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Employment & Labour

Employer owes duty of good faith in investigations

A recent decision from Ontario’s Superior Court of Justice should serve as a warning to employers to inform staff of allegations against them and provide a chance to respond, says Vaughan labour and employment lawyer Arthur Zeilikman

“Common law does not afford robust procedural fairness per se,” says Zeillikman, principal of Zeilikman Law

“But there is certainly a trend in jurisprudence and now with this decision, it shows there is an obligation for good faith in contractual performance.”

In Joshi v National Bank of Canada, 2016 ONSC 3510 (CanLII), the judge refused to allow the defendant the chance to strike a portion of the plaintiff’s pleadings, saying his employer had breached its duty of good faith.

The plaintiff, a mortgage development manager who left his position at National Bank of Canada for a new job offer at Bank of Montreal (BMO), launched the court action after what he claimed was a damaging investigation against him.

He alleges in his pleadings that National Bank added his name to a database that tracks serious banking crimes, which he claims seriously impacted his reputation and led to the loss of his new job.

“The plaintiff claims that as a result of, inter alia, his name being registered with the BCPIO database, his employment with BMO was cut short and he suffered resulting damages,” the court document says.

National Bank argued that the duty of good faith was not applicable in the case and that the portion of the man's statement of claim dealing with those details should be struck.

Justice James Diamond sided with the employee on that issue, finding the bank "owed a duty to perform contractual obligations without misrepresentation." 

Diamond wrote: “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.”

Zeilikman, who was not involved in the case and comments generally, tells that the judge's decision underscores the need for employers to understand they have a duty to allow the employee due process and, at a minimum, let them respond to any allegations. 

The employer must allow procedural fairness if there is an investigation "because if the employer wants to dismiss an employee with cause or if they lied or misrepresented a certain aspect, the employee may have legal grounds to do something about it," he says.

Zeilikman adds it’s important to note that in the pleadings stage, as this case was in, the court has not yet made a determination of the facts.

“There was no finding that the employer did not fulfil its contractual obligation or committed a wrong of any kind. There is no determination that the employee was not properly notified,” he says.

The case highlights two significant obligations of the employer, Zeilikman says.

“They have a duty to be honest and candid in their contractual relationship with the employee,” he says.

“The second obligation is to act fairly and in good faith in the employee's contractual performance. Employers should also be reminded of good faith in the manner of dismissal."

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