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No just cause after employer fails to investigate allegations of anti-Semitic remarks

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An employer alleges that an employee made anti-Semitic remarks about the employer’s owners, the employer reacts and terminates the employee for cause, an investigation is not conducted, and the employee is not given an opportunity to respond to the allegations before he is terminated. This was the case in Ludchen v. Stelcrete Industries Ltd., where the Ontario Superior Court of Justice re-emphasized the importance of a meaningful investigation prior to terminating an employee for just cause.

Richard Ludchen worked at a Stelcrete’s Welland plant for approximately 11 years, and was the welding supervisor.

In January 2008, Stelcrete decided that instead of providing a paid holiday on Family Day, it would provide an extra day off during Christmas, and asked Mr. Ludchen to post this announcement at the plant.

Allegedly, when Mr. Ludchen was posting this announcement, he loudly made an anti-Semitic remark about Stelcrete’s owners. The comment was reported to the employer by a private investigator (“Stacey”) who was undercover at the plant to investigate drug use by certain employees. Stacey had not heard the comment herself (!) but heard other employees talking about it.  This fact was known to the employer.

The employer decided to terminate Mr. Ludchen for cause, and when they met with him, they told him he was alleged to have made anti-Semitic remarks about the owners. The specific remark was not reported to him.

When Mr. Ludchen’s wrongful dismissal claim reached trial, the trial judge criticized Stelcrete for its failure to investigate the alleged cause for dismissal. Specifically, Stelcrete “did not arrange to speak with any of the men who had apparently heard the remarks…did not tell Mr. Ludchen what he was alleged to have said…and did not ask Mr. Ludchen if he made any anti-Semitic remarks.”

The trial judge found that the failure of Stelcrete to conduct an investigation into a serious allegation made it difficult for it to later prove the allegation in a courtroom.

The parties who testified at the trial either lacked credibility or could not recollect the events, which at the time of the trial had occurred over 5 years previous.

In view of the employer’s inability to assemble the evidence to prove the alleged misconduct, the Court found that just cause was not made out, and awarded Mr. Ludchen 12 months’ pay in lieu of notice.

This decision highlights yet again that it can be unwise for employers to terminate an employee without conducting an investigation in order to assess the validity of the alleged misconduct. This investigation should entail gathering evidence, and allowing the employee accused of misconduct to respond to the specific allegations made against him or her.  As we read the facts of this case, it appears that an investigation could have been conducted internally by human resources, and would have been as straightforward as asking the investigator the basis of her information, talking to the individuals who she said claimed to have overheard the remarks, and then asking Ludchen about them. This process and the information gathered as part of it, would then have been written down in a report. There was a missed opportunity to establish cause here. The trial judge says as much in the decision.

In hindsight, the need for the employer to have conducted an investigation prior to terminating the employee appears obvious. Why then did it not happen here?  We do not have any specific information about this case, but we know from fielding calls from our employer clients that sometimes, in the face of deeply unsettling allegations of misconduct, an employer reacts quickly, and decides to terminate for cause. It does so because it believes the allegations are true. The employer is angry and offended, and feels betrayed by the employee, particularly if, as in this case, the employee has worked for them for a long time. In that moment, the employer is unable to see the possibility of another side to the story and any upside of delaying the termination in order to provide the employee an opportunity to respond to the allegations.

If you provide advice to employers in these situations, and especially if you are internal counsel, this is a good case to have at your fingertips.  It is a clear reminder to slow down and investigate before terminating for cause.

Janice Rubin and Parisa Nikfarjam