CFO Awarded $35K for Mental Distress for Unfounded Allegations of Misconduct:

In Hrynkiw v. Central City Brewers & Distillers Ltd. ( 2020 BCSC 1640) Horsman J. had a situation where a CFO was accused of intentionally paying himself excess vacation and shares without the consent of the owner. The Court found that this accusation was unfounded and found that there was no just cause. The Plaintiff was awarded 12 months notice after 6.3 years of service. He was 56 years old.

The plaintiff was also awarded $35,000 in aggravated damages for the mental distress caused by the unfounded allegations and the failure of the employer to conduct a proper investigation before termination .

It is interesting that the Judge awards damages under the three concepts of Bad Faith,  Aggravated Damages and Mental Distress. This proves a point that I have been saying for many years, which is , call it anything you want , but when a Court finds that the employer acted in a manner outside the pale, they will find a way to punish the employer.

Here are some  extracts for the judgement on this issue: ( Note : Mr. Frost is the owner of the Defendant )

(i) The inadequate investigation
197      I accept the plaintiff’s characterization of Central City’s investigation of the plaintiff’s alleged misconduct as adversarial and biased from the start. Mr. Frost had formed the conclusion as early as June 28, 2018, that the plaintiff’s conduct was blatantly wrong. His interactions with the plaintiff after that point were angry and confrontational. Having concluded at the outset that the plaintiff had deliberately taken unauthorized bonus payments, Mr. Frost made no genuine effort to review the full circumstances. He sent the Termination Letter before he had reviewed the relevant payroll records or interviewed Ms. Gizzi and Ms. Duque about the 2017 share bonus payments. When documents were later uncovered that tended to support the plaintiff’s understanding of his share bonus entitlement, Mr. Frost did not consider them with an open mind. His entrenched perspective did not countenance the possibility that the plaintiff was simply mistaken in his understanding, or that perhaps Mr. Frost was the one who was forgetful or mistaken.
198      The defendant similarly rushed to judgment by alleging in the Termination Letter that the plaintiff had attended at the Central City office over the Canada Day long-weekend to “remove/transmit/copy property and/or documents”. Although the Termination Letter asserts that the full scope of the plaintiff’s actions were “still under investigation”, in fact there had been no investigation of this allegation prior to the delivery of the Termination Letter. There was simply Mr. Frost’s suspicion.
199      Mr. Frost’s set views of the matter meant that the plaintiff had no genuine opportunity to be heard by his employer on the very serious allegations that were advanced against him. I do not agree with the defendant that this should be held against the plaintiff because he absented himself from the “investigation”. For the reasons already stated, I reject the defendant’s argument that the plaintiff was guilty of insubordination in failing to cancel his vacation and schedule an immediate meeting with Mr. Frost during the week of July 3, 2018. More to the point, the defendant did not, in any event, engage in any meaningful investigation prior to sending the Termination Letter.
200      Furthermore, Mr. Frost apparently took no steps after sending the Termination Letter to preserve Central City records that might have shed light on the issues. He directed Ms. Li to clean out the plaintiff’s office without instructions to preserve relevant material. An email allegedly including a summary of the plaintiff’s employment terms appears to have been simply put in a box for shredding. I agree with the plaintiff that the defendant’s lack of effort to preserve documents is particularly egregious given the explicit warning to the plaintiff in the Termination Letter not to delete documents in his possession.
201      Even by the defendant’s account, the plaintiff had been a loyal and competent employee of Central City for over six years up to the time that he was, virtually overnight, locked out of the office and terminated without notice. To the extent that the defendant had concerns as a result of the events around the plaintiff’s request for a share bonus payment in June 2018, the plaintiff deserved to have those concerns addressed through a process that was fair, objective, and respectful. In my view, the defendant’s closed mind and failure to objectively investigate the circumstances before purporting to terminate the plaintiff’s employment for cause was unfair, unduly insensitive to the plaintiff, and constituted a breach of the defendant’s duty of good faith and fair dealing.
(ii) Unfounded allegations of misconduct
202      The defendant’s unfairness and insensitivity to the plaintiff in failing to conduct an adequate investigation was compounded by the fact that allegations of serious misconduct, including allegations of deliberate misappropriation of company funds, were advanced against the plaintiff without any evidence to support them.
203      The defendant made these allegations public in repeating them in its filed pleadings in this case, which include a counterclaim seeking to recover damages from the plaintiff for the alleged unauthorized payments. The unfounded allegation that the plaintiff had taken unauthorized bonus payments was maintained throughout the legal proceeding despite the discovery by Mr. Frost of his signed approval on the January 2017 payroll change form. The defendant maintained that the plaintiff had secured Mr. Frost’s approval by misrepresenting the purpose of the payment despite the fact the defendant was aware as of May 2019 that this allegation was directly contradicted by Ms. Gizzi’s evidence.
204      The circumstances of the defendant’s allegation that the plaintiff stole his own personnel file from the Central City office are also egregious. The defendant has never had any evidence, at the time of the plaintiff’s termination or subsequently, to support the allegation. Mr. Frost conceded as much in evidence even as he refused to resile from the allegation. The following exchange from Mr. Frost’s cross-examination is illustrative:
A. We all know what happened to the file, counsel.
Q. Okay. Well, if you know what happened to the file, you should be bringing the evidence to this court. Can you do that?
A. No, I can’t.
205      In my view, it was a breach of the defendant’s duty of good faith and fair dealing to advance and maintain such baseless allegations of serious misconduct against the plaintiff. It was entirely foreseeable that the plaintiff would suffer mental distress and reputational harm as a result of such conduct in the course of his dismissal.