Over the objections of a company’s employment lawyer, an Ontario court has permitted an employee to refer, in her Statement of Claim for constructive dismissal and bad faith, to the “communications and conduct” of the company’s lawyer in respect of a sexual harassment investigation.

The employee made sexual harassment and bullying allegations against a coworker. The employer investigated and concluded, without speaking with the employee, that the allegations were not substantiated. During this period, the employee was placed on a Performance Improvement Plan.

The employee eventually retained counsel who requested a severance package. The employer then also retained counsel. For a few months, the lawyers communicated by phone and correspondence. They discussed the investigation. The employee’s counsel urged the company to conduct a new or more thorough investigation, which the employer did. The employee then started her constructive dismissal lawsuit and included, in some paragraphs of her Statement of Claim, reference to some of counsel’s discussions and conduct.

The company moved to strike those paragraphs from the Statement of Claim on the basis that the discussions between counsel were “without prejudice” settlement discussions. The Master refused to strike the paragraphs. She held that the discussions and conduct of the company’s lawyer with respect to the harassment investigation did not relate to a “litigious dispute” but rather to the company’s statutory obligation under the Occupational Health and Safety Act to investigate the sexual harassment allegations. The sexual harassment investigation report itself was not privileged. Counsel’s conduct during the sexual harassment investigation was “highly relevant and both counsel must have understood its relevance should litigation ensue”. Finally, although the outcome of negotiations between counsel may have led to a severance settlement, and the employer’s lawyer told the employee’s lawyer that she wished to engage in without prejudice settlement discussions prior to sharing any information with him, the communications in relation to the investigation and the PIP were directly relevant to the employee’s claim for constructive dismissal and bad faith.

In the result, the communications between counsel regarding the sexual harassment investigation and the PIP were not “settlement privileged” and were not struck from the employee’s Statement of Claim.

Clayton v. SPS Commerce Canada Ltd., 2018 ONSC 5017 (CanLII)

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