Hearsay-based dismissal? Court awards over $200,000 in damages

Case involves ex-management who 'mishandled' sexual harassment complaint

Hearsay-based dismissal? Court awards over $200,000 in damages

The Court of King's Bench of Manitoba recently dealt with a wrongful dismissal case involving a worker who had been employed by a major railway company, Canadian National Railway Company (CN), for over 30 years. 

The case raised important questions about the circumstances under which an employer can terminate an employee without notice or pay in lieu of notice, and the role of summary judgment in resolving employment disputes.

In this case, the worker, who had an unblemished record and had worked his way up to a management position, was dismissed without notice after allegations of misconduct related to his handling of a sexual harassment complaint. 

Background and key issues

The worker had been employed by CN for 34 years at the time of his termination on April 5, 2021, at the age of 61. He had never been disciplined or charged with misconduct throughout his long career. 

The events leading to his dismissal began in January 2021, when a female employee made a complaint of sexual harassment against a male co-worker. Both employees reported directly to the worker.

CN appointed an independent investigator to look into the complaint. The investigator produced two reports that substantiated several allegations against the worker, including that he had witnessed inappropriate behaviour but failed to intervene, and that he had threatened to fire the complainant when she raised concerns about the incident.

However, the reports did not recommend termination of the worker's employment. Despite this, CN dismissed the worker without notice, citing the findings of the investigative reports.

The worker brought an action for wrongful dismissal, seeking 24 months' pay in lieu of notice and aggravated damages. He then brought a motion for summary judgment, arguing that there was no genuine issue requiring a trial.

The applicable legal principles

In its decision, the court began by reviewing the well-established principles governing wrongful dismissal claims, noting that "employers can be held liable in damages for failing to give reasonable notice of termination of a contract of employment or payment in lieu of notice.  In cases where sufficiently serious or egregious misconduct can be proven, the contract of employment can be terminated without notice."

The court emphasised the importance of a contextual analysis in assessing whether an employee's misconduct is sufficiently serious to justify summary dismissal, citing the Supreme Court of Canada's decision in McKinley v. BC Tel:

"McKinley teaches that no single act of impropriety or dishonesty by an employee can necessarily lead to termination for cause without notice, unless the facts when examined in context demonstrate that "… the impugned behaviour was sufficiently egregious to violate or undermine the obligations and faith inherent to the employment relationship" (at para. 55)."

The court also noted that the onus (burden) is on the employer to prove just cause for dismissal:

"If a dismissed employee establishes a fundamental breach of the employment contract, such as termination without notice or pay in lieu thereof, the onus shifts to the employer to prove on the balance of probabilities that there was just cause for the termination of the contract of employment (Irvine v. Gauthier (Jim) Chevrolet Oldsmobile Cadillac Ltd., 2013 MBCA 93 (CanLII), at paras. 55-56)."

Turning to the principles governing summary judgment motions, the court cited the Manitoba Court of Appeal's decision in Dakota Ojibway Child and Family Services et. al. v. MBH:

"The legal test for summary judgment under the King's Bench Rules is set out in Dakota Ojibway Child and Family Services et. al. v. MBH, 2019 MBCA 91 (CanLII), which provides at paras. 107-111 that the moving party bears the persuasive burden of proof at all times to establish that the process it is proposing allows for a fair and just adjudication on the merits and that there is no genuine issue requiring a trial."

Dismissal based on hearsay

The court found that CN had failed to meet its onus of proving just cause for dismissal. The court noted that CN had not provided any evidence from the individuals involved in the decision to terminate the worker's employment, and had instead relied solely on the hearsay evidence contained in the investigative reports:

"On the facts before me, I am left with no other conclusion than that CN took the most extreme option open to it (termination without notice) without being able to explain why this was proportional to the severity of the alleged misconduct.  The Reports themselves do not recommend a sanction for what the [worker] apparently did."

The court also emphasised the importance of procedural fairness in the dismissal process, even though employers do not owe a strict duty of procedural fairness to employees:

"Although CN did not owe a duty of procedural fairness to the [worker] by conducting a thorough investigation by its management team or offering him any kind of due process before terminating his employment, they took a risk by doing so,” the court said. 

“By failing to prove what facts it considered prior to termination, apart from the fact that an allegation of sexual harassment was raised, CN cannot discharge its onus under the McKinley test,” it added.

Worker’s damages

On the issue of damages, the court found that the worker was entitled to 24 months' pay in lieu of notice, based on his age, length of service, and the availability of similar employment.

The court rejected CN's argument that the worker had failed to mitigate his losses by accepting an early retirement package and not making reasonable efforts to find alternative employment:

"It is fundamentally unfair for CN to argue that the [worker] made a 'decision to retire' in these circumstances.  Due to the unjust conduct of CN in terminating his long-term employment without notice, the [worker] was faced with a difficult dilemma because he had no reasonable prospects of finding employment that would pay him substantially the same wages, benefits and bonus structure as he had enjoyed at CN."

In the result, the court awarded the worker damages in the amount of $202,197.12, representing the remuneration he would have received over the 24-month notice period. 

The court's decision reminded employers to conduct thorough investigations or provide employees with an opportunity to respond to allegations of misconduct before imposing the ultimate sanction of dismissal without notice.

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