Poor investigation leads to potential bad faith lawsuit

One leading employment lawyer offers insight into a recent case which highlights the importance of due diligence.

Poor investigation leads to potential bad faith lawsuit
In 2014 the Supreme Court of Canada recognized a legal obligation to perform contracts in good faith.  Our blog on that decision: Bhasin v. Hrynew, 2014 SCC 71 can be found here.  In 2016, that principle is being applied in an ongoing Ontario Court action. 

The Plaintiff, Rajesh Joshi, was employed by the Defendant, National Bank of Canada, from 2009 until he got a new job with the Bank of Montreal and tendered his resignation in June 2014.  Unbeknownst to Mr. Joshi, before his resignation, the National Bank of Canada was conducting an internal investigation into allegations of serious misconduct during his employment.  Also unbeknownst to Mr. Joshi, after his resignation the National Bank contacted the Canadian Bankers Association Bank Crime Prevention and Investigation Office (BCPIO) and added the Plaintiff’s name to that database.  The BCPIO database is intended for member banks to report individuals found guilty of serious banking crimes. 

When BMO noticed that their new employee’s name was on the BCPIO database, it contacted the Defendant to ask about it.  The Defendant allegedly told BMO that Mr. Joshi had “resigned before being met by an investigator” and that he “falsified documents relating to mortgage application files”.  The Plaintiff also alleged that the Defendant advised a representative from CIBC that he had committed mortgage fraud.

The Defendant moved to have the Court strike the Plaintiff’s claims for intentional interference with economic relations, and breach of the duty of good faith.  The Court agreed with the Bank on the first ground, but refused to strike the duty of good faith claim.

The Defendant stated that since Mr. Joshi had resigned his employment, there was no remaining contract that the Bank had to perform in good faith.  The Plaintiff of course disagreed, stating that there are a number of contractual obligations that continue even after the contract ends, both express and implied.  The Court sided with the Plaintiff I this regard, stating in relevant part at paragraph 26:

[26]           …  There is no doubt that the defendant owed a duty to perform employment contractual obligations and without misrepresentation.  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.

The Court ruled that given the allegation that the Bank did not afford that opportunity to the Plaintiff, and in light of the allegations of subsequent breaches including adding the Plaintiff’s name to the BCPIO database without proper investigation and making representations to other member banks, there was no reason to strike those allegations.

It is important to note that this decision is not a final ruling on the bad faith claim, and the Court has not made any factual findings yet.  But more important to employers should be the fact that the Court is willing to entertain claims that employers have not properly conducted their investigations, not just in wrongful dismissal claims, but now also in the context of the relatively new legal obligation of good faith in contractual relations.

Workplace investigations are often delicate undertakings.  Employers are well-advised to seek out legal advice to ensure that their workplace investigations are being carried out properly, both in terms of substance and procedure.  The Ontario Court has just sent a strong message for employers to heed: even after your employee has resigned, you still owe them a duty to carry out their contract in good faith.  The following lawyers at CCPartners are experienced in conducting workplace investigations and can help ensure that your company remains legally compliant in their employee relations.

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