Canada: Salina V. Investors Group: Employers Do Not Owe A Duty Of Care To Employees In Connection With Workplace Investigations

In Salina v. Investors Group Financial Services Inc., 2023 BCSC 86 (the "Decision"), the Supreme Court of British Columbia (the "Court") considered the question of whether an employer owes its employee a duty of care in conducting internal investigations of their employees' conduct. Drawing on appellate jurisprudence, the Court ultimately found that employers do not owe such a duty of care to their employees. The Decision offers guidance and key assurances to employers navigating internal workplace investigations as well as investigations by regulatory bodies.

Background

The plaintiff, Mr. Salina, (the "Plaintiff") was engaged by the defendant, Investors Group Financial Services Inc. (the "Investors Group") as an investment advisor pursuant to a consulting agreement entered into in 2002. Both the Plaintiff and the Investors Group were regulated members of the Mutual Fund Dealers Association of Canada ("MFDA"). As a result, both parties were subject to the regulatory requirements, standards of practice, and rules of the MFDA bylaws and the British Columbia Securities Act, R.S.B.C., c. 418 (together, the "Rules").

In December 2016, the MFDA commenced an investigation of the Plaintiff relating to certain investment consultation services he provided to one of the Investors Group's clients, to determine whether the Plaintiff had violated any of the Rules. The MFDA also investigated the Investors Group due to its oversight of various transactions performed by the Plaintiff. During the course of these investigations, and as part of its regulatory reporting obligations, the Investors Group provided information to the MFDA in respect of the Plaintiff. Both parties ultimately entered into settlement agreements with the MFDA.

The Plaintiff was terminated for cause in May 2018 while the MFDA investigations were ongoing. The Plaintiff then commenced an action for wrongful dismissal against the Investors Group. Among other things, the Plaintiff plead that he was not an independent contractor, but an employee, and that the Investors Group breached its duty of care owed to him by having:

• "negligently conducted their investigation about the Plaintiff"; and
• "reported inaccurate information about the Plaintiff to the MFDA".

The Investors Group brought an application to strike those pleadings for failing to disclose a reasonable cause of action against the Investors Group and for being bound to fail and/or for abuse of process as they amounted to a collateral attack on the MFDA process.

Notably, the Decision does not make findings of fact as to the propriety of the Investors Group's internal investigation, or reporting to the MFDA, but rather, considers whether the Plaintiff had a proper cause of action in respect of same.

The Plaintiff's Position

The Ontario Court of Appeal has made clear that for public policy reasons, there is no liability in tort for an employer conducting a negligent internal investigation into employee conduct.¹ More specifically, it has been held that recognizing such a tort would: be inconsistent with the Supreme Court of Canada's refusal to recognize an action in tort for breach of a good-faith and fair dealing obligation in the context of employment dismissals, and have a potential chilling effect on non-professional investigators.²

Despite the foregoing, the Plaintiff took the position that his claim against the Investors Group for negligent conduct of its investigation was not bound to fail. Pointing to the decision in Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41 ("Hill"), which recognized the tort of negligent investigation as applied to police officers and found that the police owed a duty of care in negligence to suspects, the Plaintiff argued that a similar duty of care was owed to the Plaintiff because the investigation in question was in support of a quasi-judicial hearing. According to the Plaintiff, it was not plain and obvious that the reasoning in Hill would not extend to the case at bar because the MFDA regulates "in furtherance of the public interests with investigative and enforcement powers."

The Decision of the Court

The Court rejected the Plaintiff's arguments, and ultimately struck the Plaintiff's claims against the Investors Group regarding negligent investigation and negligent reporting. The Court held that these claims disclosed no reasonable cause of action and were bound to fail as: 1) the Investors Group did not owe the Plaintiff a duty of care in connection with their internal investigation; and 2) the communications between the MFDA and the Investors Group were protected by absolute privilege.

No Duty of Care

To determine whether a duty of care was owed to the Plaintiff, the Court applied the two-part Anns test:

• Does the relationship between the plaintiff and the defendant disclose sufficient foreseeability and proximity to establish a prima facie duty of care?
• If so, are there any policy considerations that should nevertheless negate or limit that duty of care?

The parties conceded that it was reasonably foreseeable that the Plaintiff could face discipline and other financial consequences as a result of a negligently conducted investigation such that the first prong of the test was satisfied. The Decision, therefore, turned on the question of whether policy considerations could negate the existence of a duty of care in the circumstances.

Drawing on Correia, the Court found that public policy favoured the reporting of wrongdoing and that recognizing a duty of care in this instance could have a chilling effect on same. The Court recognized that these policy considerations did not necessarily apply to an individual decision maker guilty of malicious investigation, but in this case, there was no allegation made by the Plaintiff against any individual.

Reporting to MFDA Protected by Absolute Privilege

As to the Plaintiff's allegation that the Investors Group was negligent in the provision of inaccurate information to the MFDA, the Court found that a person giving evidence to a court or adjudicative tribunal enjoys absolute immunity from a suit in respect of the evidence, even if what was said was false or made with malicious intent.

The Decision confirms that this absolute privilege extends to communications made in respect of complaints and regulatory proceedings carried out by self-regulating bodies, such as the MFDA. In light of the foregoing, the Court found that the communications between the Investors Group and the MFDA were protected by absolute privilege and as such could not give rise to civil liability.

Our Views

The Decision confirms that an employer who conducts a well-intentioned internal investigation will not attract liability for negligent investigation. Given this protection may not extend to an individual decision maker investigating with malicious intent, employers should ensure that all such investigations are conducted fairly and in good faith.

Footnotes

1. Correia v. Canac Kitchens, 2008 ONCA 506 [Correira].

2. For a further discussion of the tort of negligent investigation, see the line of Ontario Court of Appeal and Supreme Court of Canada cases cited at paragraphs 26-27 of the Decision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.