Crime scene: How HR should respond when employees face criminal allegations

Employee misbehaviour always makes for a good headline, and recently two cases alleging just that have made waves in Canada.

In Quebec, two former employees of the province’s auto insurance board (SAAQ) were charged in relation to an alleged scheme to sell more than 2,000 fake driver’s licenses. In Ontario, Molson Coors Canada filed documents in court accusing former managers of embezzling millions through shell companies and fake vendors. 

So, how should HR leaders respond when employees are facing criminal allegations?

According to Joel Smith, an employment lawyer at Shields O’Donnell MacKillop LLP in Toronto, when an organization learns of new and potentially criminal misconduct, or criminal charges have been filed against an employee, quick, thoughtful fact-gathering is essential.  

“The first step certainly is to investigate, but it doesn't have to be a big, formal investigation [initially],” says Smith. “Get a handle on the circumstances, what happened, what are the charges, when was the employee charged, and then consider that in the context of their role.” 

That emphasis on context is critical for HR. A fraud charge for a back-office role will be evaluated differently than for a controller handling client funds, just as alleged license fraud in a regulatory authority handling auto insurance raises public trust issues that go well beyond a job description. 

Having policy tools ready to act 

The SAAQ case is a reminder of how off-duty conduct and on-the-job authority can intersect. Allegations that internal staff helped people obtain fraudulent driver’s licenses go to the heart of public safety and institutional credibility, not just employment performance. 

In such situations where the alleged misconduct is clearly connected to core duties or public-facing authority, Smith says the first move should be to take the employee off active duty to control risk. The immediate focus is typically on suspending access to the workplace and stabilizing the situation while facts are gathered, but it has to rest on something solid, such as policies or terms in their employment contract that provide the right to put them off work on an investigative suspension, says Smith. 

“For HR, that means the time to negotiate suspension language and build off-duty conduct clauses is at the offer letter stage, not when your phone lights up with police inquiries or media calls,” he says. “Without those tools, you may be relying on a more fragile common law right to suspend, which increases the risk of constructive dismissal claims if the situation is mishandled.” 

Smith points to the longstanding Millhaven Fibres test as the legal backbone for employer responses to criminal charges with workplace implications. The test focuses on factors such as reputational harm, impact on job performance, coworker refusal to work with the individual, and the employer’s ability to carry on its business. Used properly, it can help HR translate messy, high-emotion allegations into a structured risk assessment and defensible response, he says. 

“If any of those apply, then you could look at discipline or dismissal, but there's always going to be more risk if you're taking action without having an off-duty conduct policy,” says Smith. 

When criminal misconduct strikes at the core of the job and the business 

The Molson Coors Canada lawsuit underscores a more complex scenario: alleged fraud embedded in the employee’s core duties and the company’s revenue. Molson claims in its court documents that a former sales director oversaw “a complex scheme to defraud the company of many millions of dollars” through shell companies and fake vendors, allegedly in collaboration with the president of a major pub chain and two subordinates. 

Smith says the first instinct may be to defer entirely to law enforcement when the organization itself discovers criminal misconduct, but organizations can’t abdicate their own investigative responsibilities.

“If there's a criminal issue and there aren’t any charges yet, you call the police, but that doesn't mean that you should just defer entirely to the police,” he says. “Depending on the severity of the issue, the police might not take much interest unless the company does some investigating for itself.” 

“Whether [the police are] conducting a fulsome investigation of their own or not, that shouldn't take the place of the organization doing its own due diligence and investigating — especially when it involves things like internal finances,” Smith adds. 

In Molson’s case, court documents suggest its own internal review and access to email records helped uncover details of the alleged scheme. 

Smith notes that in some midsized fraud matters, police may be slow to act unless the employer does serious legwork, such as bringing in forensic auditors or producing detailed transaction analyses. That work isn’t just about supporting potential charges, as it also becomes the evidentiary backbone of any just-cause termination and a key part of demonstrating to stakeholders that the organization didn’t turn a blind eye, he says. 

Managing client entanglement and preserving trust 

One of the more unsettling angles in the Molson Coors Canada lawsuit is the allegation that a senior figure at a major pub chain — to which Molson Coors supplies product — was involved in shell-company arrangements with Molson sales managers. 

When alleged fraud straddles the boundary between employees and clients, the old playbook of “Deal with our employee, let the client worry about theirs” quickly becomes inadequate, according to Smith, adding that the size and structure of the client could affect the strategic approach. 

“There's probably somebody more senior within [a larger] organization with whom you can touch base,” he says. “In many cases, they’ll be aligned with you in wanting to investigate it and take it seriously — each company probably will do their own investigation, but they’re both going to have a mutual interest in doing something about these employees.” 

If the client is smaller, it might be better for an organization to proceed with its own investigation first before reaching out to the client, says Smith.

“It may be that you need to cut off the relationship with the client temporarily while you're taking steps,” he says. “As a general rule, subject to some contractual obligations, an organization isn’t going to have the same requirements to be forthright with a client as it would with its own employee while you're investigating something involving them.” 

Whistleblowing and senior-level misconduct 

The Molson Coors Canada case also highlights a structurally difficult problem: alleged misconduct at senior levels, potentially involving those who sign off on expenses and approvals. 

When the risk sits high in the hierarchy, junior employees may see red flags but feel unable or unsafe to report them. Smith believes that this is where whistleblower mechanisms and neutral oversight become indispensable for an organization. 

“Having a whistleblower policy of some sort provides the opportunity for lower-level people to bring concerns forward,” he says. “It can ensure that you have a neutral department within the business or separate from the business that can operate separately from the larger corporate structure.” 

For HR, the design challenge is to create channels that are accessible and trusted, but still allow enough feedback to investigate. Fully anonymous reporting with no way to follow up can leave investigators with just fragments, limiting their ability to substantiate allegations or understand scope, says Smith, who adds that strong whistleblower policies build in a mechanism to ask clarifying questions while preserving anonymity — whether through thirdparty hotlines or secure internal platforms. 

Civil suits and third-party harm 

However, criminal processes aren’t the only part of the risk landscape for illegal employee misconduct. Organizations also face potential civil exposure from third parties who say they were harmed by employee misconduct. Smith says that, in general, the same core principles that support sound employment decisions also help demonstrate that an employer has met its duty of care toward third parties, such as standard investigation and discipline principles. 

“Giving yourself the information you need to action properly is also going to help you show that you've met a duty to care where there’s a third party impacted,” he says. “Investigating it effectively, asking the right questions of the right people who are alleged to have committed the misconduct, and ensuring they have a chance to respond.” 

Smith believes that the organizations that fare best are those that have done their homework in advance — solid off-duty conduct and suspension clauses in contracts, clear investigative procedures, active relationships with external counsel and PR professionals, and whistleblower frameworks that work under pressure.  

Criminal allegations will always be disruptive to an organization, but with the right preparation and a disciplined playbook, HR leaders can turn chaos into a structured response that protects the organization’s legal position, honours its duty of care, and signals — both internally and externally — that integrity is nonnegotiable.