An employer always needs to be careful when accusing employees of misconduct, but an additional level of caution needs to be exercised when the alleged misconduct has criminal dimensions, and - as a new case from the Ontario Court of Appeal, Pate v. Galway-Cavendish (Township), 2011 ONCA 329, makes clear - an employer must be especially careful and diligent when reporting alleged employee misconduct to the police.
This is not the first cautionary tale. In a recent post about Canac Kitchens, I alluded to the Correia case in which the employer investigated thefts then mixed up two employees with similar names and reported the wrong one to the police.
This new Pate case, however, is interesting for a number of reasons.
Mr. Pate was the Chief Building Official for the Township of Galway and Cavendish for 9 years before it amalgamated to form the Township of Galway-Cavendish and Harvey on December 31st, 1998. He was relegated to a Building Inspector position and reported to Chief Building Official John Beaven. No, this isn't a constructive dismissal case. This arrangement didn't last long.
On March 26th, 1999, Mr. Pate was told of apparent 'discrepancies' relating to permit fees paid to him but not remitted. He was not given an opportunity to respond, but was told that, if he resigned, the matter would not be reported to the police. He did not resign, so he was fired and charged criminally.
In December 2002, following a trial lasting four days over the course of a year, he was acquitted, and he sued in December 2003 in wrongful dismissal and malicious prosecution. (A caution about limitations: Following amendments to the Limitations Act effective January 1st 2004, there would be a solid argument today to be made that the wrongful dismissal claim was brought too late.)
So the obvious questions are these: On what basis was he accused, and on what basis was he acquitted?
Well, Mr. Beaven was a retired staff sergeant from what was then known as the Metropolitan Toronto Police Service, and conducted his own investigation into certain irregularities - records of remittances missing, essentially - and prepared statements for the police relating to alleged theft of fees relating to six properties.
The trouble is that there were other explanations for the irregularities. In one case, the records were kept under a different name because the fees had been paid by the property owner's son-in-law. Mr. Pate noted this in his journal. However, on termination, Mr. Pate's journal was seized by Mr. Beaven, and was not provided to the police. In other cases, property owners had paid fees at a municipal satellite office which moved in 1998, during which move many files were lost. Municipal officials were well aware of the missing files, but police were not told.
One of the irregularities had even come to the Township's attention in 1995, whereupon it was investigated and the Township concluded that there was no wrongdoing. Of course, the police were not told about this.
Remember the effect on the employee, and the timeline. He was fired in March 1999, charged with theft in or around April 1999, and only had the charges finally dealt with in December 2002, nearly four years later. One can imagine the toll it would take on his professional life, and as well it seems that his marriage fell apart in that time.
The parties agreed on a reasonable notice period of 12 months, but argued about the entitlement to aggravated damages, punitive damages, and whether or not the employer was liable for "malicious prosecution". The trial judge dismissed the malicious prosecution claim, but awarded aggravated and punitive damages on the wrongful dismissal claim.
Malicious prosecution is a hard claim to make, but the trial judge found that this was a close case, then proceeded to refuse the claim...but made a couple of mistakes in doing so. He set the bar too high, finding that the necessary intention of the employer would have to have been to pervert the administration of justice, and also found that the employer did not 'initiate' the prosecution...failing to fully consider the effects of its failure to disclose the material exculpatory facts in its possession. To top it all off, the trial judge did find malice in the wrongful dismissal context, so the conclusion that there was no evidence of malice in the malicious prosecution context is inconsistent.
The other issue on the appeal was the quantum of punitive damages: The judge awarded $25,000, essentially saying that the principle of proportionality prevented him from awarding more. The Court of Appeal found that the reasons the judge provided for limited himself were inadequate.
So we're more than twelve years past the termination date, and the Court of Appeal sent the matter back for a new trial on those two issues.
The lesson for employers is simple: When referring a matter to the police, make sure you're certain of your reasons for doing so, and make sure you disclose everything to the police.
Also, I should highlight that the "Resign and we won't call the police" bit is most certainly not conduct the Court would look kindly upon. As a lawyer, I am prohibited by the Rules of Professional Conduct from threatening criminal proceedings to secure a civil advantage. It smells like blackmail, and that's how the Courts are likely to see it.
This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.