By James D. Kondopulos

A flawed investigation of alleged employee misconduct is a recipe for trouble. It can, in certain circumstances, result in a significant damages award against an employer.

This is illustrated in a number of cases, but perhaps none better than Elgert v. Home Hardware Stores Limited, 2011 ABCA 112, a case in which the employer learned its lesson the hard way. In the wake of a shoddy workplace investigation, the employer was sued by one its former employees, Daniel Elgert, and in a stunning jury award, ended up having two years’ pay in lieu of notice, $200,000 aggravated damages, $300,000 punitive damages, interest and costs awarded against it.

While the Alberta Court of Appeal ultimately set aside the aggravated damages award and reduced the punitive damages award to $75,000, the Court dismissed the appeal in all other respects. An application for leave to appeal to the Supreme Court of Canada was dismissed with costs.

Turning to the facts of the case, Elgert was a supervisor at the employer’s distribution centre. He supervised an employee named Christa Bernier.

As luck would have it, Bernier was the daughter of Elgert’s boss, but also a problem employee with job performance issues. When Elgert took her to task, she reacted badly. In the presence of a couple of co-workers, she said she would get even with Elgert and make him pay.

Shortly afterwards, Bernier told her father about an incident that had allegedly taken place around four months earlier. She said that Elgert had followed her up some stairs into a storage room, bumped her against a table and put his legs between hers. Bernier said she yelled and left after another employee entered the room.

When Bernier’s story came to management’s attention, an investigator from inside the organization was assigned to conduct an investigation.

The investigator was a long-time friend of Bernier’s father. He was untrained and inexperienced. He did not know how to investigate a complaint of sexual harassment. He did not obtain a written statement from Bernier, neglected to interview at least one key witness and, in addition, interviewed witnesses with no first-hand knowledge of the alleged incident involving Elgert. The investigator failed to examine the wider relationship between Bernier and Elgert and did not consider motive and the possibility of fabrication. In short, he did not gather and weigh all relevant evidence and make the necessary credibility assessments.

To make matters worse, the investigator dealt with Elgert in an accusatory way. When Elgert asked what he was alleged to have done, he was told that he knew. Elgert explained that he did not know and pleaded for particulars of the alleged wrongdoing. No particulars were provided. No questions were asked as to his side of the story. Elgert became upset and broke down in tears.

Notwithstanding the fact that he had worked at the distribution centre for nearly 17 years, Elgert was suspended from employment, escorted out of the building and not allowed to collect his belongings. He never returned to work. He was dismissed from employment for just cause.

Elgert sued for wrongful dismissal and defamation. He was found not to have subjected Bernier to the alleged sexual harassment and to be entitled to the damages, interest and costs described above (as reduced on appeal). He was also found to be entitled to $60,000 in damages for the defamatory conduct of Bernier and one of her friends.

Perhaps most interestingly, the majority of the Court of Appeal reviewed the various deficiencies in the employer’s investigation. The majority was critical of the employer’s “failure to conduct an appropriately broad investigation that took account of Bernier’s possible motives against Elgert” and found it surprising that although this was described “as the most serious allegation of sexual harassment ever at Home Hardware,” the employer dispatched an investigator “who had no training or experience in investigations” to conduct the investigation.

The majority made a useful statement to guide employers dealing with allegations of sexual harassment and other employee misconduct:

There is no specific standard of investigation that employers must follow; what is required will vary depending on the facts surrounding the employer, its policies, sophistication, experience and the workplace …

… [H]ow the employer reacts is subject to judicial scrutiny. Its responsibilities do not give it licence to conduct an inept or unfair investigation or behave in malicious, vindictive, or outrageous ways.

Cases like Elgert make it clear that an employer must conduct a workplace investigation which is appropriate and fair in all of the circumstances. Here are some basic pointers to avoid running into difficulties:

1. Use an impartial investigator. Elgert’s case was prejudged by the investigator and his discharge from employment was already a fait accompli.
2. Apprise the employee under investigation of all allegations against him or her. This is a matter of fairness. It gives the employee the opportunity to hear the allegations and then tell his or her story.
3. Gather and weigh all relevant evidence, even if you have to interview multiple witnesses, and be sure to meet with the witnesses from both sides.
4. Make the necessary credibility judgments, and be alive to the inherent dangers of hearsay evidence, motive and the possibility of fabrication.
5. Keep detailed, accurate records of interviews. Consider asking the individual being interviewed to review and sign any statement that he or she has provided.
6. Perhaps most importantly, seriously consider hiring a skilled, independent workplace investigator.

This article was published in abridged form in the December 2014 edition of the Canadian Bar Association British Columbia’s BarTalk magazine.

James D. Kondopulos is a founding member and partner (practising through a law corporation) of Vancouver-based employment and labour law boutique, Roper Greyell LLP. He advises employers in employment, labour relations and human rights matters. He also acts for employers and employees in wrongful dismissal actions, and investigates and reports on allegations of workplace harassment, bullying and code of conduct violations. James has won Lexpert’s Rising Stars: Leading Lawyers Under 40 award, has been recognized by Lexpert as a “Litigation Lawyer to Watch”, and has been recognized by his peers as a leading lawyer in employment and labour law and listed in Best Lawyers International, Canada. He can be reached by e-mail at jkondopulos@ropergreyell.com. For more information about James and Roper Greyell, please visit www.ropergreyell.com/james-d-kondopulos.html.