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Ontario court potentially expands the actionable duty of good faith to workplace investigations

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In recent years, there has been a growing incidence of legal disputes involving inadequate workplace investigations.  While these disputes often involve an employer’s failure to comply with prescribed statutory duties (e.g. as per the Occupational Health and Safety Act, the Ontario Human Rights Code, etc.), courts have equally demonstrated an increased willingness to impose upon employers common law duties to investigate workplace matters.

For example, an employer’s failure to investigate allegations of employee misconduct is frequently raised as a successful defence to assertions of just cause in wrongful dismissal actions.  In addition, that failure is often tacked on to existing actionable wrongs to support findings in favour of expanded damage awards – for example, a finding of bad faith conduct in the manner of dismissal, or a finding that the employer is vicariously liable for the tortious actions of its employees.

The recent decision in Joshi v National Bank of Canada, 2016 ONSC 3510 (“Joshi”) has the potential for further expanding the common law consequences of an employer’s failure to conduct an adequate and proper investigation.  Specifically, the Ontario Superior Court of Justice suggests that an inadequate investigation may give rise to a breach of the independently actionable duty of good faith, a contractual duty that was recognized by the Supreme Court of Canada in Bhasin v. Hrynew, 2014 SCC 71.

In Joshi, Mr. Joshi brought an action alleging, among other things, that his former employer, the National Bank of Canada (the “Bank”), had breached its duty of good faith by contacting a crime prevention office and adding his name to a database populated by the names of individuals found guilty of serious banking crimes (the “Database”).  Mr. Joshi specifically alleged that the Bank commenced an investigation into his purported misconduct before he resigned from his employment, and that he was not made aware of that investigation nor given an opportunity to respond.  The Bank brought a motion to strike out that aspect of Mr. Joshi’s claim as disclosing no reasonable cause of action.

It is particularly relevant that Mr. Joshi’s dispute with the Bank did not involve an allegation of wrongful dismissal.  Notwithstanding, Justice Diamond dismissed the Bank’s motion and held that the alleged facts could qualify as a breach of the independently actionable duty of good faith owed to Mr. Joshi.

Specifically, Justice Diamond found that there was an implied contractual obligation whereby, in the course of its investigation, the defendant would afford the plaintiff due process and allow him to respond to any allegations of misconduct:

If an investigation into alleged misconduct on the part of the plaintiff was ongoing during his employment, it was, at a minimum, an implied contractual obligation to afford the plaintiff due process and allow him to respond and/or refute such allegations.

If the defendant was not afforded such an opportunity, this could qualify as a breach of the duty of good faith.  The defendant’s subsequent acts as alleged in the pleading (adding the plaintiff to the Database without a proper investigation and making the representations to member banks) would be premised upon a potential breach of the duty of good faith and carried out in furtherance of that alleged breach.

The decision in Joshi is a further reflection of the ever-expanding scope of liability that employers may be exposed to when they act (and/or fail to act) without properly and fairly investigating purported misconduct.  Accordingly, regardless of the perceived guilt or the ultimate results of a workplace investigation, employees must be afforded a fair and reasonable opportunity to respond to the allegations against them.

Key Takeaway:  Employers would be well-advised to ensure that workplace investigations adhere to the principles of due process, which at a minimum requires adopting such measures as:

  • commencing the investigation as soon as possible;
  • notifying the employee of the allegations and affording him/her a fair opportunity to respond;
  • interviewing other witnesses with relevant information; and
  • assessing the totality of the evidence with impartiality and objectivity.

Titus Totan

About the Author: Toronto employment lawyer Titus Totan supports both employee and employer clients in all areas of employment law, including employment standards, contractual and implied obligations, terminations, workplace investigations and workplace human rights.