Sexual harassment in the workplace continues to be a top legal risk for employers, especially in the context of the #metoo movement. Employers have a duty to investigate and promptly deal with allegations of harassment in the workplace. However, an Alberta court has issued a warning to employers regarding unfounded allegations of sexual assault and sexual harassment in just cause termination in the case of Smith v Vauxhall Co-Op Petroleum Limited, 2017 ABQB 525.

The plaintiff, Mr. Smith, and the employee, Ms. AM, were manager and subordinate, respectively, at the same company in the same department. After some time, they began a (secret) intimate relationship. Five years after it began, the relationship ended. Not unexpectedly, the working relationship between Mr. Smith and Ms. AM became strained.

Mr. Smith treated Ms. AM in a harassing manner at work following the end of the relationship. Eventually, Ms. AM complained to Mr. Smith’s superiors regarding his behaviour. She also alleged Mr. Smith had sexually harassed and sexually assaulted her both before and after the relationship ended. Mr. Smith was suspended while the claims were investigated. As it turned out, Mr. Smith had also failed to notify his superiors about the intimate relationship with Ms. AM (contrary to policy) and was dishonest or misleading when he had previously been asked by his superior about the nature of his relationship with Ms. AM.

After a short investigation, Mr. Smith was terminated for cause. Mr. Smith sued for wrongful dismissal. The defendant employer defended on the grounds that the just cause termination was established based on Mr. Smith’s personal harassment, dishonesty and sexual harassment, including sexual assault of Ms. AM. Significantly, despite a lack of supporting evidence regarding the sexual assault and sexual harassment claims, the defendant employer maintained those allegations through to trial.

The court dismissed the claim, finding Mr. Smith’s dishonesty regarding his relationship with Ms. AM and his personal harassment of Ms. AM were enough to justify a with cause termination. However, the court did not accept that Mr. Smith had sexually assaulted or sexually harassed Ms. AM and further, that the employer’s investigation into the allegations was problematic. It found that by continuing to maintain that Mr. Smith sexually assaulted and sexually harassed Ms. AM, the defendant had perpetuated an unfounded attack on Mr. Smith’s reputation. While the employer was the successful party, the court would not let the false allegations go unaddressed and noted the defendant’s continued reliance on Ms. AM’s allegations at trial could be reflected in a costs award.

The general rule is that the successful party is entitled to costs; there is rarely justification for making a successful party pay. However, when inviting the parties to make submissions on costs, the court went so far in remarking that “the Defendant’s persistence in alleging sexual harassment and sexual assault throughout trial will likely be a material consideration in any cost order.” The message from the court was clear: unfounded allegations of serious morally reprehensible conduct will not be ignored.

Tips for Employers

  1. Exercise caution when investigating employee misconduct. Investigations are necessary and useful tools regarding allegations of misconduct and can be indispensable in defending wrongful termination lawsuits. They are particularly critical where there have been allegations of morally reprehensible conduct. However, employers must carefully consider the evidence obtained by the investigation. For particularly egregious conduct, consider if your investigation uncovered sufficient evidence to justify the allegations.
  2. When defending on grounds of just dismissal, consider carefully the evidence supporting the allegedly improper conduct. Where the allegations are serious (such as sexual assault) consider if you have enough evidence to maintain those allegations through to trial.