In the recent decision of Correia v. Canac Kitchens the Ontario Court of Appeal found that employers cannot be held liable for negligent investigation leading to the dismissal of an employee. In that case, an employer suspected that its employees were stealing and dealing drugs in its plant. The employer hired a private investigator who placed an undercover agent in the plant. In coordination with police, the agent identified a suspect and collected evidence of the alleged offences. When the investigation was complete the employer dismissed several employees who were charged by the police, including the plaintiff.

The only problem: the plaintiff was the wrong man.

As a result of investigative errors, instead of firing the correct suspect, the employer dismissed the plaintiff, who had a similar name. Once the error was uncovered, the plaintiff sued his employer, the private investigator and the police for negligent investigation.

The tort of negligent investigation

In 2007, the Supreme Court of Canada held in Hill v. Hamilton-Wentworth Regional Police Services Board that a police force which is negligent in the way it conducts investigations may be liable for injuries consequently inflicted on a suspect. In his claim, the plaintiff sought to expand liability for negligent investigation from police to encompass employers and private investigators.

In a significant victory for employers, the Court of Appeal held that employers cannot be liable for negligent investigation. There were two grounds for the decision. First, the Court held that to recognize a duty of care on employers in these circumstances could have a “chilling effect” on reports of criminality by honest citizens to the police.

Second was the finding by the Supreme Court of Canada in Wallace v. United Grain Growers Ltd. that there is no separate action in tort for breach of a good faith obligation in the dismissal of an employee. The Court of Appeal held that making employers separately liable for negligent investigations which lead to the dismissal of an employee would violate this rule.

Although the Supreme Court reconsidered Wallace in the Keays v. Honda Canada Inc. decision, which was released three days after Correia, it does not appear that the reasoning in Keays changes the basis for the Court of Appeal’s decision.

What does this mean for your business?

The Court of Appeal has drawn a bright line, explicitly refusing to hold employers liable for negligent investigations that lead to terminations. While this decision is good news for employers, it should be noted that an employer who conducts a negligent investigation of an employee may still be liable for wrongful dismissal and other torts, such as infliction of mental distress. In order to mitigate the likelihood of such claims, an employer should ensure that it diligently pursues any claims that the information used to support the dismissal is inaccurate.