Careful, Lawyer’s Communications Are Not Always Protected

by & Ava Z Moradi, JD, Editor, First Reference Inc.

The Ontario Superior Court of Justice recently found that the communications and conduct of the employer’s lawyer regarding sexual harassment investigation were not privileged and could be referred to in the employee’s Statement of Claim in the litigation against the employer

What happened?

A long-service employee (employed since 2002), while being placed on a performance improvement plan (PIP), raised allegations that her supervisor was bullying and sexually harassing her. In response, her employer:

  • Conducted an investigation but failed to interview the complainant employee during this process;
  • Concluded that the claims were unsubstantiated.

The results of the investigation were communicated to the employee but she received no written report. Following the conclusion of the investigation, the employee was denied her annual salary increase because she was on a PIP. That same day she began a pre-approved medical leave of absence to donate her kidney to her brother.

Upon her return from medical leave, the PIP resumed and she had to continue working with the same supervisor.

The employee in response retained an employment lawyer who asked for a severance package on her behalf.

The employer retained an employment lawyer as well and discussions started between the parties. The lawyers communicated by phone and correspondence over the next few months to discuss the results of the investigation and the reason for the PIP.

The employee’s lawyer urged the employer’s lawyer to conduct a new or continued and more thorough investigation with a written conclusion, according to the employer’s statutory obligations under the Occupational Health and Safety Act as well as to comply with the Ontario Human Rights Code. The employee’s lawyer also provided names of additional witnesses and the employee’s willingness to consider a severance package. The employer did conduct a second investigation to comply with their statutory obligations, did interview the witnesses named by the employee’s lawyer and provided a written report.

Shortly thereafter, the employee filed a Statement of Claim for constructive dismissal, which included reference to some of her lawyer’s discussions and conduct with the employer’s lawyer.

The employer filed a motion to strike some paragraphs of the Statement of Claim on the basis that the employee has pleaded without prejudice settlement discussions between the lawyers which are protected by settlement privilege. They assert that the employee failed to return to work after her leave of absence, requested a severance package and retained to discuss the termination and anticipated a possible litigation of the matter, which were the object of the communications.

Ontario Superior Court of Justice decision

Generally, the Court can strike all or part of a pleading on the basis that the pleading could prejudice or delay the fair trial of the action, is scandalous, frivolous or vexatious, or is an abuse of the court process.

Informed by Interleasing Inc. v Ontario (Minister of Finance), [2009] O.J. No. 4714, it is well established that pleading without prejudice settlement discussions is improper, and that the following three conditions must be present for settlement privilege to apply:

  1. A litigious dispute must be in existence or within contemplation;
  2. The communication must be made with the express or implied intention that it would not be disclosed in a legal proceeding in the event negotiations failed; and
  3. The purpose of the communication must be to attempt to effect a settlement.

The above must be considered within the context of “whether a reasonable person with the same knowledge of the situation as one or both parties would find it unlikely that the dispute would be resolved without it.”

When uncovering the evidence of the case, it became clear to the Court that the purpose of the communications, while also to discuss a possible severance package, was to compel the employer to comply with its statutory obligations in conducting a thorough and complete investigation relating to the sexual harassment and bullying matter. The sexual harassment investigation report was not privileged and the lawyers’ conduct during the sexual harassment investigation was “highly relevant and both counsel must have understood its relevance should litigation ensue.”

To this, the Court clarified that

“[T]he information contained in the investigative report is factual—and was conducted as part of [the employer’s] legal and statutory obligations. It was not an offer, nor a compromise, nor a settlement negotiation. An employee’s right to a sexual harassment investigation cannot be negotiable. Accordingly it does not attract the protection of settlement privilege.”

Given these considerations, the three conditions for settlement privilege were not met and thus, were not removed from the employee’s Statement of Claim.

Takeaways for employers

This case illustrates the grave consequences when an employer does not comply with the statutory obligations as set out in the Ontario Human Rights Code to provide a workplace free from discrimination and harassment, and the Occupational Health and Safety Act, which requires an employer to ensure that an investigation is conducted into incidents and complaints of workplace harassment that is appropriate in the circumstances. A major issue in this investigation was to conclude the claim was unsubstantiated while failing to interview the complainant herself. This was exacerbated as the employer also failed to meet its obligation in informing the parties (complainant and the alleged harasser) in writing of the results of the investigation and any corrective action that will occur.

Sometimes certain documents that could be used in a wrongful dismissal action are documents that one party does not want to disclose. In order to show solicitor-client privilege to prevent a document from being shown, a party must meet the three-part test. This means, the intention of the communication matters, and that intention must be to seek or receive legal advice, not just to inform. If the party cannot meet this test, that document will have to be disclosed.

Care must be taken in order to preserve solicitor and client privilege where a lawyer is retained to assist in responding to allegations of employee misconduct.

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