hassle and cost of an investigation, and they have simply decided to proceed on a without cause basis and pay of the person out. However, one recent Ontario decision suggests that they may not have the right to do so, and that it will be necessary to investigate before dismissing the employee, even if the dismissal is on a without cause basis.
As I have written many times, employers should never reacted in haste when they suspect that an employee is guilty of wrongdoing. They should always take the time to investigate properly, which includes confronting the employee with the specific allegations and giving them an opportunity to respond and explain. In some cases, the employer may discover that the suspicions are unfounded, or that there is a legitimate explanation or mitigating circumstance that should be taken into account. Even if the employer concludes that there was misconduct, it does not necessarily give them the right to terminate the employment relationship for cause. A contextual approach must be used in which all relevant circumstances are considered in order to to determine the appropriate penalty; in many cases, courts will find that some lesser form of discipline would have been appropriate in light of all of the circumstances.
Particularly in cases where the employee’s entitlement to notice of dismissal, or pay in lieu thereof, is relatively minimal, employers often choose not to proceed with an investigation, but to simply “let the person go” without cause. That is what Honda did in a recent situation that was considered by the courts.
In Brownson v. Honda Canada Mfg., the plaintiff was alleged to have been one of 23 employees engaged in misconduct, though the nature of the misconduct is vague in the decision. The company decided to dismiss him with a package rather than engage in a lengthy investigation and discipline process, and the plaintiff sued for wrongful dismissal. On a motion for summary judgment, the Court held as follows:
 By offering compensation in lieu of notice the Defendant submits it is merely terminating an employee in accordance with the law which permits an employer to terminate employment on adequate notice and in compliance with statue.
 If this termination had come out of the blue I might be persuaded. However, in the present case, the juxtaposition of the termination with a contemporaneous investigation of misconduct colours the ordinary procedures, such as escorting the terminated individual out of the workplace, with an innuendo that could give rise to the mental suffering alleged by the Plaintiff particular to the circumstances of the termination rather than the fact of being terminated.
 In the circumstances of the present case it is a triable issue whether the employer adopted the procedure intentionally to side step the criteria for fair treatment of an employee against whom cause is alleged.
The court denied the request for summary judgment, holding that there were issues that should be tried in the normal litigation process.
The decision clearly suggests that it may be inappropriate for an employer to simply dismiss an employee without cause when it suspects that the employee is guilty of misconduct but prefers not to go through the investigation process. This would be a significant change in the law. As we all know, in Canada, in the non-unionized context, employers are entitled to end the employment relationship at any time, for almost any reason. Some reasons for dismissal will be contrary to law, such as those based upon protected grounds pursuant to Human Rights legislation. However, aside from those limited exceptions, the right to terminate the employment relationship is generally absolute, and the only issue to be addressed is how much notice of termination, or pay in lieu, is required.
As indicated above, the decision quoted above was made on a motion. It remains to be seen whether it will have any impact on the law going forward. However, it seems as though there is a possibility that our courts might hold employers to a higher standard even when they decide to terminate the relationship on a without cause basis, knowing there was some allegation or suspicion of wrongdoing. It appears that Honda may once again be part of our developing employment law jurisprudence.
Stuart E. Rudner
Rudner MacDonald LLP
Canadian Employment Law
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[…] One aspect of the law relating to employee termination that has developed in recent years is the obligation of an employer to investigate alleged misconduct before taking disciplinary action, writes Toronto employment lawyer Stuart Rudner for the blog First Reference Talks. […]