Canada: Ontario Court Dismisses Claims For Constructive Dismissal And Bad Faith Damages Arising From Workplace Investigation

Claims of constructive dismissal and allegations of bad faith in the context of workplace investigations can be particularly challenging for employers. However, a recent decision of the Ontario Superior Court of Justice provides an example of when such claims will not be successful and includes some helpful findings for employers facing similar claims.


Persaud v Telus Corporation, 2016 ONSC 1577, involved an employee, Jan Persaud, who worked for Telus as a Java developer for seven years until resigning in 2004. Throughout her employment, Persaud maintained a close friendship and mentoring relationship with one of her supervisors. When the supervisor resigned from Telus, Persaud followed suit and resigned two days later. Nonetheless, Persaud subsequently commenced an action alleging that she had been constructively dismissed on the basis that Telus had increased her hours and caused her to work in a poisoned work environment.

Persaud also sought damages for bad faith termination, intentional infliction of mental suffering, and aggravated and punitive damages relating to a subsequent workplace investigation conducted by Telus that concluded Persaud had accessed and sabotaged Telus' server after her departure. The results of the workplace investigation were reported to Toronto Police, but charges were not laid.

In a decision dated April 5, 2016, the Honourable Justice Glustein dismissed all of Persaud's claims.

Constructive Dismissal Claim

In order for a constructive dismissal to occur there has to be either (a) a unilateral change to an essential term of employment, or (b) a series of acts evidencing an intention to no longer be bound by the terms of the employment contract. In this case, Persaud alleged that there had been both a unilateral change (i.e., an increase in her hours) and a series of acts (i.e., a poisoned work environment). However, Persaud's position was complicated by her resignation letter that attributed her departure to unhappiness with a perceived lack of loyalty by Telus to its employees.

Persaud argued that as long as a breach of the employment agreement satisfying (a) or (b) had occurred, a claim for constructive dismissal could succeed even if the ultimate reason for the resignation was not related to the breach. The Court disagreed. Instead, it held that the reason for the resignation must be related to a breach under either (a) or (b) of the test in order for a claim of constructive dismissal to succeed. Further, based on the evidence, the Court found that neither a breach under (a) nor (b) had been made out.

With respect to her work hours, Persaud's allegation that she resigned because of a concern that her work hours would increase following her supervisor's resignation was unwarranted given that she did not give Telus an opportunity to address the impact of the supervisor's departure.

With respect to the allegation of a poisoned work environment, Persaud's evidence was limited to allegations that two supervisors raised their voices in meetings in 2003. The Court held that the alleged incidences were minor, and noted that there had been no complaints related to these isolated incidents until after Persaud's resignation. In these circumstances, the Court concluded there was no "hostile environment" that would support a claim for constructive dismissal.

Finally, even if there had been a unilateral change in work hours or the two incidents could support a claim for a poisoned work environment, the Court concluded that Persaud had acquiesced in, or condoned, any such changes or conduct. Persaud's own evidence was that her working hours had increased in 2002 (two years prior to her resignation) and that, in any event, she would have stayed at Telus had her supervisor not resigned. The Court also noted that at the relevant time many employees were leaving Telus for competitors due to higher salaries and that Persaud could easily have found alternative employment, which further supported a finding of condonation.

Workplace Investigation Claims

Following Persaud's resignation, Telus experienced three serious billing malfunctions and assembled an internal investigation team consisting of security team members and technical specialists to determine the cause of the malfunctions. The investigation team concluded that the billing malfunctions were the result of sabotage caused by an external intruder. Based on the evidence, including that the intruder had used Persaud's user ID, the investigation team concluded that Persaud had accessed the server after her departure from Telus and caused the billing malfunctions.

In assessing whether the workplace investigation was conducted in bad faith, the Court noted that it was not necessary to determine whether the conclusions reached by the investigation team were accurate. Rather, the question was whether Telus had a good faith basis to conclude that Persaud was the author of the sabotage. The Court held that Telus did indeed have a good faith basis for this conclusion.

Helpfully, the Court rejected the allegation that the investigation report could be said to be in bad faith or outrageous simply because Telus did not rely on external consultants and did not contact Persaud before preparing the report. The Court held that the investigation team consisted of Telus employees with abilities relevant to the investigation and there was no evidence that participation by Persaud would have altered the result.

Finally, the Court concluded that, even if the conclusions in the investigation report were wrong, at worst Telus' conduct would constitute an "honest mistake" and would not amount to bad faith or unfair conduct that could support Persaud's claims.

Key Takeaways for Employers

This decision includes a number of findings that will be of assistance to employers facing claims of constructive dismissal or allegations of bad faith arising out of workplace investigations:

  1. For constructive dismissal to occur, the alleged breach of the employment contract must be tied to the reason for resignation. To minimize these claims, employers should request a written resignation letter or otherwise document employee resignations. 
  2. The "ordinary stress" flowing from the nature of a position cannot be the basis for constructive dismissal as it could not cause a reasonable person to conclude that the employer no longer intends to be bound by the employment contract.
  3. An external workplace investigation is not necessarily required to avoid a bad faith claim. An investigation by appropriate individuals within the company (provided they do not have any preconceptions as to the outcome of the investigation) can be sufficient.
  4. Simply notifying the police of conclusions reached by a workplace investigation does not, at least in the circumstances described in this case, meet the test for bad faith, intentional infliction of mental suffering, or punitive damages.
  5. Provided that a workplace investigation is conducted fairly without any preconceptions as to the result, any honest mistakes in an investigation report's conclusions should not give rise to liability for bad faith.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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