Employer loses on just cause and pays $50,000 in bad faith damages in part because of improper investigation

In Rutledge v Markhaven (2022 ONSC 3183) Justice Dow awarded 22 months notice to a 43 year old Executive Director of a long-term care home with just under 21 year service.

The Defendant alleged just cause because they claimed that she had breached her fiduciary duty by agreeing with a service provider of the Defendant to promote one of their employees who worked in the defendant’s premises with whom she was having a romantic relationship. However, it was determined by the Court that:

1. No such relationship existed at the time of the promotion.
2. The Plaintiff disclosed the relationship at the time to the HR department and that the Board of Directors knew about the relationship a short time later.
3. The Board took no action regarding this matter until months later and only  when an employee complained.

The Judge therefore found that the Board of Directors condoned the Plaintiff’s actions. When asked in the investigation whether she had been romantically involved, the Plaintiff admitted it.

The interesting part of the case is the Judge also awarded $50,000 for bad faith damages. This seems to be largely based on the manner in which the Defendant conducted their investigation. The Judge noted the following concerns:

1. Although the Plaintiff was told that the investigation would be conducted by an independent third party, it was in fact conducted by a “investigation business associated with defence counsel.”
2. The defendant secured information from the Plaintiff without her prior knowledge.
3. It conducted parts of the investigation at a local Tim Hortons where many of the Defendants went for coffee, thereby failing to conduct the investigation in a confidential manner.
4. “Portions of the investigation file were not produced under the guise of solicitor – client privilege.”
5. The scope of the investigation was expanded.

The Plaintiff went on disability leave prior to her dismissal and led evidence that her psychological condition was caused by the investigation.

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Barry B. Fisher LL.B.

Barry B. Fisher, LL.B., is a mediator and arbitrator of both employment and labour relations matters. He offers three forms of ADR based on clients’ needs: Mediation, Arbitration and Med/Arb. Barry is from the evaluative school of mediation and brings his over 30 years' experience as an employment lawyer and legal author to the dispute. In addition to his knowledge of the legal issues involved in these disputes, he also has a deep understanding of the psychological factors that motivate both employees and employers. By combining these two skills, Barry is able to achieve a settlement rate of over 80% of the disputes that he mediates.

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