In the recent decision of the Alberta Court of Appeal, Elgert v. Home Hardware Stores Limited, an employer learned a very tough lesson about the importance of careful investigation into sexual harassment complaints and the serious monetary consequences which can flow from the failure to perform them.

The plaintiff Elgert had been employed by the defendant Home Hardware Stores Ltd. for almost 17 years. He was 48 years old and earned approximately $60,000 per year. Another employee, Bernier, also a defendant (and, not insignificantly, the daughter of the plaintiff’s boss), worked under the supervision of the plaintiff. She was a problematic employee, spending her time during work hours pursuing a male colleague. The plaintiff decided to address the situation by moving her to a different area, away from her romantic interest. Bernier swore that she would “get even” with the plaintiff.

Shortly after Bernier was transferred, she began to talk to family (including her father) and co-workers about an alleged incident where the plaintiff pushed himself up against her in a storage room. Stengle, another defendant and employee of Home Hardware, told a similar story involving the plaintiff. No formal sexual harassment complaint was lodged but it wasn’t long before the stories reached senior management which appointed another member of management to carry out an investigation. Unfortunately, that individual had little experience with such matters. He failed to obtain a written statement from Bernier and didn’t even interview Stengle. Based on seemingly scant evidence, he suspended the plaintiff from employment.

The plaintiff pleaded for information about the allegations made against him but that request was denied. He was escorted from the workplace without being allowed access to his personal belongings (including a log book where he had kept notes about employee performance, which strangely could not be located after litigation was commenced). It was not until 10 days after his suspension that the plaintiff received particulars about the accusations made against him. Following the plaintiff’s refusal to meet with the employer without the presence of his legal counsel, Home Hardware terminated the plaintiff for cause, citing sexual harassment and insubordination (for failure to take part in the previously mentioned meeting).

The matter went to trial before a jury, which concluded that the plaintiff had not sexually harassed Bernier and Stengle and that they had defamed the plaintiff by alleging that he did. The jury also found that Home Hardware had no cause to terminate the plaintiff and that the manner in which he was terminated constituted bad faith such that aggravated damages were appropriate. The jury also found that the actions of Home Hardware were deserving of punitive damages. The plaintiff was awarded 24 months severance pay, $60,000 for defamation, $200,000 for aggravated damages and $300,000 for punitive damages.

The Court of Appeal dismissed Home Hardware’s argument that the amount of severance pay awarded was too high, holding that it was within the acceptable range in the circumstances. They also found that the damages awarded for defamation were reasonable.

However, the Court reduced the award of aggravated and punitive damages. Aggravated damages are intended to be compensatory. Where the manner of dismissal is unfair or in bad faith, in the sense that it is “untruthful, misleading or unduly sensitive”, then aggravated damages may be awarded. Punitive damages, on the other hand, are meant to punish. Such damages are awarded only in exceptional cases where the conduct of the offending party constitutes “malicious and high handed misconduct that offends the court’s sense of decency” and “represents a marked departure from ordinary standards of decent behavior”.

The Court of Appeal reviewed the jury’s awards of aggravated and punitive damages and concluded that the jury should not have been allowed to have decided the issue of whether the plaintiff was entitled to aggravated damages. Therefore, the Court set aside the award completely. As for the punitive damages, the Court found that the amount awarded by the jury was far outside the normal range and “unnecessary to convey the message intended”. As a result, the Court reduced the award of punitive damages to $75,000.

Although the jury’s award was cut down significantly, the punitive damages figure which remained was still significant. This case illustrates the importance of:

• a careful investigation into allegations of sexual harassment (performed by an experienced human resources professional and/or with the advice of legal counsel),
• providing the employee against whom the allegations have been made with full particulars within a reasonable period of time, and
• treating all employees, regardless of the allegations made against them, with dignity.