Keep Calm and Conduct an Investigation: Managing Allegations of Serious Misconduct

There are, in general, two types of defective workplace investigations. In some cases, the employer receives an allegation of workplace misconduct—or becomes aware of potential misconduct in some other way—and simply does not take the allegation seriously. This was the case in the Cooksville Hyundai decision, wherein the Human Rights Tribunal of Ontario found that the employer “effectively did not conduct” any investigation at all.

There are also cases in which the employer becomes aware of potential misconduct, overreacts, and imposes discipline without conducting a proper investigation, normally because the allegation is some combination of especially serious and especially credible. The Supreme Court of British Columbia’s recent decision in Hrynkiw v Central City Brewers & Distillers Ltd, 2020 BCSC 1640 (“Hrynkiw”) concerns this second type of defective investigation.

The facts of Hrynkiw are as follows: the Plaintiff served as the Defendant’s Chief Financial Officer from 2012 until his termination for cause in 2018. He regularly received bonus pay as part of his compensation. The Plaintiff believed that his bonus entitlement for 2018 was $50,000, and he submitted a request to the payroll office for payment of that amount. However, the Defendant’s Chief Executive Officer, Mr. Frost, believed that he had approved a bonus payment of only $25,000. When he learned that the Plaintiff had requested $50,000, he became angry and immediately concluded that the Plaintiff had attempted to defraud the Defendant.

Mr. Frost confronted the Plaintiff, but the two were never able to have a serious conversation about the Plaintiff’s bonus entitlement. What followed was, in the Court’s words, “a series of unfortunate communications between Mr. Frost and the plaintiff, primarily by text message, which did little to assist in clarifying or resolving the parties’ disagreement.” These events unfolded over a period of eight days, at the end of which Mr. Frost sent the Plaintiff a long, combative, and highly accusatory termination letter. The Plaintiff sued for wrongful dismissal.

The Court found for the Plaintiff. With respect to the disagreement over the Plaintiff’s bonus entitlement, the Court found that there had been a genuine misunderstanding between the Plaintiff and Mr. Frost, and that the Plaintiff’s interpretation of his bonus entitlement was plausible (the Court also noted that the Plaintiff’s employment contract had been entirely oral, greatly increasing the likelihood of such a misunderstanding). Mr. Frost therefore erred in concluding, without evidence, that the Plaintiff had attempted fraud. For his part, Mr. Frost denied that there had been a misunderstanding, and never wavered from his belief that the Plaintiff had acted maliciously.

As the Court acknowledged, the employer’s duty to investigate is ultimately a duty to follow a particular process. While the content of the required process is context-dependent, and it is certainly possible that solid evidence of serious misconduct might call for immediate dismissal, the employer cannot forgo an investigation simply because the alleged misconduct is serious. In Hrynkiw, Mr. Frost was absolutely convinced of the Plaintiff’s wrongdoing, even at trial. Moreover, he came to this conclusion more or less immediately upon learning of the Plaintiff’s payment, without “undertaking any steps that could conceivably be viewed as a proper investigation.”

The Court ultimately awarded the Plaintiff $200,000, including $35,000 in aggravated damages for the Defendant’s 1) failure to conduct a proper investigation and 2) insistence on alleging fraud, even in the absence of evidence of fraud.

The takeaway for employers is that, unless there is incontrovertible evidence of serious misconduct, it is best to err on the side of conducting some kind of investigation—even if the investigation is simply a meeting at which the employee is able to explain his or her actions to management. Relying on weak or non-existent evidence can have serious consequences, and employers should think twice before accusing employees of fraud or other unlawful conduct.