Duty of Good Faith Owed to Employees Includes a Duty to Investigate and Respond Appropriately to Workplace Harassment: Boucher v. Wal-Mart, 2014 ONCA 419

In a recent decision, the Ontario Court of Appeal held that an employer may breach its duty of good faith and fair dealing to employees in cases where allegations of workplace harassment are brought to the employer’s attention and where, among other things, the employer fails to investigate and respond to the allegations appropriately. This is a significant extension of the duty owed by employers, which has previously been restricted to the manner in which an employer terminates a person’s employment. The decision implies that the duty subsists throughout the employment relationship, not just at the point of dismissal.

Summary of the Facts

Meredith Boucher began working for Wal-Mart in 1999. By all accounts, she was an excellent employee and received frequent promotions to greater and greater levels of responsibility. In 2008, Wal-Mart transferred her to their Windsor store and promoted her to assistant manager. Her immediate supervisor was the store manager, Jason Pinnock. Boucher and Pinnock initially had a good working relationship.

However, by May 2009, the relationship had become toxic after Pinnock pressured Boucher to alter an incomplete temperature log for a cooler. Pinnock wanted the log falsified because the omission in the log would affect his bonus. After Boucher refused, Pinnock gave her a disciplinary “coaching” session. Boucher complained to management with an expectation that her complaint would not be communicated to Pinnock. But Pinnock learned of the complaint, in violation of Wal-Mart’s Open Door Communication policy. After learning of the meeting, Pinnock’s abusive and demeaning conduct towards Boucher escalated. He told Samantha Russell, the Store People Manager, he would not stop until Boucher quit.

After reporting the incidents to Wal-Mart’s District People Manager, Wal-Mart purported to investigate the complaint and ultimately dismissed Boucher’s allegations as unsubstantiated. Wal-Mart accused her of trying to undermine Pinnock and advised her that she would herself face disciplinary consequences for having made an unfounded allegation against Pinnock. Management appeared to ignore the numerous incidents in which Pinnock had berated Boucher in front of co-workers and customers, as well as his comments to other managers, all of which evidence was heard at trial and some of which even went un-challenged on cross-examination, including Russell’s evidence of Pinnock’s motive. After a culminating incident in which Pinnock again demeaned her in front of her co-workers, Boucher left the store. Four days later she e-mailed Wal-Mart, writing that she would not return until her problems were resolved. No resolution came and she never returned. Russell observed Pinnock to be overjoyed when he found out that Boucher had quit.

The Claim and Order under Appeal

Boucher sued Wal-Mart alleging, among other things, constructive dismissal, and sued Pinnock for intentional infliction of mental suffering. She also sought aggravated and punitive damages against Wal-Mart and aggravated damages against Pinnock.

Justice Laskin for the panel summarized the order at trial as follows:

[3]         The action was tried before a judge and a jury.  The jury found that Boucher had been constructively dismissed and awarded her damages equivalent to 20 weeks salary, as specified in her employment contract.  The jury also awarded her damages of $1,200,000 against Wal-Mart, made up of $200,000 in aggravated damages for the manner in which she was dismissed, and $1,000,000 in punitive damages.  And the jury awarded Boucher damages of $250,000 against Pinnock, made up of $100,000 for intentional infliction of mental suffering, and $150,000 in punitive damages (awards for which Wal-Mart is vicariously liable as Pinnock’s employer).

The Appeal and the Court of Appeal’s Order

Wal-Mart appealed both its liability for and the amount of damages awarded against it as aggravated and punitive damages. Pinnock appealed his liability for intentional infliction of mental suffering, as well as the award of aggravated damages made against him.

The Court of Appeal upheld the aggravated damages award against Wal-Mart and reduced the punitive damages against Wal-Mart from $1,000,000 to $100,000. It upheld the liability of and amounts the jury awarded against Pinnock.

The Duty of Good Faith and Fair Dealing in the Employment Context

Although the Court of Appeal’s decision has many interesting aspects, the most important (certainly in the employment law context) is the case’s analysis of the content of an employer’s duty of good faith and fair dealing.

The issue arises in the context of the punitive damages the jury awarded against Wal-Mart. In cases where punitive damages are sought in the context of a breach of contract claim, the plaintiff must satisfy three requirements:

  • The defendant’s conduct must be reprehensible;
  • The punitive damages award must, when combined with any compensatory award, be rationally required to punish the defendant and meet the objectives of retribution, deterrence and denunciation; and
  • The defendant must have committed some independent actionable wrong, separate from the claim for damages for breach of contract.

Wal-Mart submitted that the jury charge improperly suggested that Pinnock’s conduct was the necessary independent actionable wrong that grounded the punitive damages claim.

While the Court of Appeal was critical of the jury charge, it nonetheless held that the jury had, in substance, concluded that Wal-Mart had breached its duty of good faith and fair dealing to Boucher.

There is nothing novel about this analysis. What is important about the case is Justice Laskin’s identification of the content of the duty. Although he held that the duty arose in the context of the manner of her dismissal, Justice Laskin appears to have concludedthat the duty extends beyond the facts that immediately surrounded her dismissal, and extends to other reprehensible conduct that occurred during the balance of the employment relationship.

In this case, the content of the duty and Wal-Mart’s breach centred on the employer’s investigation and response to Boucher’s harassment complaint. As the Court held:

[84]      … [T]he evidence reasonably supports the jury’s finding that Wal-Mart’s own conduct was reprehensible.  That evidence, which I reviewed earlier, includes Wal-Mart’s refusal to take Boucher’s complaints about Pinnock seriously, its dismissal of those complaints as unsubstantiated despite substantial evidence to the contrary, its unwillingness to discipline Pinnock or intervene to stop his continuing mistreatment of Boucher, its threatened reprisal against her, and its contravention of its workplace policies.  Although Wal-Mart may not have deliberately sought Boucher’s resignation, on the evidence led at trial that the jury undoubtedly accepted, Wal-Mart’s actions and its inaction were reprehensible.

In summary, the Court of Appeal held that the content of the duty includes:

  • A duty to treat harassment complaints appropriately;
  • A duty to investigate complaints adequately;
  • A duty to respond to workplace complaints appropriately, including intervening and/or disciplining other employees where appropriate;
  • A duty not to make reprisals against employees; and
  • A duty to abide by workplace policies the employer has promulgated.

The Court of Appeal’s decision will likely have wide ranging impacts on both labour and employment law, but also related areas including human rights and workplace safety.

The decision also opens up some interesting issues, which have yet to be litigated. For example, is it open to an employee to sue his or her employer for breach of its duty of good faith and fair dealing in circumstances where the employee is not asserting a constructive dismissal claim? The answer would seem to be “yes”, as it is necessary that the breach be an independent actionable wrong in order to support the award of punitive damages. It is also unclear whether such a lawsuit against one’s employer would itself be considered a renunciation of the employment contract.

It is also unclear to what extent a court will or should put itself in the employer’s shoes and second guess the outcome of a workplace investigation. In this context, the evidence of harassment was overwhelming. But what happens in a closer case? Is it appropriate for the court to substitute its judgment for the employer’s own?

It would also appear that the decision may influence the types of investigative processes undertaken by employers where workplace harassment complaints have been made. The decision raises the possibility that investigations may have to become more formal and more court-like in terms of their procedures. The question is: is this desirable? Or does it impose too high a duty on an employer? Might the formality mean that other objectives of workplace investigations (such as restoring the relationship between co-workers) be frustrated by the application of more formal processes?

The answers to these questions stand to be answered by subsequent cases. The point is that the case may stand as a watershed moment in which the employment relationship itself will become subject to greater scrutiny by the courts under the lens of an employer’s duty of good faith to its employees.

Conclusion

The Court of Appeal’s decision in Boucher v. Wal-Mart extends significantly the ambit and content of an employer’s duty of good faith and fair dealing, at least in the context of workplace harassment investigations and a constructive dismissal claim. Employers are now under an obligation to investigate workplace complaints and respond adequately. The full impact of this extension remains to be seen.