A recent decision of the Superior Court of Justice, O’Reilly v Purolator Courier Ltd, 2014 ONSC 3266 (CanLII), suggests that questions regarding how a workplace investigation was conducted may mean that a release signed in favour of the employer may not be enforceable.

The facts of the case are straightforward. In 2007, two female Purolator employees complained that a fellow male employee sexually harassed and assaulted them over a two and a half year period. Purolator investigated the complaints and concluded that there was not enough evidence to support the complaints. The employees went to the police, and the male employee was charged with two counts of criminal harassment. He was eventually convicted of one count.  This was in 2009.

By that time, both employees had been terminated due, to what the company maintained, was restructuring. They had both been offered severance packages well in excess of the statutory minimums, and had been given time to consider the package and consult with a lawyer. They had both signed a comprehensive full and final release that clearly stated that in consideration of the payment of the severance amounts, they would not commence legal proceedings against Purolator or its employees.

Nevertheless, both employees commenced an action against Purolator seeking damages for wilful infliction of mental distress, stemming from the harassment and assault. The employer brought a summary judgment motion on the basis that the release clearly precluded the commencement of the action. The employer lost. The motions judge concluded that notwithstanding the recent jurisprudence highlighting the broader use of summary judgement motions, there was a genuine issue for trial in this case. The basis for this was the plaintiffs’ evidence that, amongst other things, they did not understand that what they were signing precluded action on the basis of the harassment and assault, they were unsophisticated,  and had signed under duress.

I would not have thought these to be particularly strong arguments in light of the existing case law on the enforceability of signed releases. On its face, this employer seems to have done everything right in terms of the execution of the release, as well as the form of it.

Why then were these employees successful at least at this stage? As I read the decision, it would appear that the judge was concerned that the investigation was not properly handled. The decision refers to a video showing an incident of harassment of the complainant that was apparently disregarded by the employer in the course of the investigation. This seems to have been at odds with the employer’s conclusion that there was insufficient evidence to support sexual harassment and/or assault. The employees also claimed that the person who decided to terminate their employment was a friend of the co-worker accused of harassment and assault. This raises the possibility of a biased decision maker. The evidence also showed that one of the employees was fired two days after she testified at the criminal trial of the co-worker. This looks like a potential reprisal. At the very least, then, the workplace investigation optics may have looked bad to the motions judge.

This is certainly a new twist on the legal consequences of a potentially flawed investigation.  Thus far, when a workplace investigation has been problematic, employers have been required to pay damages well in excess of pay in lieu of notice, including so called moral damages. Here the suggestion is that a problematic investigation may nullify a release in some circumstances.

The case is headed for trial and we will have an opportunity to learn more about the investigation that occurred and whether there was indeed something substantially wrong with it. This may very well be instrumental in whether this employer can ultimately rely on the release. Should these employees ultimately succeed, employers can add preventing “shaky releases” to the list of reasons why it is important to conduct proper workplace investigations.

Janice Rubin