Smith v Vauxhall Co-Op Petroleum Limited, 2017 ABQB 525

Court of Queen’s Bench of Alberta Citation: Smith v Vauxhall Co-Op Petroleum Limited, 2017 ABQB 525 Date: 20170830 Docket: 1006 00032 Registry: Lethbridge Between: Rick Smith Plaintiff - and - Vauxhall Co-Op Petroleum Limited and South Country Co-Op Limited Defendant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C. Dario _______________________________________________________ I. Introduction [ 1 ] The Plaintiff, Ricky (Rick) Smith (“ Mr.

Smith ”), claims against the Defendant, his former employer Vauxhall Co-Op Petroleum Limited (the “ Co-Op ”, now South Country Co-Op Limited), for wrongful termination. The Defendant asserts Mr. Smith was summarily dismissed for just cause due to dishonesty and the breach of workplace policies prohibiting sexual harassment, including sexual assault, and personal harassment. II. Background

[2] Mr. Smith worked for the Co-Op for over 20 years, from the spring of 1987 to August 28, 2009. He was initially employedas a Driver Salesman, promoted to Petroleum Manager, and then subsequently promoted again to Division Petroleum Manager. Mr.Smith did not have a written employment agreement for any of his positions with the Co-Op. [3] In 2003, AM (“Ms. AM”) was hired by Mr. Smith as a Driver Salesman. After Mr. Smith was promoted to DivisionPetroleum Manager, Ms. AM was promoted into Mr.

Smith’s previous role as Petroleum Manager based on his recommendation. [4] The parties dispute how and when the romantic relationship between Mr. Smith and Ms. AM (the “Relationship”) began.Ms. AM claims it commenced in the summer/fall of 2003, after Mr. Smith allegedly sexually assaulted her. Mr. Smith claims itcommenced in February 2004 and was initiated by Ms. AM based on mutual interest. [5] The Relationship continued until October 2008, at which point Ms. AM told Mr. Smith that she had met someone else.Subsequently, the work relationship between Mr. Smith and Ms. AM became strained. Mr. Smith claims Ms.

AM was insubordinate,while Ms. AM claims Mr. Smith was controlling and repeatedly threatened to fire her without reason. [6] By August 2009, Ms. AM advised Mr. Smith’s supervisor, Miles Longman, of the Relationship and Mr. Smith’s allegedsexual harassment and sexual assault. After meeting with Mr. Longman on August 25, 2009, Mr. Smith was suspended for three days sothat Mr. Longman could conduct an investigation. Following this suspension, Mr. Smith was terminated without notice or pay in lieu ofnotice, effective August 28, 2009. [7] The parties dispute whether, prior to the suspension, Mr. Longman notified Mr.

Smith of the grounds for his termination. Itappears, however, that Mr. Smith was made aware of at least some of those grounds when meeting with Mr. Longman on August 25. [8] Mr. Smith was notified of his termination on September 2, 2009. Mr. Smith’s termination notice references only a “MajorViolation (misconduct),” described as severe but with no other details. Mr. Smith alleges he previously told Mr. Longman about theRelationship and denies the allegations of sexual harassment and sexual assault. [9] Mr. Smith testified at trial and also called four other witnesses to testify: two prior Co-Op employees; Mr.

Smith’s long-timefriend; and Mr. Smith’s current wife. The witnesses called by the Defendant include: the Co-Op’s current corporate representative, BruceBuckingham; the Co-Op’s former Corporate Controller, Laura Coward; Ms. AM; and Ms. AM’s current husband, TR (“Mr. TR”). [10] Ms. AM’s friend of over 20 years, LW (“Ms. LW”), was unavailable to attend trial. Her evidence, however, was permitted tobe entered de bene esse into trial by video and verbatim transcription of her examination and cross-examination, pursuant to Rule 6.21 ofthe Alberta Rules of Court, Alta Reg 124/2010.

Selected portions of the questioning of Mr. Smith’s former superior, Mr. Longman, werealso entered into evidence, as he too was unavailable at trial. At the time of questioning, Mr. Longman was acting as the Co-Op’scorporate representative. III.

Issues [11] The following issues arise from the hearing of this matter: 1) Did the Plaintiff violate the Defendant’s workplace policies and, if so, do the violations constitute serious misconduct? 2) Was the Plaintiff dishonest with the Defendant about the Relationship and, if so, does the dishonesty constitute seriousmisconduct? 3) Assuming the Plaintiff committed serious misconduct, does the misconduct constitute grounds for

summary dismissal? 4) Assuming the Plaintiff committed serious misconduct, was the misconduct condoned by the Defendant? 5) Assuming the Plaintiff was wrongfully terminated, what is an appropriate notice period? 6) Is the Plaintiff entitled to aggravated and/or punitive damages? IV. General Legal Principles [12] An employee may only be dismissed with reasonable notice, or pay in lieu of notice, unless the employer has just cause fortermination: Honda Canada Inc v Keays, 2008 SCC 39 at para 50.

The employer is only relieved of its common law obligation toprovide notice if the employee’s alleged misconduct is so serious as to constitute a repudiatory breach of the employment agreement. [13] The employer has the burden of proving just cause on a balance of probabilities: McKinley v BC Tel, 2001 SCC 38 at para 36,citing Butler v Canadian National Railway, (SK CA), [1939] 3 WWR 625 (Sask CA). [14] The Supreme Court of Canada has made clear that a contextual approach is required when determining whether anemployee’s misconduct constitutes just cause.

In McKinley at para 48, the Supreme Court held that the applicable test is “whether theemployee’s dishonesty gave rise to a breakdown of the employment relationship.” This test can be expressed in many forms and is notlimited to dishonesty. It can apply equally to any misconduct by the employee: see e.g. Ross v IBM Canada Ltd, 2015 ABQB 563 atpara 31; Henry v Foxco Ltd, 2004 NBCA 22 at para 13. [15] A contextual approach to assessing cause means proof of misconduct does not automatically constitute just cause forsummary dismissal.

In Molloy v EPCOR Utilities Inc, 2015 ABQB 356 at para 142, citing, among others, McKinley at paras 31-38,

Justice Topolniski summarizes the fundamental principles that apply in cases where just cause is disputed:

a) cause is a question of fact;

b) the assessment of cause is objective, contextual, and proportionate;

c) the assessment of cause entails three steps: i. determining the nature and extent of the alleged misconduct; ii. considering the surrounding circumstances, including [but not limited to] the employment history, theemployee’s role and responsibilities, the type of business or activity, the policies and practices, and the level of trust reposed in theemployee; and iii. determining if the response to the alleged misconduct is balanced, having regard to the facts; the question iswhether the alleged misconduct is so incompatible with the fundamental terms of the employment relationship that it warrants dismissal. [16] Further, the law has long recognized that

summary dismissal can be justified after the fact, so long as there was just cause atthe time of dismissal: see e.g.

Potter v New Brunswick (Legal Aid Services Commission), 2015 SCC 10 at para 177, citing LakeOntario Portland Cement Co Ltd v Groner, (SCC), [1961] SCR 553 at 563–64. [17] The fact that an employer does not allege cause at the time of dismissal, however, may affect the weight the court gives tosuch evidence: see Howard A Levitt, The Law of Dismissal in Canada, 3rd ed (Toronto: Canada Law Book, 2011) (loose-leaf updated2015, release 39), vol 1 at 6-12.1, citing Clark v Babcock & Wilcox Canada Ltd, 1981 CarswellOnt 2299 (Ont HCJ), aff’d 1982CarswellOnt 3499 (Ont CA). V.

Analysis [18] The first step in the just cause analysis is to consider the nature and extent of the alleged misconduct. There is no writtenconfirmation of the grounds for terminating Mr. Smith’s employment. The Defendant, however, submits that just cause for terminationis established based on: (

a) Sexual harassment, including sexual assault; (

b) Personal harassment; and (

c) Dishonesty. [19] Mr. Longman, while acting as the Co-Op’s corporate representative during questioning, confirmed that Mr. Smith was notterminated solely based on the existence of the Relationship with Ms. AM. [20] On August 25, 2009, prior to Mr. Smith’s suspension and termination, there was a meeting (the “Suspension Meeting”)between Mr. Smith, Mr. Longman, and the Co-Op’s then-Corporate Controller, Ms. Coward. Mr. Smith denies the reason for histermination was explained to him during this meeting. [21] Based on the notes and testimony of the witnesses, I find the following issues, at a minimum, were raised with Mr. Smithduring the Suspension Meeting: (

a) Mr. Smith’s dishonesty regarding the Relationship with Ms. AM; (

b) Mr. Smith’s frustration with Ms. AM, including due to her lack of respect for him; (

c) An incident during which Ms. AM suffered a miscarriage; and (

d) Ms. AM’s allegations that Mr. Smith was controlling, frequently lost his temper, and repeatedly threatened to fire her. [22] As will be addressed below, it is unclear to what extent Mr. Smith’s alleged sexual harassment and sexual assault wasdiscussed at the Suspension Meeting (if it was discussed at all). [23] Mr. Longman, acting as corporate representative during questioning, testified the Defendant initially asserted only threereasons for Mr. Smith’s termination: dishonesty about the Relationship, workplace harassment, and sexual harassment.

At trial, however,the Statement of Defence was amended to add sexual assault as a basis for termination. Mr. Smith then amended the Statement of Claimto increase the quantum of punitive damages sought. Further, while dishonesty was never expressly pleaded by the Defendant, the partiesdid not raise this as an issue at trial.

Had it been raised, the Balm principle in permitting amendments to pleadings would have applied:Balm v 3512061 Canada Ltd, 2003 ABCA 98 at para 11. 1) Did the Plaintiff Violate the Defendant’s Workplace Policiesand, if so, do the Violations Constitute Serious Misconduct? [24] The first step in the contextual approach to the assessment of cause requires that Mr. Smith’s actions constitute misconduct sosevere as to warrant termination.

[25] Mr. Smith asserts he was not advised of the existence of the Co-Op’s workplace policies during the course of hisemployment, and did not agree to have any such policies form a term of his employment. Further, Mr. Smith notes he did not receive anyconsideration in exchange for the implementation of the workplace policies and, therefore, they cannot be the basis for his termination. [26] In the alternative, Mr. Smith argues that, even if the workplace policies did form a term of his employment, he did not violatethem. In the further alternative, Mr. Smith argues none of the alleged violations are themselves sufficient to justify

summary dismissal.He claims to have received no verbal or written warnings and had no opportunity to correct the alleged misconduct. [27] For the reasons outlined below, I find the Co-Op’s workplace policies were binding on Mr. Smith and he violated thosepolicies by subjecting Ms. AM to personal harassment. Mr. Smith did not, however, subject Ms. AM to sexual harassment or sexualassault. A. Legal Principles [28] The common law requires that an employee obey the lawful orders and instructions of their employer, including theemployer's workplace policies: see Randall Scott Echlin and Matthew L.O. Certosimo, Just Cause: The Law of

Summary Dismissal inCanada (Aurora: Canada Law Book, 1998) (loose-leaf updated 2013, release 15) at 16-17. [29] For workplace policies to be considered enforceable, and thus constitute an express or implied term of the employmentcontract, they must be “reasonable, unambiguous, well published, consistently enforced, and [the employee must know] or ought to haveknown of [the policies’ contents], including the consequences of breach”: Foerderer v Nova Chemicals Corp, 2007 ABQB 349 at para67. [30] Mr.

Smith has cited the following cases as authority for the proposition that fresh consideration is required for workplacepolicies to be enforceable: Hobbs v TDI Canada Ltd, 246 DLR (4th) 43, (Ont CA); Globex Foreign ExchangeCorp v Kelcher, 2011 ABCA 240; and Nishina v Azuma Foods (Canada) Ltd, 2010 BCSC 502. Contrary to Mr.

Smith’s position,however, fresh consideration is not always required for workplace policies to bind an employee. [31] Hobbs, Globex, and Nishina are authority for the proposition that fresh consideration may be required when workplacepolicies purport to change a fundamental aspect of the employment terms or relationship.

Hobbs involves unilateral changes tocompensation structure, Globex involves the unilateral imposition of non-compete and non-solicitation covenants, and Nishina involvesan amended workplace policy that purported to, among other things, allow the employer to unilaterally modify employee work hours andconditions. Both Hobbs and Globex are also primarily relevant to the issue of forbearance as consideration for altering fundamentalterms of employment. [32] In other words, the determinative issue in each of the cases cited by Mr.

Smith was not whether the employer couldlegitimately manage day-to-day employee conduct in the workplace. Such policies are unlikely to require fresh consideration unless theyalter a fundamental term of the employment agreement. The practical reality is that employers must be able to properly manage theirworkplace through employee conduct policies, including due to changes in the legislative regime governing employers.

Requiring freshconsideration every time a workplace policy is introduced or modified would make employee management unworkable. [33] The need to recognize practical workplace realities is addressed by the Court of Appeal in Poliquin v Devon Canada Corp,2009 ABCA 216, which involves the termination of an employee due to the violation of a workplace code of conduct.

The Court ofAppeal at para 45 notes that “[e]mployers have the right to set the ethical, professional and operational standards for their workplaces.Doing so not only falls within an employer's management rights, it also constitutes an integral component of corporate goodgovernance.” Further, the Court of Appeal at paras 46-47 states that the fundamental need for a functioning workplace means that“employers are fully justified in taking proactive steps, including the adoption of codes of conduct, to curtail and prevent improperconduct.” [34] The same understanding of workplace realities is found in Foerderer, which deals with the violation of a workplace anti-harassment policy.

In her reasoning, Justice Topolniski outlines how the standard of conduct imposed by many workplace policies ismerely that of what a reasonable employee should expect to uphold in a modern workplace. In reference to the specific policy at issue inFoerderer, Justice Topolniski at para 85 finds that: The [anti-harassment] policy did not usher in a new era of workplace conduct, but rather reiterated [the employer’s] long-establisheddemand that its workers treat one another with respect and dignity, a demand emphasized in interpersonal skills training and refreshercourses.

The policy does nothing more than reflect today's societal expectations of behaviour in workplaces across Canada. [35] I agree with the reasoning in both Foerderer and Poliquin, and am also bound by the latter. Accordingly, fresh considerationis only required if the Co-Op’s workplace policies purport to change a fundamental aspect of Mr. Smith’s employment agreement. B. Application to the Facts [36] The versions of the Co-Op’s workplace policies in evidence before this Court are: (

a) A policy last amended on April 22, 2003 (the “2003 Policy”); (

b) A subsequent revised version of the 2003 Policy, amended sometime in 2004 (the “2004 Policy”); and (

c) A two page amendment introducing “Major Rule Violations,” which is dated February 5, 2001 (the “2001 Amendment”). [37] The 2001 Amendment was incorporated into the 2004 Policy but, for some reason, not captured in the 2003 Policy. The

Defendant’s current corporate representative, Mr. Buckingham, testified that the 2004 Policy has been in place since at least early 2005. [38] The 2001 Amendment introduces Major Rule Violations, which are defined as misconduct that requires an investigation. Ifconfirmed, a Major Rule Violation will result in a suspension that, pending advice from the General Manager, can lead to dismissal.Sexual harassment, sexual assault, and personal harassment all constitute Major Rule Violations. [39] The 2001 Amendment’s prohibition against sexual harassment, which includes sexual assault, reads as follows:

k) For any employee with direct line supervision of other employees or for any manager to sexually harass an employee through sexualadvances, requests for sexual favors or other verbal or physical contact of a sexual nature which are unwelcome by the employee.

l) For any employee to sexually harass another employee through sexual advances, requests for sexual favors or other verbal or physicalcontact of a sexual nature which are unwelcome by the employee. [40] In Janzen v Platy Enterprises Ltd, [1989] 1 SCR 1252 at 33, , the Supreme Court provided the followingdefinition of sexual harassment: Without seeking to provide an exhaustive definition of the term, I am of the view that sexual harassment in the workplace may bebroadly defined as unwelcome conduct of a sexual nature that detrimentally affects the work environment or leads to adverse job-relatedconsequences for the victims of the harassment.

It is … an abuse of power. [41] Evident in the Supreme Court’s definition is that the sexual conduct must be unwelcome, which is consistent with theabovementioned Major Rule Violations. [42] The 2001 Amendment’s prohibition against personal harassment reads as follows:

j) For any employee, including those with direct line supervision of other employees and including any manager, to differentiate intreatment of any other employee, either in the hiring or the conditions of employment after hiring or in a manner that could becategorized as personal harassment, because of that employee’s race, creed, religion, colour, sex, marital status, family status, sexualorientation, intimate personal relationship with the employee, physical or mental disability (in the absence of bona fide occupationalrequirements), age, nationality, ancestry, place of origin, or for any conviction(

s) for which a pardon has been granted. [Emphasis added] [43] In other words, a manager may not provide different treatment to another employee, whether in the conditions of employmentor in a manner that could be categorized as personal harassment, due to an intimate personal relationship. i. Are the Defendant’s Workplace Policies Binding on the Plaintiff? [44] Mr. Buckingham testified the Co-Op’s workplace policies were in place throughout the duration of Mr. Smith’s employment.In support of this position, the Defendant produced a signed acknowledgement by Mr.

Smith, dated January 28, 1999, confirming he hadread and understood the policies. The policies were further amended after that date, however, the Defendant did not produce anysubsequent signed acknowledgment by Mr. Smith. [45] Despite the lack of a subsequent signed acknowledgment, Mr. Buckingham testified that, as a manager, Mr. Smith wasresponsible for reviewing, disseminating, and enforcing the workplace policies among the staff who reported to him. This responsibilityextended to educating new employees on the policies and recommending future amendments. [46] Ms. AM testified that Mr.

Smith reviewed the Co-Op’s workplace policies with her when she was first hired, and Ms. Cowardtestified to Mr. Smith’s presence at regular manager meetings where the policies were discussed. Both Ms. Coward and Mr. Buckinghamalso confirmed a copy of the policies was placed in the coffee room of each office branch. [47] I am satisfied Mr. Smith would have been made aware of the Co-Op’s workplace policies and had an opportunity to reviewthem. He was present at many, if not all, of the relevant manager meetings.

Revisions to workplace policies were discussed during thesemeetings and some policies would have also been reviewed. As a manager, Mr. Smith would also be responsible for advising his directsubordinates of any changes to the existing policies. [48] The consequences of committing a Major Rule Violation were clearly outlined in the policies that Mr. Smith would havereviewed.

Further, he was made aware of the possible consequences of a violation at the Suspension Meeting, and provided with anopportunity to formally respond during the investigation that followed. [49] Less clear is whether the workplace policies were unambiguous and consistently enforced. For example, both the 2003 and2004 Policy prohibit family members from working in the same cost centre, department, or in a situation where one exercises directauthority over the other. The violation of this prohibition, however, does not constitute a Major Rule Violation. [50] Mr.

Smith argues the above prohibition: (1) does not apply to unrelated employees in a dating relationship (i.e. himself andMs. AM); and (2) was not consistently enforced, as Mr. Longman’s wife also worked for the Co-Op. [51] Regarding the first objection, it appears from witnesses called by the Defendant, including Ms. Coward, that there was ageneral understanding that dating a subordinate was not permitted under the workplace policies. Should such a situation occur, it wouldbe reviewed and the employees would likely be separated into different departments.

This understanding, however, is not explicitly statedin either the 2003 or 2004 Policy. [52] Regarding the second objection, the Defendant argues the circumstances are different because Mr. and Mrs. Longman’srelationship was not secret, and Mrs. Longman was not Mr. Longman’s direct report. Mr. Smith concedes Mrs. Longman was not Mr.Longman’s direct report, but counters that, as General Manager, Mr. Longman was still indirectly Mrs. Longman’s manager.

[ 53 ] The Defendant claims the relationship between Mr. and Mrs. Longman was reviewed and Mrs. Longman was terminated with notice. This, however, did not occur until February 2010, which was after Mr. Smith had already been terminated. [ 54 ] On the basis of the abovementioned objections, Mr. Smith argues the Co-Op’s workplace policies were ambiguous, specifically regarding what constitutes a family member, and inconsistently applied. Mr. Smith also points to other aspects of the policies that may not have been rigorously enforced, such as taking holiday time. [ 55 ] I am not persuaded by Mr. Smith’s objections.

There is a difference between the provisions highlighted by the Plaintiff and the Major Rule Violations he is alleged to have committed. Most notably, the Major Rule Violations represent the portion of the workplace policies the Defendant deems most critical. The consequences for violating those provisions are also clearly set out (i.e. suspension and/or dismissal). [ 56 ] In

summary, I find the relevant workplace policies, and specifically the Major Rule Violations, are binding on Mr. Smith. The Major Rule Violations are reasonable (i.e. the nature of many of the prohibitions are common expectations in a modern workplace and/or appropriate for the nature of the business and work performed); unambiguous; well published (i.e. posted in the coffee room of each branch); there is no evidence these policies were inconsistently enforced; and Mr.

Smith knew or ought to have known of the their contents, including the consequences of breach (i.e. he attended many of the manager meetings in which the policies were discussed and was required to review the policies with new employees). [ 57 ] Further, fresh consideration is not required to make the workplace policies binding on Mr. Smith. They do not purport to alter a fundamental term of his employment agreement. They are merely a legitimate attempt by the Defendant to regulate the day-to-day conduct of employees in the workplace. ii.

Did the Plaintiff Violate the Workplace Policies Prohibiting Sexual Harassment and Sexual Assault? a. Allegations of Sexual Assault [ 58 ] Ms. AM alleges Mr. Smith sexually assaulted her on several occasions. She identified three incidents in particular to the Court: two in 2003, prior to the commencement of the Relationship with Mr. Smith; and one in the spring of 2009, after the Relationship had ended. [ 59 ] Ms. AM described the first incident as occurring after a corporate sponsored golf tournament. She alleges Mr. Smith insisted on driving her home after the tournament. Once she was in Mr.

Smith’s van, he kissed her and fondled her breasts without her consent (the “ First Incident ”). Ms. AM further testified she was intoxicated at the time of the incident and, as a result, has difficulty recalling specific details. [ 60 ] Ms. AM described the second incident as occurring a few weeks after the First Incident. She alleges Mr. Smith called her into the office for after-hours training, put a condom in her hand, and drove her to a battery site where they had intercourse (the “ Second Incident ”). Ms. AM testified she “did not want to do this at all” and was crying during intercourse. [ 61 ] Ms.

AM described the third incident as occurring after the Relationship with Mr. Smith had ended. She alleges she was unloading oil in a shed when Mr. Smith came up behind her and grabbed her buttocks (the “ Third Incident ”). Ms. AM verbally protested and Mr. Smith walked away. [ 62 ] Mr. Smith denied that he ever sexually assaulted Ms. AM. [ 63 ] The evidence of Ms. AM and Mr. Smith is contradictory in terms of what happened during the alleged incidents, or whether the incidents even occurred at all. As witnesses, however, both Ms. AM and Mr. Smith have credibility issues. [ 64 ] Mr.

Smith’s credibility issues relate to his interactions with his employer. For example, he has consistently denied knowledge of workplace policies he was clearly familiar with. It is also difficult to believe Mr. Smith’s testimony regarding what he disclosed to Mr. Longman about the Relationship and when he disclosed it (as will be discussed further below). [ 65 ] Ms. AM had significant difficulties remembering dates and times of incidents, which she admitted at trial. For example, her testimony regarding the date of her separation from her then-husband, Mr.

AM, was months apart from the date she swore to in an affidavit. As a result, her recollection of the timing of events is suspect. I note that Mr. Longman also had the same issue with recalling dates, timelines, and details. [ 66 ] Ms. AM’s credibility issues are most evident in her allegations against Mr. Smith. For example, Ms. AM testified she told her friend, Ms. LW, about the First Incident. The Defendant then proffered Ms. LW’s testimony as evidence of Ms. AM’s state of mind at the time. In examination, however, Ms. LW’s testimony appeared to contradict Ms.

AM’s version of events: A When the tournament ended all the golfers were back at the clubhouse preparing to eat and she come [sic] back and she had said to me specifically that her and Rick had made out in the back of his van, um, once everybody had left; and she showed me the hickeys on her neck. Q So she had physical marks on her neck? A Yes. Q Okay. How did [AM] react to those marks on her neck?

A Um, she was taken back a bit about it. I think just I’d -- I’m not sure she was expecting that to happen between the two of them,um, and she expressed to me that she was guilty because she was still married. [67] Based on Ms. LW’s testimony, it is difficult to infer that Ms. AM’s state of mind was such that she was subject to anunwanted or non-consensual sexual act. While Ms. AM may have believed the First Incident to have been unexpected, or subsequentlyregretted the incident and felt guilty it had occurred, that does not support a finding that Mr.

Smith’s actions constituted sexualharassment or sexual assault. [68] Ms. AM’s subsequent conduct is also irreconcilable with her version of events. For example, shortly after the First and SecondIncidents, Ms. AM separated from her then-husband. She testified that, at the time, her marriage was already rocky, she felt guilty overwhat happened with Mr. Smith, and believed her then-husband “did not deserve this.” I note the Relationship, which lasted four-plusyears, began shortly after the First and Second Incidents, and prior to Ms. AM’s separation from her then-husband. [69] Ms.

AM’s conduct during the Relationship is similarly difficult to reconcile with her testimony. For example, although Ms.AM and Mr. Smith did not go out in public together, they did go on trips, including with some of Mr. Smith’s family members. They alsohad dinners together with family members or friends and were sexually intimate. Ms. AM expressed her love for Mr. Smith in variouspersonal notes, even once signing her name as “[A] Smith.” Ms. AM now states she did not understand what love meant at the time anddid not really love Mr. Smith. [70] Mr. Smith suggests that other aspects of Ms.

AM’s behavior also seem inconsistent with someone who is alleging sexualassault. For example, Mr. Smith testified that Ms. AM called him for a ride home from Lethbridge because she did not want to go to amovie with some friends or family. Ms. AM admits she called Mr. Smith at the time, but insists it was because she was working, he washer superior, and the ride was related to a job. Mr. Smith further notes Ms. AM did not make a formal statement to the police regardingthe alleged sexual assaults or take any other action at the time. He also points to some inconsistencies in Mr.

Longman’s description ofthe Second Incident, as attested to by Ms. AM. [71] Overall, I find that Ms. AM’s behaviour is inconsistent with her allegations of sexual assault. While I accept the parties mayhave been physically involved as early as the summer of 2003, at the time of the charity golf tournament, I am not persuaded that Ms.AM was sexually assaulted by Mr. Smith. Nor am I persuaded that Mr. Smith coerced Ms. AM into commencing or remaining in theRelationship, or that Ms. AM stayed in the Relationship out of fear of the consequences to her employment. b. Allegations of Sexual Harassment [72] Ms.

AM’s allegations of sexual harassment against Mr. Smith encompass the period before, during, and after the Relationship. [73] Ms. AM testified that, prior to the Relationship, Mr. Smith made comments regarding her appearance, such as that she lookedgood in coveralls. He would also stop by her house to deliver unsolicited gifts to her and her children. During the Relationship, Mr. Smithcontinued to provide unsolicited gifts and allegedly touched Ms. AM at work when no one was looking. After the Relationship ended,Ms. AM testified that Mr. Smith continued the same type of comments and gift-giving.

I note another Co-Op employee testified to thefact that Mr. Smith, on occasion, also gave small gifts to other members of his staff. [74] Mr. Smith testified his behaviour was the result of Ms. AM’s “mixed messages.” He claims that, post-Relationship, Ms. AMhad at times hugged him, gone to lunch with him, requested that he drive her home from work, and accepted his offer to help build a firepit in her backyard. Ms. AM insisted her behaviour was merely an attempt to stay on good terms with Mr.

Smith, but also concedes that,in hindsight, it may not have been a good idea. [75] In light of the parties’ conduct before, during, and after the Relationship, I am not persuaded by Ms. AM’s allegations ofsexual harassment. Sexual harassment requires Mr. Smith to have engaged in unwelcome conduct of a sexual nature, which detrimentallyaffected Ms. AM’s work environment or led to adverse job-related consequences. Based on the evidence before this Court, it is not clearMr. Smith’s conduct fits that description. c.

The Defendant’s Investigation [76] The Co-Op, as employer, had the responsibility to conduct a fair investigation into the allegations against Mr. Smith beforeterminating him: see Levitt, The Law of Dismissal in Canada at 6-23, citing Roe v Schneider National Carriers Inc, 48 CCEL (3d) 153, (Ont SCJ); McIntyre v Rogers Cable TV Ltd, 18 CCEL (2d) 116, (BC SC). Despite thisresponsibility, there are obvious problems with how the Defendant’s investigation was carried out. [77] In conducting his investigation, Mr. Longman took very few steps to substantiate Ms. AM’s allegations.

For example, Mr.Longman testified that Ms. AM claimed she had witnesses who could corroborate her allegations of sexual assault and sexualharassment. In conducting his investigation, however, Mr. Longman acknowledged he did not ask Ms. AM for the name of anywitnesses. Nor did he question any of the alleged witnesses. In fact, it does not appear Mr. Longman interviewed anyone other than Ms.AM and Mr. Smith. [78] Further, Mr. Longman admitted he did not ask Ms. AM for specifics regarding her allegations, such as where Mr. Smithtouched her. All she told him was that Mr.

Smith was “touchy-feely.” He also did not ask Ms. AM for specifics regarding Mr. Smith’salleged sexual comments because, according to Mr. Longman, Ms. AM did not wish to repeat them. [79] Mr. Longman’s testimony that the alleged sexual harassment was discussed with Mr. Smith during the Suspension Meeting isnot substantiated by the evidence. I accept that Ms. AM’s work diary, which she started in the summer of 2009 as a record of herinteractions with Mr. Smith, was discussed during the Suspension Meeting. The diary, however, primarily contains references to herwork stress and feelings of mistreatment by Mr.

Smith, including his threats to terminate her. It does not contain specifics of any sexualharassment or sexual assault. Further, Ms. Coward testified only to the discussion of personal harassment at the Suspension Meeting. The

sparse notes taken at the time do not reference any instances of sexual harassment or sexual assault. [ 80 ] Mr. Longman testified his assessment of the credibility of the parties was affected by the discovery of Mr. Smith’s ongoing dishonesty in concealing the Relationship. The mistrust this created was exacerbated by Mr. Smith’s admission of certain misconduct, such as repeatedly threatening to fire Ms. AM, as well as confirmation that, despite Ms. AM’s concerns about a possible miscarriage, Mr. Smith had sent Ms. AM on a scheduled delivery (during which she did miscarry). As a result, Mr.

Longman was inclined to believe Ms. AM’s version of events. [ 81 ] Mr. Longman did appear to have had some vague understanding of the Third Incident alleged by Ms. AM. He also had the information contained in Ms. AM’s work diary about the personal harassment. It is not clear, however, what else Mr. Longman did to substantiate Ms. AM’s very serious allegations of sexual harassment and sexual assault, or if he even fully understood the extent of those allegations. [ 82 ] To be clear, the Defendant was not required to adjudicate Ms. AM’s allegations based on the standards expected in a judicial process.

Most private employers are not equipped with the same investigative tools, authority, or safeguards as those available in the judicial system. This Court, however, cannot rely upon Mr. Longman’s problematic investigation as justification for terminating Mr. Smith. Especially when its conclusions are based on allegations of sexual harassment and sexual assault that have clearly not been made out on the facts. [ 83 ] Accordingly, I find the Defendant has failed to establish just cause for

summary dismissal on the grounds of sexual harassment and/or sexual assault. I make this finding based on the evidence before this Court, bearing in mind Mr. Longman’s problematic investigation as well as the credibility issues of Ms. AM and Mr. Smith. [ 84 ] I recognize an employer is placed in a difficult position when an employee makes allegations of sexual assault or sexual harassment, particularly when those allegations are made against a direct supervisor.

The failure to properly address such allegations can have potentially devastating consequences for the complainant, the workplace as a whole, and the employer itself. The consequences of false allegations, however, can also have potentially devastating consequences for the person accused of such conduct. iii. Did the Plaintiff Violate the Workplace Policy Prohibiting Personal Harassment? [ 85 ] Mr. Smith appears to have been very attentive to Ms. AM prior to the breakdown of the Relationship. He gave her gifts, purchased items for her and her children, and helped with household repairs or improvements. Ms.

AM admitted this was one of the things she liked about Mr. Smith. [ 86 ] Mr. Smith also conceded that Ms. AM received preferential treatment at work due to the Relationship. For example, he would warm up her vehicle and stock it with snacks prior to her scheduled deliveries. A former Co-Op employee testified Ms. AM’s behaviour around Mr. Smith was as though she could do whatever she wanted and there would be no repercussions. Although Mr. Smith’s treatment of Ms.

AM may have impacted on the work environment, none of this treatment appears to be the type of negative disparate treatment contemplated in the Co-Op’s workplace policies. [ 87 ] Mr. Smith’s treatment of Ms. AM became more troublesome following the breakdown of the Relationship. Ms. AM testified that he became overly controlling, which made their ongoing work relationship very stressful. For example, an incident occurred involving Mr. TR, who was a client of the Co-Op at the time. Mr. TR began working with Ms. AM to correct several billing errors, but Mr. Smith demanded he deal with Mr. TR directly. Ms.

AM viewed this as an attempt to interfere with the intimate relationship developing between her and Mr. TR (who is now her husband). [ 88 ] Mr. Smith testified that he found Ms. AM’s behaviour towards Mr. TR, a client, to be inappropriate. This behaviour included Ms. AM’s use of profanity in communications with Mr. TR, making over 20 long-distance phone calls per month to Mr. TR (which Mr. Smith did not believe were all business related), and Ms. AM’s acceptance of a lawnmower from Mr. TR for personal use. [ 89 ] From Mr. Smith’s perspective, Ms. AM also became insubordinate following the end of the Relationship.

In response, he admitted to sometimes losing his temper with her and even threatening to terminate her employment on several occasions. In doing so, Mr. Smith did not follow company protocol, which required Ms. AM be given either verbal or written warnings when warranted. Ms. AM testified that, subsequent to the threats of termination, Mr. Smith failed to advise her of what she was doing wrong or how to correct it. [ 90 ] I note there is evidence Ms. AM was, in fact, insubordinate towards Mr. Smith. She insists, however, this insubordination stemmed from Mr.

Smith’s overly controlling attempts to manage her personal life. [ 91 ] As both Ms. AM and Mr. Smith have otherwise exemplary work records, it appears as though the difficulty between them largely stems from the breakdown of the Relationship. For his part, Mr. Smith admitted there were instances where, due to the Relationship, he failed to discipline Ms. AM when he otherwise should have. Despite this admission, Mr. Smith does not believe the Relationship affected his ability to do his job. There is evidence, however, that the Relationship also caused him to subject Ms.

AM to negative differential treatment. [ 92 ] Particularly troubling is an incident that occurred in 2005, while Mr. Smith and Ms. AM were still in the Relationship. Ms. AM discovered she was pregnant and advised Mr. Smith. Ms. AM testified Mr. Smith then warned her she would lose her job if she carried the child to term (as the Relationship would likely be discovered by management). At trial, Mr. Smith did not deny he wanted Ms. AM to terminate the pregnancy. [ 93 ] Three to four weeks later, Ms. AM went to the hospital because she thought there may be issues with the pregnancy.

She was advised to rest out of fear she may suffer a miscarriage. Ms. AM testified she told Mr. Smith about her fear of a miscarriage, but he still sent her on a scheduled three-hour delivery. Ms. AM claimed she completed the delivery and suffered a miscarriage later that day.

Despite advising Mr. Smith of her miscarriage, Ms. AM asserted he still instructed her to return to work that day. [94] Ms. AM testified Mr. Smith’s fear that Mr. Longman would become suspicious of the Relationship motivated his order thatshe complete her scheduled delivery, despite being instructed to rest, and then return to work despite her miscarriage. Mr. Smith testifiedthe delivery was one of the easier tasks, and that he was not even aware Ms. AM returned to work following the miscarriage. [95] To be clear, while Ms. AM claimed Mr.

Smith did not want the child, I do not find he had any nefarious intent in ordering herto continue working despite the risk of a miscarriage. Instead, Mr. Smith appears to have been motivated at all times by his fear that theRelationship would be discovered and he would be disciplined by Mr. Longman. That motivation, however, does not justify Mr. Smith’sbehaviour in the circumstances. [96] I find Mr. Smith subjected Ms. AM to personal harassment in violation of the Defendant’s workplace policies. He did sothrough his repeated threats to fire her, angry outbursts towards her (even if instigated by Ms.

AM’s insubordination), and failure tofollow proper disciplinary procedures. Further, I find that, absent the Relationship, Mr. Smith would not have ordered an employeedirected to rest for medical reasons to complete a three-hour delivery, and then require that employee to immediately return to work aftersuffering a miscarriage, if he in fact did so. 2) Was the Plaintiff Dishonest with the Defendant about theRelationship and, if so, does the Dishonesty Constitute SeriousMisconduct? [97] For the reasons outlined below, I find Mr.

Smith was intentionally dishonest with the Defendant, his employer, in concealingthe Relationship with Ms. AM, its effect on his duties as a manager, and the personal harassment it inevitably caused. A. Legal Principles [98] In Poliquin at para 32, the Court of Appeal notes that dishonesty has been “traditionally recognized as constituting cause foran employee's discharge without notice.” Further, the Court at para 35, citing McKinley, clarifies that dismissal may be justified when anemployee’s dishonesty: (

a) violates an essential condition of the employment contract; (

b) breaches the faith inherent in the work relationship; or (

c) is fundamentally or directly inconsistent with the employee's obligations to the employer. [99] The Court of Appeal at para 37 also makes clear that employees have an obligation to provide faithful service to theiremployer. This obligation increases depending on the position held by the employee (i.e. a greater obligation for a manager). [100] As a result, in certain circumstances, an employee’s dishonesty may be so significant that it erodes the employer’s trust to thepoint where termination is warranted: see e.g.

Denhamer v RBC Dominion Securities Inc, 2000 ABQB 651 at para 44. [101] Such a significant erosion of trust occurred in Ptolemy Estate v Epcor Industrial Water Services Inc, 2010 ABPC 387, whichdeals with an employee terminated for violating workplace policies prohibiting the misuse of company property. Judge O'Ferrall (as hethen was) at para 10 explains why

summary dismissal was justified in that case: I came to that conclusion not because the Plaintiff may have misappropriated company tools, equipment and materials or the tools,equipment and materials of the company's one and only client, the Town of Okotoks. Nor did I conclude that the

summary dismissal wasjustified because the Plaintiff may have breached his employer's ethics policies. Rather, I came to the conclusion that the Defendant wasjustified in its actions because I was satisfied on the evidence before me that Mr.

Ptolemy was not forthcoming, was not completelytruthful, and may have even been deceitful in responding to the employer's questions about the alleged misappropriations. [102] Judge O'Ferrall at para 18 also cites Courchesne v INCO Ltd, (Ont SCJ), and Obeng v Canada SafewayLtd, 2009 BCSC 8, as authority for the proposition that “an employee's failure to explain his actions with full candor during aninvestigation or his failure to provide truthful explanations of questioned conduct may justify

summary dismissal.” [103] In short, an employee’s dishonesty in relation to his conduct under a workplace policy may be grounds for

summary dismissaleven where the policy violation does not itself constitute just cause for

summary dismissal. [104] In certain circumstances, an employee’s dishonesty about a workplace relationship may also constitute grounds for

summarydismissal: see e.g. Bell v Computer Science Corp, 2006 CarswellOnt 9143 (Ont SCJ), aff’d 2007 ONCA 466; Carroll v Emco Corp,2006 BCSC 861, aff’d 2007 BCCA 186; Dillon v Dillon Hillstead Melanson CGA Prof Corp, 2015 SKQB 18 at para 207. Based on thereasoning in Poliquin at para 35, however, it is important to note such dishonesty must touch on a fundamental aspect of the employmentrelationship. [105] For example, in Reichard v Kuntz Electroplating Inc, 2011 ONSC 7460, the Court upheld an employer’s decision to terminatean employee for cause following the discovery of a workplace relationship.

After the plaintiff was hired, the employer introduced apolicy requiring employees to notify their immediate supervisor of any workplace relationship. It explicitly stated that failure to report arelationship could result in discipline up to dismissal. The policy was intended to prevent favouritism between employees by enabling thecompany to take steps to prevent conflicts of interest that may arise from such relationships. Despite the policy, the plaintiff, a manager,

maintained a relationship with an administrative assistant, who he eventually had transferred to his own department and put under his immediate supervision. [ 106 ] Although the relationship in Reichard did not have an adverse impact on the employer’s operations, the plaintiff was found to have shown favoritism to the assistant through his ability to dictate her work, discipline her, and influence her level of compensation. On several occasions, after rumours of their relationship surfaced, the manager denied to his superiors that he was in a relationship with the assistant.

He ultimately admitted the relationship and was subsequently suspended and then dismissed. [ 107 ] In upholding the plaintiff’s dismissal, the Court in Reichard found the plaintiff was in a supervisory position and was therefore trusted by the employer to supervise its assets and employees in a fair and even-handed manner. The Court also found the plaintiff’s dismissal was warranted; not solely because of the relationship itself, but because the plaintiff continually and flagrantly breached the anti-fraternization policy and was dishonest in failing to report the relationship on multiple occasions.

The plaintiff’s cumulative conduct, including prolonged breach of policy and deception, justified dismissal for cause. B. Application to the Facts [ 108 ] Both Mr. Smith and Ms. AM intentionally concealed the Relationship from the Defendant. The parties disagree, however, over who instigated this dishonesty. Ms. AM testified Mr. Smith demanded secrecy because he knew the Relationship violated workplace policies, and repeatedly warned she could be terminated if anyone found out. Ms. LW testified Mr. Smith made similar statements to her. Mr. Smith, meanwhile, testified it was Ms.

AM who demanded secrecy. [ 109 ] In contrast to the decision in Reichard , it is much less clear on the facts before this Court whether the Relationship was explicitly prohibited by the Co-Op’s workplace policies. Based on the testimony of Ms. Coward, Mr. Longman, and Mr. Buckingham, however, I find the Defendant intended to avoid the same kind of conflict of interest contemplated by the employer in Reichard . Further, Mr. Smith engaged in a similar pattern of long-term deception aimed at preventing the Defendant from discovering the Relationship. [ 110 ] Regardless of who instigated the dishonesty, Mr.

Smith either outright lied or intentionally misled his employer about the existence and/or extent of the Relationship when confronted on more than one occasion. [ 111 ] Given Mr. Smith’s role as Ms. AM’s direct supervisor, in addition to the existing workplace policies, I find the Defendant had a legitimate interest in knowing about the Relationship. Mr. Smith’s deception, whether by his own volition or at the behest of Ms. AM, constitutes serious misconduct. Even if the dishonesty was Ms. AM’s idea, Mr. Smith cannot be absolved of his misconduct merely because his subordinate requested it. Further, I find Mr.

Smith wanted the Relationship to remain secret because he believed it was in violation of the Defendant’s workplace policies. 3) Assuming the Plaintiff Committed Serious Misconduct, does the Misconduct Constitute Grounds for

Summary Dismissal? A. Nature and Extend of Misconduct [ 112 ] As part of the first step in the contextual approach, I have considered the nature and extent of the alleged misconduct and found Mr. Smith committed serious misconduct by: (

a) subjecting Ms. AM to personal harassment contrary to the Defendant’s workplace policies; and (

b) engaging in a long-term pattern of dishonesty aimed at concealing the Relationship from the Defendant, regardless of whether the Relationship was itself contrary to workplace policies. B. Surrounding Circumstances [ 113 ] The next step in the contextual approach is to determine whether, considering the surrounding circumstances, Mr. Smith’s actions constitute just cause for

summary dismissal. The relevant circumstances will either mitigate or aggravate the seriousness of the misconduct, and my analysis will include a consideration of Mr. Smith’s employment history, role, and responsibilities, the Defendant’s policies and practices, and the level of trust the Defendant placed in Mr. Smith. [ 114 ] Mr. Smith’s responsibilities as Division Petroleum Manager, as set out in his written job description, included, among other things, oversight of the activities of the Petroleum Managers and providing mentorship to those below him. [ 115 ] Mr.

Smith worked for the Co-Op for approximately 22 years, from March 23, 1987 until he was terminated on August 28, 2009. He started as a Driver Salesman, was promoted to Petroleum Manager, and then promoted again to Division Petroleum Manager. He consistently received positive performance reviews and had no prior verbal or written warnings regarding his work performance. These are mitigating factors. [ 116 ] In each of his roles as manager, Mr. Smith had at least one other employee under his direct supervision. He also often had more than one employee under his indirect supervision.

His responsibilities included supervising employees, interviewing potential new hires, and ensuring staff adherence to the workplace policies and practices. These are aggravating factors.

[ 117 ] I have already reviewed the Co-Op’s relevant workplace policies, as well as the Defendant’s ability to rely upon and enforce those policies. As a Division Petroleum Manager, the members of Mr. Smith’s team and other employees at the office looked to him for leadership. As a result, the Defendant reasonably expected Mr. Smith to set a high standard, act in compliance with its policies, and otherwise conduct himself honestly. It is clear the Defendant placed a significant level of trust in Mr. Smith. [ 118 ] Based on Mr.

Smith’s role in relaying and enforcing the Defendant’s workplace policies, as well as his supervisory capacity and position of trust, I find Mr. Smith’s non-disclosure of the Relationship and personal harassment of Ms. AM, his subordinate, to be significant. C. Proportionality of the Defendant’s Response [ 119 ] The final step in the contextual approach to assessing cause requires a determination of whether the Defendant’s response to Mr. Smith’s misconduct was proportionate. [ 120 ] Dismissal is the most serious punishment available to an employer.

The law requires less serious misconduct be disciplined using less serious sanctions: McKinley at paras 52-53 . Further, for dismissal to be justified, the misconduct must be irreconcilable with sustaining the employment relationship: McKinley at para 57 ; Ross at para 31 . Therefore, this Court’s determination must be made having regard to the facts, and must consider whether Mr. Smith’s actions were so incompatible with the fundamental terms of his employment that they warranted

summary dismissal. [ 121 ] I note Mr. Longman asked Mr. Smith about the Relationship several times prior to Mr. Smith’s admission of it. On each of these occasions, Mr. Smith was either dishonest or misleading in his response. The Relationship was only honestly admitted once it was obvious that it had already been exposed. Prior to this, Mr. Smith continually failed to disclose both the extent of the Relationship and the inter-office conflict it created. [ 122 ] Once Mr. Smith’s misconduct was exposed, he directly or indirectly substantiated many of the allegations relating to personal harassment and dishonesty.

For example, Ms. Coward testified that, when finally confronted during the Suspension Meeting, Mr. Smith apologized for lying about the Relationship and his mishandling of Ms. AM’s insubordination. Consequently, there is a lesser requirement for an investigation by the employer to substantiate these particular allegations. As already discussed, however, the same cannot be said about the investigation into the allegations of sexual harassment and sexual assault. [ 123 ] Although Mr.

Smith testified he did not understand that he could be terminated as a result of his misconduct, the workplace policies clearly indicate termination is a possible consequence. This consequence was reiterated in the letter notifying him of his suspension. Mr. Longman and Ms. Coward’s testimony, together with subsequent emails between Mr. Smith and Ms. Coward, also indicate he was offered early retirement rather than face termination. Mr. Smith claimed, however, that he did not understand why retirement was being suggested.

He had a further opportunity to clarify his confusion after the Suspension Meeting, but failed to do so. [ 124 ] Although Mr. Smith did not receive any prior warnings about his conduct, it is doubtful that discipline short of termination would have been sufficient to restore the Defendant’s trust and confidence in him. Neither would it have alleviated the conflict between Mr. Smith and Ms. AM. Merely transferring Ms. AM to a different position within the office may not have been an option given that Mr. Smith was the division manager. Nor would transferring Mr.

Smith have addressed his fundamental breach of the Defendant’s trust [ 125 ] With that said, there are still issues with how the Defendant went about Mr. Smith’s dismissal. For example, it is not clear which of Ms. AM’s allegations Mr. Longman addressed during the Suspension Meeting. Further, and of particular concern, is a notice prepared for the Co-Op staff advising that Mr.

Smith was terminated for “just cause.” There was varying testimony at trial regarding whether this notice was actually posted for all staff to see, or merely circulated to the managers, as well as why the notice would have been circulated at all. These irregularities, however, while not ideal, do not undermine the Defendant’s basis for termination or qualify its response as disproportionate. [ 126 ] Based on the serious nature of Mr. Smith’s personal harassment and dishonesty, I find the decision to terminate him was a proportionate response.

The Defendant has satisfied this Court on a balance of probabilities that Mr. Smith’s misconduct was so incompatible with the fundamental terms of his employment that it justified

summary dismissal. In other words, his misconduct violated an essential condition of his employment agreement without reasonable excuse. [ 127 ] There is an important nexus between Mr. Smith’s personal harassment of Ms. AM and his dishonesty with the Defendant about both the Relationship and its effect on the workplace. Taken individually, it is arguable whether

summary dismissal was warranted. Cumulatively, however, Mr. Smith’s dishonesty and personal harassment have irrevocably destroyed the Defendant’s trust in him. This Court cannot expect the Defendant to continue to rely on Mr. Smith as a manager given that he so actively sought to deceive the Co-Op’s management over a prolonged period of time. Nor can this Court expect the Defendant to continue to rely on Mr.

Smith to effectively oversee his subordinates and enforce workplace policies when he has violated those same policies in this manner. 4) Assuming the Plaintiff Committed Serious Misconduct, was that Misconduct Condoned by the Defendant? [ 128 ] Condonation occurs when an employer learns about an employee’s misconduct and, despite this knowledge, allows the employee to continue in his position for a considerable period of time: Foerderer at para 124 .

If condonation occurs, the employer cannot then subsequently dismiss the employee based on the misconduct that was already known but ignored. [ 129 ] In Foerderer at para 125 , Justice Topolniski describes the condonation analysis as follows:

Condonation may be inferred from the circumstances of the case and the omissions or commissions of the employer. Most often, courtslook for evidence that the employer was aware or ought reasonably to have been aware of the misconduct and intended to forgive it.Where there has been condonation, it would be "most unjust" to penalize the employee for having relied on that forgiveness. Theemployee's subjective view as to the seriousness of the misconduct or the forgiveness or condonation of the misconduct is notdeterminative, however. [130] I note Mr.

Smith bears the onus of establishing that condonation has occurred: Foerderer at para 63, citing Duguay v MaritimeWelding & Rentals Ltd (1989), (NB KB), 28 CCEL 126 (NB QB). Further, it must be shown the employer was fullyaware of the details, or at least negligent in its failure to inquire further, in order to have truly condoned the misconduct: see e.g. Olsen vRitchie Bros Construction Ltd, 1994 CarswellAlta 958 at paras 21-28 (Alta QB). [131] Mr. Smith testified that he informed Mr. Longman about the Relationship in the spring of 2009, which is prior to Ms.

AM’sallegations in August 2009, but after the Relationship had already ended. Specifically, Mr. Smith claimed he invited Mr. Longman to hishome, admitted to the Relationship, handed over his office keys and company cell phone, and stated his future with the Co-Op was inMr. Longman’s hands. [132] In response to his confession, Mr. Smith claimed Mr. Longman thanked him for his honesty and stated that it was fine andeveryone in the community already knew about the Relationship. Based on this exchange, Mr. Smith argues Mr.

Longman, and thus theDefendant, condoned the Relationship and any related violation of the workplace policies. [133] Mr. Longman does not deny a conversation with Mr. Smith occurred in the spring of 2009, but disputes Mr. Smith’scharacterization of events. He testified Mr. Smith only admitted that “if there had been a relationship, it was over now,” and provided nofurther details. [134] Mr. Smith’s characterization of his 2009 conversation with Mr. Longman is troubling when considered in contrast to thebalance of his testimony. If, as Mr.

Smith claims, the Relationship was not a violation of any policies, nor did its concealment constitutemisconduct warranting termination, then it is odd he would effectively acknowledge there were grounds for termination and pre-emptively offer his resignation when speaking to Mr. Longman. [135] Mr. Smith’s characterization of events also appears inconsistent with Mr. Longman’s subsequent reaction to Ms. AM’sallegations (or at least his reaction once he became aware of the true extent of the Relationship). Further, Ms. Coward testified that,during the Suspension Meeting, Mr.

Smith did not acknowledge the Relationship or apologize for being dishonest about it until the veryend of the meeting. [136] I accept Mr. Longman’s characterization of his conversation with Mr. Smith. It is consistent with the balance of the evidence,including Ms. Coward’s description of the Suspension Meeting and Mr. Smith’s apology at the end of that meeting. Merely admitting thepossibility and/or existence of the Relationship is, in my view, insufficient disclosure to constitute a basis for condonation. Mr.

Longmanwas not aware of the Relationship’s more serious aspects, as well as its effect on the workplace and Ms. AM. Based on Mr. Smith’sseniority and position, Mr. Longman clearly trusted him to be completely honest and forthcoming. [137] I find Mr. Smith has failed to prove condonation. In a small town like Vauxhall, with a population of only about 1,000, it isquite possible that many had suspicions about the existence of the Relationship. For example, multiple Co-Op employees testified theyhad suspected the Relationship. Reacting to these suspicions, Mr. Longman confronted Mr. Smith on several occasions. Mr.

Smith,however, flatly denied the Relationship each time. Even when the conversation in the spring of 2009 did occur, Mr. Smith minimized ortrivialized the extent of the Relationship. In short, Mr. Longman could not condone misconduct that he was not fully aware of due to Mr.Smith’s continued dishonesty. VI. Conclusion [138] I find there was just cause to summarily dismiss Mr. Smith without notice, or pay in lieu of notice, on the grounds of dishonestywith the Defendant and the personal harassment of Ms. AM. For completeness, however, I will go on to assess Mr.

Smith’s entitlementto damages, including pay in lieu of notice, had I found he was wrongfully terminated. VII. Damages 5) Assuming the Plaintiff was Wrongfully Terminated, What isan Appropriate Notice Period? [139] I have found the Defendant had just cause to dismiss Mr. Smith. Despite this finding, I will still assess the appropriate amountof notice that Mr. Smith would be entitled to had I found otherwise. [140] Mr. Smith argues he is entitled to 24 months of notice, or just over one month per year of service. In support of this position,Mr. Smith cites Elgert v Home Hardware Stores Ltd, 2011 ABCA 112.

The Defendant argues 15 months is a more appropriate noticeperiod. In support of this position, the Defendant cites Szczypiorkowski v Coast Capital Savings Credit Union, 2011 BCSC 1376. A. Legal Principles [141] The Supreme Court in Honda at para 28, citing Bardal v Globe & Mail Ltd (1960), (ON SC), 24 DLR (2d)

140 (Ont HCJ), lists four factors to consider when determining reasonable notice in the circumstances (the “Bardal Factors”): (

a) the character of the lost employment; (

b) the employee’s length of service; (

c) the age of the employee; and (

d) the availability of similar employment, having regard to the employee’s experience, training, and qualifications. [142] Each Bardal Factor is given equal weight and what is reasonable is determined on a case-by-case basis: Honda at para 29.

Anyaward, however, “is qualified by what is referred to as the ‘rough upper limit’ of 24 months reserved for senior, long service employeesin a management capacity”: Carroll v ATCO Electric Ltd, 2017 ABQB 267 at para 89. [143] Further, it is a misconception that an employee is entitled to one month’s notice per year of service: Lederhouse v VermilionEnergy Inc, 2015 ABQB 387 at para 17.

There is also no reduction in reasonable notice because the employee’s misconduct constitutednear cause: Dowling v Halifax (City), [1998] 1 SCR 22 at para 2, (SCC). [144] I note the authorities submitted by the Plaintiff and Defendant were largely distinguishable based on the facts. Szczypiorkowskiinvolves an older employee with fewer years of service and explicit plans for impending retirement.

Meanwhile, Elgert deals with a juryaward that the Court of Appeal held to be not “wholly erroneous,” and also involves a malicious conspiracy against the plaintiff(although in that case, it was a younger plaintiff with fewer years of service). B. Application to the Facts [145] At the time of his termination, Mr. Smith held the position of Division Petroleum Manager and was earning an annual incomeof approximately $69,504.00 per annum plus benefits, including a six percent contribution to his RRSPs (equivalent to $4,710.24 perannum). He was paid to the date of his suspension on August 25, 2009.

With the exception of his unpaid vacation, the Defendant madeno further payments to Mr. Smith. [146] Mr. Smith has provided evidence that the work he obtained following his termination was compensated at a lesser salary. Hereports earning approximately $79,506.36 in the 24 months following his dismissal. [147] Mr. Smith was 57 years old when he was dismissed. Older employees may have a harder time finding new employmentcompared to their younger colleagues: Nelson v Champion Feed Services Inc, 2010 ABQB 409 at para 87. [148] Further, Mr. Smith worked for the Co-Op for over 20 years.

A longer tenure usually warrants a longer period of notice “becausethe employee has narrowed his or her skills by working for one employer for a long time, or the employee has been paid more than thejob is worth because of long service”: Nelson at para 87. I note an employee having been paid more than the position is worth appears tospeak to the limited availability of replacement work with a comparable salary. [149] Although not the General Manager, Mr. Smith was a senior employee and Division Petroleum Manager. In other words, he wasa mid to upper level manager is a smaller sized corporation.

This also suggests he may have greater difficulty finding new employmentbecause there are fewer comparable positions available: Nelson at para 87. I note, however, that little evidence was offered by eitherparty on this point. [150] Mr. Smith’s residence in a small community also supports a longer period of notice: Nelson at para 87. [151] Conversely, Mr. Smith’s tenure and position must be balanced against the unique experience, training, and qualifications he hasto offer prospective employers: Nelson at para 88. [152] Based on the Bardal Factors, I find Mr.

Smith would be entitled to a notice period of 20 months. He is entitled to such an awardgiven his length of service, level of seniority, and the difficulty he may have had securing comparable employment. [153] In calculating Mr. Smith’s notice period, I have also taken into consideration Ms. AM’s allegations of sexual harassment andsexual assault: see Elgert at para 68. Consequently, I have assessed the notice period as higher than it would normally be for someone insimilar circumstances. This is due to the impact the allegations may have had on Mr. Smith’s ability to find new employment. [154] Mr.

Smith is not entitled to an award at the “rough upper limit” of 24 months because it “is reserved for the most senioremployees in management”: Novakowski v Canadian Linen & Uniform Service Co, 2015 ABQB 53 at para 104. Mr. Smith is a senioremployee, but not “the most senior.” [155] In Novakowski, a 63 year old Western Canada District Manager, working for the same employer for approximately 30 years, didnot qualify as one of the “most senior employees in management.” A similar conclusion can be drawn regarding Mr.

Smith’s position asDivision Petroleum Manager, which, while important, does not have the level of responsibility and complexity often associated with theupper limit: see e.g. Geddes v Silvestri Holdings Inc, 2014 ABQB 416 at para 75; Hansen v Altus Energy Services Partnership, 2010ABQB 820 at para 49; Molloy at para 287. [156] Accounting for a notice period of 20 months, an annual salary of $69,504.00 ($5,792.00 per month), annual RRSP contributionsof $4,710.24 ($392.52 per month), and subtracting 20 months of post-termination income earned after leaving the Co-Op, the Defendantwould owe Mr.

Smith the following amount in lieu of notice: Monthly Salary (x 20 months) $115,840.00 Monthly RRSP Contribution (x 20 months) $7,850.40

Post-Termination Income (to April 30, 2011) $62,073.60 Total Award $61,616.80 [157] The total award is subject to any applicable pre-judgment interest. 6) Is the Plaintiff Entitled to Aggravated and/or PunitiveDamages? [158] Mr. Smith is seeking punitive damages in the amount of $250,000.00. I will also consider his entitlement to aggravateddamages, but stress that he bears the onus of proving the actual damages necessary for such an award. [159] Mr. Smith’s claim for punitive damages is founded in the circumstances surrounding his dismissal, which he alleges wasconducted maliciously and/or in bad faith.

He takes specific umbrage with Mr. Longman’s overall handling of the investigation anddismissal, the vague notice to staff that he was terminated for “just cause” (which may or may not have actually been circulated), and theDefendant’s reliance on Ms. AM’s allegations of sexual assault, which was maintained to the end of trial. [160] The Defendant argues the investigation and dismissal of Mr. Smith was at all times conducted in a fair and even-handedmanner. The Defendant further insists it acted honestly and in good faith when addressing Ms. AM’s allegations of sexual assault.

Ifthose allegations were false, then the Defendant points to Ms. AM as the blameworthy party. A. Legal Principles [161] Aggravated damages are intended to compensate the employee, while punitive damages are intended to punish the employer:Elgert at para 78, citing Whiten v Pilot Insurance Co, 2002 SCC 18 at para 36. [162] The Supreme Court in McKinley at para 78, citing Vorvis v Insurance Corp of British Columbia, [1989] 1 SCR 1085 at 1103-04, (SCC), and Wallace v United Grain Growers Ltd, [1997] 3 SCR 701, (SCC), outlines the test forawarding aggravated damages: (

a) the employer's conduct must be independently actionable; (

b) the conduct must amount to a wrong that was separate from the breach of contract for failure to give reasonable notice oftermination; and (

c) the conduct must arise from the dismissal itself, rather than the employer's conduct before or after the dismissal. [163] In Molloy at paras 298-99, citing Elgert at paras 72-77, Justice Topolniski summarizes how aggravated damages are evaluatedin the context of wrongful dismissal: Damages for mental distress resulting from the mere fact of termination are not compensable, but those resulting from the manner ofdismissal are available if the employer's conduct was unfair or in bad faith, for example, by being untruthful, misleading or undulyinsensitive.

An unproven allegation of cause does not automatically entitle the employee to aggravated damages; such an award is not anarbitrary extension of the notice period and proof of damages is required: Honda Canada Inc. at para 57; Wallace at para 98; MerrillLynch Canada Inc. at para 18; Mulvihill v. Ottawa (City), 2008 ONCA 201 (Ont. C.A.) at para 51, (2008), 90 O.R. (3d) 285 (Ont. C.A.).

The type of insensitivity in terminating an employee that has resulted in aggravated damages in the cases cited includes: telling otheremployees or the employee's family that the dismissed employee is stupid or incompetent; dismissing the employee within a day or twoof a major family event or trauma; telling others unfounded, embarrassing or demeaning reasons for the dismissal without an honestbelief as to their truth; attacking the employee's reputation by declarations made at the time of dismissal; and misrepresenting the reasonfor dismissal to deprive the employee of a pension benefit or another right.

In Chapell, the Court found bad faith damages werewarranted where the employer blindsided the employee and did not provide him with a full opportunity to provide an explanation. [164] Similarly, the Supreme Court in McKinley at paras 86-87, citing Vorvis at 1107-08 and Wallace at para 73, outlines the test forawarding punitive damages: (

a) The employer's conduct must be an independently actionable wrong; (

b) The conduct must be separate from the dismissal itself; and (

c) The conduct must be deserving of punishment because of its extreme and injurious character. [165] In Molloy at para 303, citing Elgert at paras 78-82, Justice Topolniski summarizes how punitive damages are evaluated in thecontext of wrongful dismissal:

Punitive damages are awarded in exceptional cases for malicious and high-handed misconduct that offends the court's sense of decencyto address the objectives of retribution, deterrence and denunciation. They are recoverable if the employer's conduct gives rise to anindependent actionable wrong. They are restricted to advertent wrongful acts that are so malicious and outrageous that they are deservingof punishment on their own, and the discretion to award them should be most cautiously exercised: Whiten v.

Pilot Insurance Co., 2002SCC 18 (S.C.C.) at paras 36 and 43, [2002] 1 S.C.R. 595 (S.C.C.), Honda Canada Inc. at paras 62, 68. [166] The Court of Appeal in Elgert at paras 88-89 also provides specific caution for when addressing an employer’s investigation ofsexual harassment allegations: When evaluating the employer's conduct in the context of punitive or aggravated damages, it is important to acknowledge that anemployer cannot be faulted for honestly believing an allegation of sexual harassment (or any other wrongdoing) and should not bepunished simply because an investigation was clumsy or [the finder of fact] subsequently concludes that the allegation was notsubstantiated.

An employer is entitled, indeed sometimes required, to make decisions to suspend or terminate employees (even if a courtsubsequently disagrees with its assessment) without being subject to a claim for punitive or aggravated damages. Employers must takeseriously allegations of sexual harassment. There is no specific standard of investigation that employers must follow; what is requiredwill vary depending on the facts surrounding the employer, its policies, sophistication, experience and the workplace.

Courts must notrequire such a high standard of investigation that there is a chilling effect on employers' manner of dealing with allegations of sexualharassment. Nevertheless, how the employer reacts is subject to judicial scrutiny. Its responsibilities do not give it licence to conduct an inept orunfair investigation or behave in malicious, vindictive, or outrageous ways... [167] In short, this Court must give careful consideration to the fact that it is dealing with a wrongful dismissal action relating toallegations of sexual harassment and sexual assault in the workplace.

I also recognize that unfounded allegations of sexual assault areoften far more serious than those of sexual harassment. B. Application to the Facts [168] I find Mr. Longman acted honestly in his investigation and dismissal of Mr. Smith. He appears to have also honestly, ifmistakenly, believed Ms. AM’s allegations of sexual harassment and sexual assault. He confronted Mr. Smith about these allegationsand, in good faith, allowed him ample opportunity to respond and seek clarification prior to dismissal.

Further, even if the notice of Mr.Smith’s dismissal was indeed circulated to the Co-Op’s staff, its contents are not of a nature that would attract aggravated and/or punitivedamages. [169] Accordingly, I find the evidence does not support Mr. Smith’s claim for punitive damages. Nor would it support a claim foraggravated damages. It is clear from the facts that Mr. Longman is not an adept investigator. A clumsy General Manager, however, is notthe same as one who is acting maliciously or in bad faith. Neither would I qualify Mr.

Longman’s performance as incompetent. [170] With that said, I recognize false allegations of sexual harassment and sexual assault constitute misconduct that should not be leftunaddressed. It is understandable that Mr. Smith wishes to hold someone to account for the false allegations against him. The Defendant,however, had a duty to take Ms. AM’s allegations seriously, and thus its conduct in initially pursuing her allegations does not warrant adamages award. The Defendant’s continued reliance on Ms. AM’s allegations at trial, however, can be reflected in a costs award. VIII.

Costs [171] In Hogarth v Rocky Mountain Slate Inc, 2013 ABCA 116 at para 5, the Court of Appeal confirmed “[t]he general rule is thatthe successful party is entitled to receive costs, and there is rarely any justification for making a successful party pay costs.” [172] In Mikkelsen v Truman Development Corp, 2016 ABQB 255 at para 54, rev’d on other grounds 2017 ABCA 99, Justice Erbfurther elaborates on the general rule: Often, a successful plaintiff who alleges but fails to prove fraud should be deprived of costs or have its costs reduced. However, this isnot a general rule: Conway v.

Zinkhofer, 2007 ABQB 2 (Alta. Q.B.) at paras 21 and 23; aff'd 2008 ABCA 392 (Alta. C.A.) ... [173] In addition to fraud, a court may also use cost sanctions against a party who makes unfounded allegations regarding other typesof morally reprehensible conduct: see e.g. College of Physicians & Surgeons (Alberta) v H (J), 2009 ABQB 48 at paras 25-26, citingRecovery Production Equipment Ltd v McKinney Machine Co (1998), 1998 ABCA 239 , 223 AR 24 at para 46 (Alta CA), andDavis v 850015 Alberta Ltd, 2003 ABPC 68 at para 33.

This principle extends to unfounded allegations of sexual harassment and sexualassault. [174] In cases of wrongful termination, and even where the employer is successful at trial, courts have declined to award thesuccessful defendant costs where a significant amount of time was spent dealing with serious but frivolous allegations against theplaintiff. For example, in MacDonald v Can Games Park Comm, 174 APR 29, 1986 CarswellNfld 83 at para 27 (Nfld Dist Ct), theCourt refused to award costs to the successful employer due its reliance on frivolous grounds for termination.

Similarly, in King v GulfCanada Ltd, 60 OAC 139, 1992 CarswellOnt 974 at para 18 (Ont CA), the Ontario Court of Appeal allowed costs on a solicitor andclient basis against the employer despite dismissing the plaintiff’s appeal. [175] Accordingly, when awarding costs, I am inclined to consider the unfounded allegations of sexual harassment and sexual assaultagainst Mr. Smith. While these allegations were initially levelled by Ms.

AM, the Defendant continued to rely on them throughout trial.Such conduct, while not warranting a damages award, is still worthy of denunciation given the facts of this case. [176] To be clear, Mr. Smith committed serious misconduct that constituted just cause for

summary dismissal. He engaged in a

pattern of personal harassment against Ms. AM after the Relationship ended, and was continually dishonest with the Defendant about the existence of the Relationship and its consequences. Unfounded allegations of both sexual harassment and sexual assault, however, are also a serious matter that cannot be tak

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