Canadian Lawyer InHouse

By Henry Dinsdale and Jeff Goodman Criminal investigations in the workplace How to avoid the pitfalls of dismissal for criminal conduct. I n part one of this two-part series, we look at how involving police upon discovering possible workplace fraud can impact an employer's abil- ity to carry out its own investigation and, where justified, terminate employees for just cause. Most employers will at some point face situations involving the discovery of workplace theft or fraud. When discov- ered, many employers will respond viscer- ally and immediately involve the police. However, where an employer has no tan- gible evidence to prove who is behind these criminal acts, it should carry out an internal investigation before reporting the theft to the police. Immediately involving the police may compromise the employer's ability to con- duct a proper internal investigation and by extension, its ability to build a strong just cause case for termination of the guilty employee without notice or pay in lieu of notice. It can also expose the employer to aggravated and punitive damage claims. Police forces are operating with lim- ited resources, especially fraud units. As a consequence, employers can sometimes wait months or years for police to investi- gate workplace fraud or theft. Early police involvement in a fraud investigation is far more likely if the employer conducts its own internal investigation and can provide police with a written report containing the investigation findings and any documen- tary evidence supporting those findings. An internal investigation allows the employer the opportunity to interview employees and outside parties regarding the suspected theft or fraud. An employee has a duty to co-operate with an employer's investigation and by extension employ- ers may draw adverse inferences from an employee's dishonesty in answering or even refusing to answer the employer's questions. This lack of co-operation can support a decision to dismiss the employee for just cause. Police investigations occurring prior to or simultaneously with internal employer investigations may have the effect of com- promising the employer's investigation and make it harder for the employer to deter- mine if it has just cause to terminate an employee without notice. For example, where a police investigation is ongoing (or even in cases where the employee is aware the police have been contacted but have not yet become involved), an employee can invoke his Charter protections against self-incrimination when questioned by his employer. This may severely comprom- ise the employer's ability to rely on the employee's refusal to answer questions or co-operate with the investigation in sup- port of a termination for just cause without notice. Further, during criminal investigations police often seize documentary evidence from the employer and employees that, in turn, may negatively impact the employer's ability to effectively conduct an internal investigation. This is particularly true if an employee is subsequently charged by the police, as the employer may not be able to access this documentation until the out- come of the criminal proceedings, often years later. Relying on police investigation findings to terminate an employee for just cause also has its own risks. If an employee is charged prior to the employer conducting its inves- tigation, the employer may be placed in an untenable position from a civil perspective. If they rely on criminal charges to termin- ate the employee for just cause and the employee is later acquitted, they will be exposed to a claim for wrongful dismissal. While an employee who is acquitted crim- inally may still be properly discharged for just cause on a civil standard, the employer will effectively be forced to rely on the find- ings in the criminal investigation, having not conducted its own investigation prior to terminating the employee. Suspending the employee pending the outcome of the criminal trial is also prob- lematic. It may take several years before the trial is completed. The cost to the employer of leaving the employee on a paid sus- pension may exceed the costs of simply terminating the employee without cause at the time they were arrested. On the other hand, the Supreme Court of Canada has ruled that suspending employees without pay pending the outcome of the criminal trial will allow them to treat themselves as having been constructively dismissed. By holding off contacting police until they have completed their own internal investigation, an employer can ensure they can demand a greater level of co-operation from their employees. They will also be in a better position to learn everything there is to know about the alleged fraud includ- ing who is the likely culprit. Further, with this greater level of disclosure it will have a better chance of convincing police to review the investigation report and poten- tially lay charges. In the second part of this article we will consider a recent Ontario Court of Appeal decision which introduces an additional risk for the employer who contacts police before gathering all the facts, which is greater exposure to the tort of malicious prosecution. IH Henry Dinsdale and Jeff Goodman are labour and employment law partners with Heenan Blaikie LLP in Toronto. INHOUSE APRIL 2012 • 9

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