The Ramifications of rehiring a harasser

A decision by the Ontario Court of Appeal in Colistro v. Tbaytel provides some important guidance on the consequences of rehiring an employee who was previously terminated for harassment.

The preamble to the decision explains the issues succinctly:

This appeal considers the consequences that flow from a company’s decision to place its business interests above the expectations and concerns of a valued, long-time employee by rehiring an executive dismissed in part due to allegations of harassment of that same employee and others a decade earlier.

It raises two main questions: (1) whether this decision constituted intentional infliction of mental suffering on Colistro, Linda Colistro; and (2) whether it resulted in her constructive dismissal

Background

Tbaytel, formerly the Thunder Bay Telephone Company, is a municipally-owned telecommunications company. It was renamed Tbaytel in 2004 although it remained wholly owned by the City of Thunder Bay.

Colistro worked for Tbaytel/City of Thunder Bay for nearly 20 years. On January 29, 2007, Tbaytel announced the hiring of Steve Benoit as Vice-President of Business Consumer Markets. The City of Thunder Bay had previously terminated Benoit’s employment in 1996 for sexually harassing Colistro and others.

Colistro expressed concern to the executive vice-president of operations and the vice-president of human resources about Benoit’s hiring. She told them that she had previously reported to Benoit and that he had been terminated for sexually harassing her and other employees.

Tbaytel made inquiries and determined that Benoit had not been interviewed during the investigation into allegations of sexual harassment. It also learned that he had not been terminated for just cause, although the complaints of sexual harassment were part of the reason why he was terminated. Notwithstanding this information, Tbaytel decided to rehire him.

Colistro was very upset. She immediately left work for medical reasons, was diagnosed with PTSD and depression, and never returned to work. She rejected Tbaytel’s offer to accommodate her by moving her to an equivalent position in another building and would not accept anything less than Tbaytel not hiring Benoit. When he was hired, she commenced legal action for wrongful dismissal and damages for intentional infliction of mental suffering.

At trial, the judge found that she was constructively dismissed and awarded her the following:

• 12 months’ notice, less short-term salary continuation and long-term disability benefits she received over that time, and
• “Honda” (bad faith) damages of $100,000
• her claim for intentional infliction of mental suffering was dismissed

Even though she won, because she had rejected previous settlement offers, she was ordered to pay $150,000 in legal costs to Tbaytel and $50,000 to the City of Thunder Bay, leaving very little left for her, especially after paying her own lawyer.

Colistro appealed to the Court of Appeal the intentional infliction of mental suffering dismissal, as well as the costs she was ordered to pay. Tbaytel and the City of Thunder Bay cross-appealed the constructive dismissal and Honda damages amounts.

The Court of Appeal dismissed all the appeals.

Tort of Intentional Infliction of Mental Suffering

The Court of Appeal concluded that although Tbaytel’s offer to move Colistro to a different position in an adjacent building, was not acceptable to Colistro, it might have been acceptable to others. As a result, there could be no conclusion that Tbaytel had subjective knowledge that serious psychological injury was substantially certain to occur, which was an essential element to a finding of infliction of mental suffering.

Constructive Dismissal

The Court of Appeal accepted the trial judge’s finding that a reasonable person would consider Colistro’s continued employment intolerable given that (i) someone who had sexually harassed her was being rehired, and (ii) Tbaytel knew that Colistro was shocked and very upset by this.

Honda Damages

The trial judge found that Tbaytel’s conduct was unduly insensitive. The Court of Appeal found that the amount awarded to Colistro was consistent with other cases and did not change the trial judge’s findings.

Costs

Colistro said that she had not accepted the previous settlement offers because a settlement without an admission of liability would not provided vindication. Therefore, she appealed the trial judge’s cost award.

The Court of Appeal dismissed this aspect of her appeal. An appeal of costs will not be granted unless there are strong grounds to find that the judge erred in exercising their discretion. The Court also noted that the trial judge’s notation on costs suggests that the second offer did not include a “no admission of liability” clause. In other words, Colistro’s argument that she would not accept an offer without an admission of liability did not hold water.

Conclusion

There are a couple of lessons for employers arising from this case.

1. If you rehire someone who has previously harassed an existing employee, that employee may claim constructive dismissal; and
2. Settlement offers are an important tool in managing litigation claims.