In Hucsko v. A.O. Smith Enterprises Limited, 2021 ONCA 728 (A.O. Smith), a long-term senior employee’s co-worker alleged that the employee sexually harassed her. After a workplace investigation that determined the co-worker’s allegation was justified, the employee was terminated for cause when he refused to apologize to the co-worker, a requirement of his continued employment. Ontario’s Superior Court of Justice awarded the employee a 20-month damage award in lieu of common law reasonable notice when it determined that his for-cause dismissal was unjustified. The Court of Appeal of Ontario (OCA) overturned the lower court decision when it concluded that the employee did in fact sexually harass his co-worker and his for-cause dismissal was supportable.

Background

A 20-year, 62-year-old employee who was a Senior Product Designer (Employee) made the following comments to his co-worker (Complainant), each on a different occasion:

1. The Employee asked the Complainant if she danced on tables at a work-related dinner.
2. The Employee told the Complainant to sit on a male colleague’s lap and ask him nicely to complete some action items.
3. When the Complainant mentioned she had planted new plants in her garden, the Employee responded, “oh it's all good any reason for you to bend over and go down on your knees”; and
4. When the Complainant mentioned that her name was at the top of a list, the Employee responded, “of course you are on top, you are getting pumped from under the skirt till you can't stand anymore”, and simultaneously made thrusting gestures with his hips.

The Complainant contacted HR and alleged that she had been sexually harassed by the Employee when the Employee continued to make unwelcome comments despite the fact that both she and their supervisor informed him they were inappropriate. An investigation concluded that the Employee had made the inappropriate comments. At a meeting, the Employee was handed “a corrective action memo” and advised that it was a final warning that would be a permanent part of his personnel file. The memo advised the Employee that:

• Should there be another instance of inappropriate comments of this nature toward the Complainant or another employee, it would result in his immediate discharge;
• He must participate in sensitivity training to familiarize himself with the impact his comments have on others; and
• He must provide a direct apology to the Complainant in the presence of his supervisor and HR Manager.

The Employee did not agree with the investigation’s conclusions and asserted that he had not done or said anything inappropriate to the Complainant. He agreed to comply with the training requirement but refused to issue an apology. The employer terminated the Employee’s employment for cause effective immediately on the basis that his conduct was inconsistent with the employer’s policies related to anti-harassment and respect in the workplace. The employer noted that because the Employee showed no remorse for his misconduct and demonstrated an inability to recognize the seriousness of the matter, it did not believe that he was willing and able to correct his behaviour going forward. Furthermore, the Employee’s refusal to accept and comply with its decision on corrective action constituted serious, willful insubordination that it could not condone.

Trial Decision

The trial judge concluded that the Employee’s comments did not justify summary dismissal. He found it unclear whether the employer had concluded that the Employee’s conduct amounted to sexual harassment and noted that the Employee was not dismissed for sexual harassment but for “serious and willful insubordination.” Furthermore, the trial judge criticized the employer for failing to negotiate the content of the apology with the Employee before terminating his employment after 20 years of service, and concluded that an important aspect of the employer’s decision to terminate was that the Employee consulted a lawyer. In the trial judge’s view, this was not a justifiable reason to dismiss an employee of long service.

The trial judge did not believe the employer could rely on just cause to terminate the Employee’s employment as his conduct “did not justify a conclusion that there had been an irreparable breakdown in the employment relationship.” The Employee was awarded 20 months’ damages in lieu of common law reasonable notice.

Decision of the OCA

For the reasons set out below, the OCA allowed the appeal and set aside the trial judgment.

1. The trial judge made a palpable and overriding error of fact when he decided it was unclear whether the employer found that the Employee’s four comments constituted sexual harassment.

The OCA held that based on the evidence it was clear that the employer concluded that the allegation of sexual harassment was substantiated, the employer communicated this to the Employee, and the Employee understood it. In making this finding, the OCA emphasized:

• The written Investigation Summary and Final Warning (Summary) concluded, in the specific context of the Complainant’s sexual harassment complaint that the Employee had made inappropriate comments to the Complainant.
• When cross-examined, the Employee testified that when he was given the Summary, he was told his comments constituted sexual harassment and understood this was the employer’s finding.
• One of the investigators testified that the investigators concluded that:
  
  • The Employee’s comments fit the definitions of sexual harassment in the employer’s Workplace Harassment Policy & Procedure (Policy) and in the Occupational Health and Safety Act; and
  • The Employee singled out the Complainant for those comments because of her gender; and
  • The trial judge did not make adverse credibility findings against the investigator who provided this testimony or suggest a basis to reject the investigation’s conclusions.

2. The trial judge erred in law by failing to correctly apply the test for determining whether the employer had just cause to dismiss the Employee.

The OCA held that the trial judge erred by failing to properly apply the test for just cause. The test must be applied in context, and requires the following question to be answered: Did the employee engage in misconduct that was sufficiently serious that it struck at the heart of the employment relationship, i.e., was it incompatible with the fundamental terms of the employment relationship? The OCA indicated that the answer involves the following three-step analysis, which it concluded the trial judge did not conduct:

1. A determination of the nature and extent of the misconduct, which may include wrongdoing discovered both before and after the termination. The OCA determined that the employee’s conduct consisted of his four inappropriate comments, including after he was told by the Complainant that they were inappropriate and unwelcome, and after he was warned by his superior, followed by his refusal to apologize when the employer told him it was required.
2. A consideration of the surrounding circumstances: (a) The employee’s age, employment history, seniority, role and responsibilities in the organization, including the degree of trust placed in the employee; and (b) The nature of the employer’s business, and whether there are any relevant policies or practices. The OCA observed that although the trial judge took into consideration that the Employee was a long-term, 20-year employee, he did not refer to the Policy or the Employee’s recent training with respect to it, or consider the Employee’s senior position and the degree of trust placed in him by the employer as a result.
3. A decision whether dismissal is a proportional response; i.e., can the employment relationship be sustained despite the misconduct or is it so serious that it has caused a breakdown in the employment relationship? The OCA noted that the trial judge’s assessment of whether dismissal was warranted by the Employee’s misconduct, “was tainted by his failure to consider, as part of that misconduct, the inappropriate, sexually harassing comments that the respondent made to the complainant, that were the basis for the investigation and discipline.”

3. The trial judge erred by failing to find that the employer had just cause to terminate the Employee’s employment.

The Nature and Extent of the Misconduct

The OCA canvassed and then applied definitions and descriptions of sexual harassment in judicial precedent, a legal academic text, and the Policy to the four comments the Employee made and the circumstances in which they were made. For the following reasons, the OCA held that these comments undoubtedly constituted sexual harassment of the Complainant:

• They were each based on gender, had a distinct sexual connotation, and would only have been made to a woman;
• They were demeaning, undermined the Complainant’s dignity, and implied provocative behaviour by the Complainant or that she welcomed sexual suggestions by the Employee;
• They were unwelcome and the Employee knew that because the Complainant told him and his superior did as well; and
• They created a poisoned atmosphere for the Complainant in her workplace. As stated in the Policy, “the comments were unsolicited and unwelcome, they were of a sexual nature, and they might reasonably be expected to cause discomfort and humiliation and create a hostile and offensive work environment.”

The Surrounding Circumstances

The OCA then considered the circumstances of the Employee and the employer. The Employee had recently received training on the Policy, which, as a senior, 20-year employee, he would have been trusted to abide by in his relations with co-workers. The Complainant also had to work closely with the Employee and he was expected to treat her with dignity and respect. The Policy had a complaints procedure that the employer followed. The Employer conducted an investigation, and afforded the Employee an opportunity to address the allegations against him. The employer determined that the Employee had made sexually inappropriate comments to the Complainant, and communicated its findings to him together with the steps he was required to take to address the situation. Finally, the OCA noted that the Policy provided that if the employer finds that an employee engaged in harassment or sexual harassment in the workplace, the employer may take corrective action, up to including termination of employment.

The Employee’s Dismissal was Warranted

Finally, the OCA held that the employer’s decision to terminate the Employee was a fair and proportionate response in view of the Employee’s lack of contrition, lack of understanding of the seriousness of his conduct, and refusal to apologize to the Complainant.

Bottom Line for Employers

The decision of the OCA in A.O. Smith confirms that if a properly conducted investigation concludes that an employee has engaged in sexual harassment in the workplace, the employer is entitled to take firm action, which may range in severity and, at its most forceful, may include termination of employment for cause.

Notably, the OCA found that the employer’s initial disciplinary response of requiring the Employee to apologize and take sensitivity training was a fair and proportionate response by the employer. Only when the Employee demonstrated that the employer could have no confidence that the Employee would not engage in similar conduct in the future did the employer dismiss the Employee, which the OCA also concluded was proportionate and wholly warranted. This finding indicates that corrective action short of dismissal can be an appropriate employer response to workplace sexual harassment. The appropriate disciplinary action is dependent on the context of each case.

In the event that an employer receives a complaint that sexual harassment has occurred in its workplace, it is encouraged to seek the guidance of experienced employment counsel before responding.