May 30, 2022

By Brian Babcock

A failure to do a proper investigation before terminating an employee, and then botching the termination, can lead to significantly increased damages payable by the employer to the employee.

This is illustrated in the case of McGraw v Southgate (Township).

The plaintiff was a volunteer fire fighter who held the rank of captain and was employed part time as an administrative assistant with the fire department. In her role as captain, she received small payments for certain activities. She also had ambitions to gain more well-paid future employment if a further paid position was added to the department. At the time of her employment, the only paid positions were those of the Fire Chief and her part time job as administrative assistant.

The plaintiff was fired without cause. In the defence of the lawsuit for wrongful dismissal, the fire department relied upon rumors about the plaintiff’s behavior as the reason for termination. As the judge found, most of the things being said about her were unfounded, malicious, and sexist falsehoods. Most of these rumors were irrelevant to the employer’s decision to terminate.

Because the plaintiff’s compensation was modest, her damages in lieu of reasonable notice were modest. The more significant issue in the case was a claim for moral damages, damages pursuant to the human rights code for discrimination, damages for defamation, and punitive damages. The judge found in the plaintiff’s favor on all of these claims and although none of the awards were record setting or significantly large numbers, in total it was a $190,000 addition to the plaintiff’s damages, all of which could have been avoided if the defendant had simply acted properly.

The number of things that the employer did wrong in this case are almost too numerous to mention. It is hard to see anything that they did right.

• Although the fire department had no written or verbal policy prohibiting relationships between members of the department, the Township’s chief administrative officer (CAO) was critical of the fact that the plaintiff had intimate relationships with two members of the department, one of whom was her superior.
• The defendant then alleged a conflict of interest arising from this but had no convincing evidence to show an actual conflict.
• There were rumors that the plaintiff and another firefighter shared a room at fire college. This was simply irrelevant to any defence.
• Similarly, the defendant called evidence to try to prove an ongoing intimate relationship that was simply was not relevant or reliable.
• The defendant tried to blame the plaintiff for turnover of volunteers within the department, but once again the evidence at trial did not support this allegation.
• There was also evidence put forward by the defendant that alleged the plaintiff had sent intimate photographs to other firefighters. Other than photographs sent to her boyfriend who happened to be a firefighter, this evidence was not reliable. In addition, the plaintiff was never cross-examined about these allegations and did not have a chance to respond to them.
• The defendant further alleged that the plaintiff had shared confidential information with others, especially her boyfriend. This evidence was also unreliable, and was not related to the decision to terminate
• The plaintiff worked part time as an instructor at the Ontario fire college. The defendant was involved in the spreading of rumors that she exchanged “sex for grades” in this position. Once again, the evidence to support this was not reliable.
• The investigation by the CAO was superficial and minimal. For the most part, he relied upon information that came to him as opposed to him gathering information and he relied extensively on inaccurate and second-hand information. He did not follow up with direct inquiries to people with firsthand knowledge, but rather relied upon rumors.
• The CAO did hire a human resources consultant for advice regarding terminating the plaintiff, but the information the CAO gave to the consultant was misleading. The only allegations the CAO shared with the consultant were the sex-related concerns. The consultant made no inquiries on his own. The consultant advised the CAO that there was no proof of the allegations and there was no cause for dismissal. The consultant in his evidence did suggest that the department was in a crisis to justify the decision to terminate. The judge determined that this evidence was an exaggeration in an effort to support the department’s case as opposed to objective evidence.
• The plaintiff was not given an opportunity to respond to any of the rumors or allegations before she was terminated. That is a normal and important part of a proper investigation.
• In a recorded conversation between the CAO and the plaintiff’s former lover, the CAO repeated the rumors and made comments about the plaintiff’s gender. The ex-boyfriend warned the CAO that this was all rumors and gossip.

That is a lot of things to do wrong.

Moral damages are available where an employer engages in unfair or bad faith conduct leading up to or during the termination or its aftermath such as being untruthful, misleading or unduly insensitive. They may be founded on a broad variety of conduct and are not limited to humiliation at the moment of dismissal. Although the loss of a job always causes some emotional upset, where the conduct is improper and causes undue humiliation embarrassment or damage to one’s sense of self worth and self esteem, damages are payable.

It is not surprising that the trial judge described the unfairness as “exceptional” or that the judge was satisfied that the plaintiff suffered significant mental anguish and distress. The plaintiff was awarded $75,000 for moral damages, a significant award although not the highest award ever given.

The trial judge also found that there was gender-based discrimination against the plaintiff, which is prohibited under the Human Rights Code. She was marginalized in a toxic male-dominated workplace and her termination was based on unfounded sexist allegations. Under the Code, a plaintiff in a wrongful dismissal action may add a claim for damages for a breach of the Code.

The judge awarded $35,000 for this breach, commenting that he would have awarded more if he had not also awarded the moral damages.

The “sex for grades” comment and other comments made by the CAO were defamatory –  meaning false statements that would lead to disrepute, were untrue, and would tend to lower her reputation within the community. The judge rejected all the available defences for defamation and awarded further damages at $20,000. This reflected the fact that the audience for the statements was limited but were people important to the plaintiff’s life. The judge also said that he would have awarded higher damages for the defamation if he had not made awards for moral damages and discrimination.

Punitive damages are not awarded to compensate the plaintiff. They are not about the plaintiff’s injuries but are about the defendant’s conduct or misconduct. They are intended to deter the defendant and others from similar misconduct in the future. The misconduct must be reprehensible, that is “malicious, oppressive, and highhanded” and “a marked departure from ordinary standards of decent behavior”. Compensatory damages must also be considered, and punitive damages will only be awarded when compensatory damages are insufficient to send the message of deterrence.

The judge in this case determined that the damages for reasonable notice plus the $130,000 awarded for moral damages, discrimination, and defamation were insufficient to send that message. The judge was concerned that the behavior reflected a different era and that this behavior no longer has any place in a workplace. Male-dominated workplaces, such as a fire department, must be particularly mindful of avoiding gender-based discrimination.

The reliance on exaggeration and rumors was particularly inappropriate because the defendant is a small rural municipality. Based on this, a large award of punitive damages was not necessary to send the message. Punitive damages of $60,000 were awarded. If the defendant had been a larger organization, the damages likely would have been higher.

By now the message for employers should be clear: do not do any of the things that the employer did in this case.

• Be professional in managing your employees.
• Do not listen to rumors and gossip.
• Believe only facts backed up by evidence.
• Do not spread rumors.
• Make sure any investigation is done thoroughly, honestly and appropriately.
• Hire consultants and lawyers who will give you solid, objective advice. Be honest with them and inform them of the real facts. Follow their advice.
• If you decide to terminate without cause, say as little as possible and especially say nothing that may be defamatory
• If you do not have a strong case for cause, do not terminate for cause.

Failure to follow these tips will cost you considerably more money in the long run, as happened in this case.

If you are an employee who is treated in this manner by your employer, you should be aware that you may have a claim for substantial amounts of damages above and beyond the amounts owing to you for payment in lieu of notice. You ought to seek good legal advice as soon as possible and not sign any documents presented by the employer without advice.

Weilers LLP was a pioneer in employment law in Thunder Bay and Northwestern Ontario. We continue this proud tradition by staying current on issues including workplace investigations, grounds for termination, discrimination, and defamation. Preventative advice is one of our strengths. So is damage control when it is just too late for prevention. We may just be the right lawyers whether you need advice and help with negotiations or are confronting tough litigation.