The consequences can be severe for employers who mishandle workplace rumours

Workplace rumours run amok can create a toxic environment for employees. For employers who mishandle them — or worse, propagate them — the consequences can be severe, too.

Those are some of the lessons to be drawn from the case of Melanie McGraw, who was fired from her role as a part-time administrative assistant and volunteer fire captain with the Dundalk Fire Department in Dundalk, Ont., based on what a judge has described as “unfounded, malicious, sexist falsehoods“ masquerading as “rumours.”

According to the ruling in a lawsuit filed by McGraw, the department’s chief administrative officer, David Milliner, believed that she was affecting morale and conducted a so-called investigation. But he did so without even contacting, let alone interviewing, McGraw herself. For that matter, she was left unaware that her dismissal was even being contemplated.

After investigating, Milliner decided to fire her, as he stated to City Council, because of her “inappropriate behaviour … and you can fill in the blanks or ask me if you want.” He also relied on a series of alleged inappropriate acts to come to that decision.

City council rubber stamped Milliner’s recommendation and she was fired, albeit without cause.

There was only one small problem. None of it was true.

In the case of one allegation, Milliner first acknowledged that he had embellished based on rumours, but when pressed further in cross-examination, that he had made it up.

The court called it “completely false and blatant gender-based discrimination.”

In the case of other allegations, the court found that a sexist double standard was applied, where to the extent the allegations played a role in McGraw’s termination she had been singled out.

The court also took great issue with Milliner’s investigation stating: “It was generous to call what Mr. Milliner did an ‘investigation.’”

“For the most part, information came to him as opposed to his gathering information,“ the ruling said.

So what did the court do with all of this?

Ontario Superior Court Justice Roger Chown, relying on the Supreme Court of Canada‘s decision in Matthews v Ocean, in which I acted, found that an employer’s failure to allow an employee to respond to allegations of misconduct, even when fired without cause, can be a factor in determining whether “moral damages” should be awarded.

The court concluded the unfairness to Ms. McGraw was exceptional.

“The defendants acted on unfounded, sexist allegations relating to conduct from years prior, without properly ascertaining the truth and without even asking her about the allegations. Mr. Milliner conducted an amateurish investigation. He conflated gossip with facts. Without justification, he accepted the allegations and assumed the worst of the fire department’s only two paid staff. He failed to recognize the patent gender-based discrimination directed (at Ms. McGraw),” the judge wrote.

On top of six months salary for wrongful dismissal (a modest amount given her position and income), she was awarded an additional $75,000 for moral damages, $35,000 more for gender-based discrimination and an additional $20,000 for defamation for the comments made by Milliner to city council.

Generally, recommendations made in the context of evaluations or dismissal recommendations are provided a “qualified privilege” so cannot be made the basis of a defamation action. The court agreed that qualified privilege applied but concluded that these comments were so reckless that they constituted malice at law vitiating that privilege. Yet another $60,000 was awarded in punitive damages, (explicitly a reduced amount than would otherwise have been awarded because the employer was a small rural municipality).

If the employer had simply fired her without cause and made no allegations, it would have paid a small fraction of what the Court ordered and avoided this embarrassing public decision and its devastated internal morale.

What are the lessons for employers?

  1. Drill down on rumours. You are legally obliged to ascertain the accuracy of rumours. Ignoring them entirely can lead to human rights violations because employers legally cannot be wilfully blind. But you cannot rely upon them without verifying their accuracy by, at the very least, speaking to all of the individuals involved directly. It may be uncomfortable but you must do that.
  2. Do not repeat damaging allegations to others without ensuring their accuracy. Do not make accusations in the course of the investigation.
  3. Have someone internal, likely in HR, conduct your investigations. Although an entire “investigation” industry has sprung up charging employers exorbitant fees, they are very simple to perform properly. Only use an external investigator if it is a senior person being investigated, such that it would be difficult for a subordinate to investigate. In those occasions, use a retired judge, experienced in fact-finding, not a lawyer trained in cross-examination, to conduct your investigations. A retired judge will also have more credibility with your board, the employees and, if it gets to that, the court, then a “hired gun.”