Sometimes, allegations of workplace misconduct will be clearly articulated and will be backed up by first-hand evidence of inappropriate behaviour or harassment, and employers will take the appropriate steps to conduct a fair and impartial investigation to determine whether such allegations are well founded.

Other times, however, issues of misconduct will come up as second- or third-hand rumour or gossip, and employers may proceed to conduct inadequate, superficial, prejudged, and unfair investigations, which may in turn lead to indefensible decisions to terminate an employee’s employment.

A recent decision of the Ontario Superior Court, McGraw v Southgate (Township), 2021 ONSC 7000, demonstrates how costly the latter approach can be.

The employee was a part-time administrator and fire captain for the volunteer fire department in a rural municipality in southern Ontario. She was also, outside of her employment with the municipality, an instructor at a fire college. The Chief Administrative Officer (“CAO”) of the municipality became aware of rumours and gossip involving the employee.

The CAO conducted an investigation. Based on the information he received, he felt the applicant was affecting morale within the fire department, and that she contributed to the high turnover of firefighters. He decided to terminate her employment. He did not interview the employee, and she was not aware of the rumours, nor that her employment was in jeopardy.

The CAO sought approval for his decision from the municipal council. He told council about allegations of “inappropriate behaviour,” which he did not elaborate on, but suggested they “fill in the blanks.” He claimed that she had texted inappropriate pictures of herself to other firefighters, and that she had done this “a fair bit.” He said he had heard rumours about intimate relationships within the fire department, though he did not elaborate, saying this was “not a place I am going,” leaving the innuendo that the employee was involved in something improper. He mentioned that he had heard from another fire department about the employee, again saying “I don’t want to fill in the blanks,” but the innuendo was that she was having sex with students at the fire college. He implied that the reputation of the fire services was suffering.

The municipal council gave unanimous support for his decision to terminate her employment. She was advised the next day that her employment was being terminated, without cause.

The fact that it was the rumours that led to the termination of her employment became publicly known shortly thereafter. The employee subsequently brought an action alleging wrongful dismissal, discrimination, and defamation.

The court found, after a six-day trial, that the decision to terminate her employment was based on cruel, vicious, unfounded, malicious, and sexist falsehoods, and that the evidence was almost entirely false rumour, unjustified innuendo, and unsubstantiated hearsay.

It came out at the trial that the CAO’s sources of information were generally not individuals with any first-hand knowledge, or that their complaints were not directly about the employee. For example, the issue about what the employee did as an instructor at the fire college, called the “sex for grades” allegation, came from vague rumours and gossip conveyed to the CAO by his daughter and son-in-law, who were firefighters in other municipalities, who had told the CAO that they had heard from others that the employee was “flirtatious,” and had engaged in “inappropriate behaviour.” The CAO did not speak to anyone with first-hand knowledge of the employee’s conduct at the fire college.

The CAO had accepted the rumour that the employee had sent inappropriate photos to a number of other firefighters, without having obtained or seen any such photos, and without having spoken to any individual who had actually seen any such photos. It turned out that the rumour was based on her having once texted a photo of herself wearing a towel to her then-boyfriend (who subsequently became her common law spouse), which he had shown to some others at the fire station. The court found that the rumours that the plaintiff had sent naked pictures of herself to a number of firefighters were simply untrue.

With respect to one witness, whom the CAO understood to be making a complaint about the plaintiff, the court concluded that the CAO had misheard and misinterpreted what he was told, and incorrectly attributed blame for the incident on the plaintiff.

The court concluded, “Here, the unfairness to Ms. McGraw was exceptional. The defendants acted on unfounded, sexist allegations relating primarily to conduct from years prior, without properly ascertaining the truth and without even asking Ms. McGraw about the allegations. Mr. Milliner [the CAO] conducted an amateurish investigation. He conflated gossip with facts. Without justification, he accepted the allegations and assumed the worst of the fire department’s only two paid staff. He failed to recognize the patent gender-based discrimination directed at Ms. McGraw.” The court further determined that “Ms. McGraw was marginalized in a toxic, male-dominated workplace. Her termination was based on unfounded sexist allegations.”

The court awarded moral damages, punitive damages, damages for defamation, and damages for sexual discrimination under the Ontario Human Rights Code, totalling $190,000. This was in addition to six month’s pay in lieu of notice.

A solid investigation is one that is fair, thorough, timely, and confidential. Though rumour, gossip, and hearsay will often arise in the course of an investigation, an investigator must ensure that such unreliable sources are not simply taken at face value, and, rather than being determinative, are at best an indication that further investigation should be pursued.

The investigation in this case was neither fair nor thorough. The CAO never gave the employee an opportunity to respond to the allegations. He did not interview individuals who may have had first-hand knowledge of the incidents in question, but instead relied on rumour, hearsay, and innuendo for the decision to terminate. Ultimately, the failure to conduct an appropriate investigation, and the decision to act on rumour, innuendo, and hearsay resulted in a significant financial liability for the municipality.

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