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Biased Workplace Investigation Warrants Punitive Damages, says Alberta Court of Appeal


It is clear how important it is to conduct a proper workplace investigation.  It is also clear that failing to do so can scuttle an employer’s case for a just cause dismissal, expose an employer to Human Rights Code damages, and, depending on the harm actually suffered, create a risk of aggravated Keays damages as well.

According to a recent decision from the Alberta Court of Appeal, we also now know that an unfair investigation that is biased from the outset can ground an award of punitive damages, which courts reserve for only the most “malicious and high-handed misconduct that offends a court’s sense of decency.”

In Elgert v. Home Hardware Stores Ltd., a 48-year old warehouse manager with 17 years of service was summarily dismissed for alleged sexual harassment of two subordinates.  The resulting investigation was conducted by a senior executive who had little experience with human resources, and no experience conducting workplace investigations.  Worse still, the investigator was a close friend of the complainant’s father, who was also the respondent’s direct superior.

The investigator made many critical flaws, which included:

  • Failing to consider motive or fabrication, especially when the complainant’s allegations came on the heels of a poor performance review;
  • Meeting with the respondent not to gather information, but to suspend him because he “knew what [he] did”;
  • Telling the respondent’s son that his father would not have been suspended unless he was “100% guilty”;
  • Refusing to provide particulars of the allegations until the respondent retained counsel;
  • Refusing to meet with the respondent in the presence of counsel; and
  • Issuing a termination letter that relied upon contradicted, if not fabricated, grounds.

Based on this, the trial judge and jury awarded 24 months notice, $200,000 in aggravated Keays damages, and $300,000 in punitive damages. 

On appeal, the Alberta Court of Appeal set aside the Keays damages, noting that insufficient evidence had been tendered to establish “actual harm” from the investigation, but upheld the award of punitive damages, albeit reduced to $75,000.

Despite upholding a damage award intended to denounce “malicious and high-handed misconduct”, the Court was quick to pre-empt any “chilling effect”  on workplace investigations that could follow, cautioning that:

“…[w]hen evaluating [an] employer’s conduct in the context of punitive or aggravated damages, it is important to acknowledge that an employer cannot be faulted for honestly believing an allegation of sexual harassment (or any other wrongdoing) and should not be punished simply because an investigation was clumsy or a jury subsequently concludes that the allegation was not substantiated.

There is no specific standard of investigation that employers must follow; what is required will vary depending on the facts surrounding the employer, its policies, sophistication, experience and the workplace.  Courts must not require such a high standard of investigation that there is a chilling effect on employers’ manner of dealing with allegations of sexual harassment.”

That said, the Court went on to emphasize the overarching importance of retaining the integrity of a workplace investigation, even if it has faults:

“Employers must take seriously allegations of sexual harassment. … [H]ow the employer reacts is subject to judicial scrutiny. Its responsibilities do not give it license to conduct an inept or unfair investigation or behave in malicious, vindictive, or outrageous ways.  Here there was sufficient evidence about how Home Hardware handled Elgert’s case to leave punitive damages with the jury.”

These comments suggest that while employers may be excused from procedural missteps owing to inexperience and/or limited resources, there is no excuse for failing to conduct an investigation in good faith, and with an open and unbiased mind.

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