A recent decision of the Ontario Superior Court has indicated that employers may in breach of their contractual duty of good faith if they fail to provide employees with due process rights in workplace investigations.
The recent decision in Joshi v National Bank of Canada, 2016 ONSC 3510 Justice Diamond refused to strike out portions of a statement of claim that alleged, among other things, that the National Bank of Canada breached its duty of good faith to Mr. Joshi because it did not notify him of any investigation into any allegation or any kind of misconduct while he was an employee.
Mr. Joshi had voluntarily resigned from the National Bank of Canada. In fact, Mr. Joshi only found out about the allegations of misconduct after he commenced employment with the Bank of Montreal and discovered that the National Bank of Canada had added his name to a crime prevention database intended for banks to report individuals found guilty of serious banking crimes. In addition, the National Bank of Canada had made representations to other banks, including the Bank of Montreal, about the allegations against Mr. Joshi. As a result of these acts, Mr. Joshi alleged that his subsequent employment with the Bank of Montreal was terminated early.
In dismissing the National Bank of Canada’s motion to strike in respect of Mr. Joshi’s claim of a breach of the duty of good faith, Justice Diamond stated that at a minimum, there exists an implied contractual obligation to afford employees who are the subject of an investigation of misconduct the opportunity to respond or refute the allegations of misconduct. Failing to provide the opportunity to respond “could qualify as a breach of the duty of good faith” (paragraph 27). If the National Bank of Canada had commenced an investigation prior to Mr. Joshi’s resignation, Justice Diamond opined that the facts, as pleaded, could support a claim for the breach of a duty of good faith. Justice Diamond further stated that the National Bank of Canada’s subsequent actions – including adding Mr. Joshi to a crime prevention database and making representations to other banks – “would be premised upon a potential breach of the duty of good faith and carried out in furtherance of that alleged breach” (paragraph 27).
Outside of the statutory context (i.e. the Human Rights Code) it is still unclear to what extent and whether employers will be held to account for their conduct in workplace investigations. Justice Diamond does not conclusively opine on whether the duty of good faith extends to workplace investigations, but he certainly opens the door to this type of claim. The Joshi decision is a good reminder to employers and their counsel that the standards for workplace investigations are still being delineated and best practices should always be employed, which means that the accused should always be notified of the alleged misconduct and should always be given an opportunity to respond to allegations made against them.
While the standard of proof in criminal law is to establish facts beyond a reasonable doubt, civil courts and administrative tribunals generally require that claims be proven on a balance of probabilities. Thanks to a recent decision of the Ontario Court of Appeal, we now know that the standard of proof in police discipline hearings lies somewhere in between.
Subsection 84(1) of the Police Services Act provides that “misconduct” as defined under the Act “is proved on clear and convincing evidence”. The Court of Appeal’s unanimous decision in Jacobs v. Ottawa (Police Service) [link: http://www.canlii.org/en/on/onca/doc/2016/2016onca345/2016onca345.pdf], specifies that “clear and convincing evidence” mandates a standard of proof that lies somewhere between a balance of probabilities and proof beyond a reasonable doubt.
Overturning the lower court’s decision, Justice Hourigan wrote that the Division Court erred in declining to follow the Supreme Court’s decision in Penner v. Niagara (Regional Police Board) [link: https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/12962/index.do] that acknowledged this third standard of proof in police disciplinary hearings. In Penner, the Supreme Court wrote:
“because the PSA requires that misconduct by a police officer be ‘proved on clear and convincing evidence’, it follows that such a conclusion might, depending upon the nature of the factual findings, properly preclude relitigation of the issue of liability in a civil action where the balance of probabilities — a lower standard of proof — would apply. However, this cannot be said in the case of an acquittal. The prosecutor’s failure to prove the charges by “clear and convincing evidence” does not necessarily mean that those same allegations could not be established on a balance of probabilities. Given the different standards of proof, there would have been no reason for a complainant to expect that issue estoppel would apply if the officers were acquitted.” [emphasis added]
Justice Hourigan concluded, “In my view, we are bound by the Supreme Court’s statement in Penner that the standard of proof in PSA hearings is a higher standard of clear and convincing evidence and not a balance of probabilities.”
This higher standard of evidence will likely make it more difficult for prosecutors in police disciplinary hearings to prove that officers have engaged in professional misconduct. However, the precise meaning of “clear and convincing evidence” has yet to be determined. Neither the Court of Appeal nor the Supreme Court has provided any guidance on the content of this third standard of proof. It also remains to be seen whether similar intermediate standards of proof will become more common before other administrative tribunals.
Andrew Wray is a panelist at the Law Society of Upper Canada’s 4th Annual Human Rights Summit on November 30, 2015. Andrew is presenting a paper entitled “Under the Microscope: Judicial Review of Human Rights Decisions”, co-authored with Niiti Simmonds and Dina Awad of Pinto Wray James LLP.
The Ontario Superior Court’s recent decision in Antunes v Limen Structures Ltd is an important caution to employers who embellish the attributes of their company or a particular position when courting future employees. This decision makes clear that the general duty of honesty in contractual performance can impact an employer’s liability for compensation in lieu of reasonable notice upon termination.
The plaintiff, John Antunes started working as a Senior Vice President of Operations/Concrete Forming with the defendant, Limen Structures Ltd (“Limen”), on May 28, 2012. After just over five months, and without prior notice, Mr. Antunes was terminated without cause on November 9, 2012.
Mr. Antunes’ employment agreement provided that he would be compensated with a starting salary of $150,000 per year, which was to increase to $200,000 after his first year of employment. In addition, he was to receive 5% of Limen’s shares, with the potential for another 5% of the shares of Limen’s Residential Division within a year of the commencement of his employment. Lastly, the employment agreement provided for up to 12 months’ pay in lieu of notice for termination.
At the date of his termination, no shares had been issued to Mr. Antunes.
Prior to signing the employment agreement, Mr. Antunes discussed the terms of his employment with Mr. Lima during numerous phone calls and two in-person meetings. During these discussions, Mr. Lima advised Mr. Antunes that the company, in his opinion, was worth $10 million. Mr. Antunes relied on Mr. Lima’s representation, along with the promise of company shares, when he agreed to sign an employment agreement with Limen on May 28, 2012.
At trial, Mr. Antunes testified that shortly after starting at Limen, he realized that the company was not worth $10 million. Limen did not call Mr. Lima, or any other witness at trial. Given that he was as a material witness with direct and relevant knowledge of the value of the company and the negotiation of Mr. Antunes’ employment agreement, Justice Brown drew an adverse inference from Mr. Lima’s failure to testify.
Ultimately, Justice Brown awarded Mr. Antunes 8 months’ reasonable notice. In determining the amount of reasonable notice owing to Mr. Antunes, Justice Brown applied the well-established factors for determining the reasonable notice period as set out Bardal v Globe & Mail Ltd (1960), 23 DLR (2) 140; namely the character of the employment (project manager in construction with supervisory responsibilities), Mr. Antunes’ length of service (5 months and 11 days), his age (50 years old) and the availability of similar employment, having regard to Mr. Antunes’ experience, training and qualifications.
Justice Brown also considered the impact of Mr. Antunes’ allegation of inducement, which she quickly dismissed, and Limen’s bad faith in terminating Mr. Antunes (of which there were ample facts to support). Of particular note, however is her consideration of general duty of honesty in contractual performance.
In relying on the Supreme Court’s recent decision in Bhasin v Hrynew, Justice Brown states that parties must be able to rely on a minimum standard of honesty from their contracting partner in relation to performing the contract as a reassurance that if the contract does not work out, they will have a fair opportunity to protect their interests (Bhasin v Hrynew, 2014 SCC 71 at paragraph 86). Justice Brown finds that Limen failed to act honestly in the performance of its contractual obligations when:
The above misrepresentations, which Mr. Antunes relied on in accepting the offer of employment, were central to Justice Brown’s determination of an eight month reasonable notice period.
Interestingly, Justice Brown determines that Mr. Antunes is entitled to the 8 months’ reasonable notice under his employment agreement as well as at common law. Although she concludes that the contractual entitlement to eight months reasonable is justified on “the plain wording of the contractual provision, [Limen’s] failure to act in good faith vis-à-vis the employment contract and the misrepresentations on which [Mr. Antunes] relied, and on the adverse inference … drawn against [Limen]”(see paragraph 74) she seems to apply the same Bardal analysis as applicable at common law.
In Limen’s case, Mr. Lima’s embellishments cost them 8 months’ salary in addition to $500,000 for Limen’s failure to issue Limen shares to Mr. Antunes as per the terms of the employment agreement. Justice Brown accepted the uncontroverted evidence that Mr. Lima told Mr. Antunes the shares were worth about $500,000 and concluded that Mr. Antunes “is to be put in a position commensurate with his expectations arising from the contract and from Mr. Lima’s representations to him.”
While it is of no surprise that employer conduct at termination can impact the reasonable notice period, this decision serves as a warning to employers who over-sell the benefits of their offer to potential employment candidates. Where such embellishments are relied on in accepting an offer of employment, they may translate into greater employer liability post-termination.
A recent case of the Federal Court of Appeal, Bernard v Canada (Customs and Revenue Agency), 2015 FCA 263, is a cautionary tale on the importance of collecting all necessary evidence and putting it before an administrative decision maker in the first instance, and not before a Court on judicial review. An applicant challenging administrative or government decision making will normally be prevented from introducing new evidence before the reviewing Court which was not put before the original administrative decision maker. This rule exists not just for efficiency, but to maintain and protect the different roles entrusted to administrative decision-makers and reviewing courts by Parliament.
In Bernard, the applicant sought judicial review of a Public Service Labour Relations and Employment Board decision not to reconsider its earlier decision, which the applicant alleged was tainted by a reasonable apprehension of bias. On judicial review, the applicant sought to file an affidavit containing paragraphs and exhibits which had not been put before the Board. The respondent moved to strike this new evidence. In response, the applicant submitted that the evidence was relevant to her allegations of bias and a breach of natural justice and should remain in the Court record.
The Court found that this new evidence could have been placed before the Board in the first instance and granted the respondent’s motion to strike it from the record. The Court explained that the rule preventing an applicant from introducing new evidence on judicial review is rooted in the fundamentally different roles accorded to administrative decision-makers as “merits deciders” and judicial review courts as “reviewers”. The evidence the applicant sought to file went to the merits of the matter before the Board and was available at the time of the Board’s proceedings.
The Court noted that the general rule is subject to exceptions and the evidence did not fall within any of these. The Court explained that the general exceptions are:(1) if the evidence is filed to provide background information or a summary of the evidence that was before the administrative decision-maker; (2) if the evidence is filed to disclose a complete absence of evidence and tell the reviewing court what cannot be found in the record; and(3) if this evidence is filed to provide details relevant to an issue of natural justice, procedural fairness, improper purpose or fraud. However, if the evidence of natural justice, procedural fairness, improper purpose or fraud had been available at the time of the administrative proceedings and the party had the capacity to object to the issue at that time, this exception does not apply.
This decision highlights the importance of seeking legal advice early on to identify and collect all necessary evidence when approaching an administrative decision maker to challenge a decision. Although administrative proceedings may be more informal than Court proceedings, it is important to understand the legal evidentiary principles applicable to maximize the chances of success. If this is not done, important evidence may be missing that is essential to a successful legal outcome of a case.