The advantage of conducting an investigation where there is not a mandatory obligation to do so is apparent. Given a workplace conflict, the employer will want to determine what the source of the problem may be, resolve it and insure its work force that it is a fair-minded employer which is interested in the welfare of its staff.

Many companies believe that such action restores the faith of its workforce in the company’s sense of responsibility and deflect from the need for union representation.

Occasionally in circumstances such as an allegation of sexual or other harassment, apart from the mandated need to investigate from the human rights perspective, the employer simply is an innocent third party and has no idea which of the competing assertions are correct. Hence the investigative tool becomes the means of fairly determining “just what did happen here”.

In addition, an investigation made in good faith and done properly will insulate the employer from any claims for aggravated or punitive damages from the alleged wrongdoer, when terminated or disciplined due to the results of the investigation.

The employer, acting in good faith, need not come to the same conclusion as a court ultimately reaches at trial. As long as the allegations of just cause are made based on a reasoned and fair approach, even though contrary to the court’s determination, the employer will not be exposed to claims of aggravated and punitive damages.

Such was the conclusion of the 2008 Ontario Court of Appeal decision in Mulvihill v City of Ottawa in which the appellate court set aside the trial judge’s award of incremental damages for bad faith conduct in alleging cause and withdrawing such a plea. Gillese J. A. spoke for the unanimous panel:

It cannot mean that because the City terminated Ms. Mulvihill's employment for cause but abandoned cause as a defence during the course of litigation, its initial act of alleging cause for dismissal was not warranted. The mere fact that cause is alleged, but not ultimately proven, does not automatically mean that Wallace damages are to be awarded. So long as an employer has a reasonable basis on which to believe it can dismiss [page298] an employee for cause, the employer has the right to take that position without fear that failure to succeed on the point will automatically expose it to a finding of bad faith.

Ironically, as set out below, a flawed investigation may lead to those very claims. This issue is reviewed here.

An example of a case that cried out for an investigation when none was made is that of July 2013 decision of the Federal Court of Canada in Tl’azt’en First Nation v Joseph written by Tremblay-Lamer J. on a judicial review of the award of the Adjudicator in an unjust dismissal complaint under the Canada Labour Code.

The allegations made against the complainant were serious and determined at the first hearing before the Adjudicator to be unwarranted. The Federal Court decision spoke to this issue as follows:

In his forty page decision, the adjudicator reviewed the evidence before him and concluded that:

-         the respondent’s responsibilities in the health department were entirely operational and not managerial;

-         none of the allegations the applicant made to justify the termination of the respondent, many of which were “vile and serious allegations of fraud, deception and mismanagement”, were proven at the hearing and the applicant’s own evidence substantiated that it knew throughout that all of the allegations were completely baseless;

-         the applicant’s contention that the respondent had abandoned his job was completely unfounded; and

-         it was plainly evident from the real facts that the treatment of the respondent by the applicant’s executive director was “high-handed and malicious”.

The adjudicator’s award of aggravated damages of $85,000 and punitive damages of $100,000 in addition to the sum of 21 months’ severance were all upheld by the Federal Court.

Had proper investigative steps been taken, this damage, human and legal, could have been completely averted.

It is evident that allegations of serious misconduct which have not been the subject of a fair and reasonable investigation will lead the employer to exposure for such incremental damages. This point was hammered home in the 2009 B.C. Supreme Court decision of van Woerkens v Marriott Hotels of Canada of Pearlman J. No more can be said:

An employer who fails to investigate the validity of allegations against an employee, and as a result is unable to establish cause, runs a further risk.  If the employer draws unfounded conclusions damaging to an employee’s reputation without affording the employee any opportunity to answer those allegations, it exposes itself to a claim for damages for breach of its obligation of fair dealing in the manner of termination of the employment contract...