Trouble in Paradise: Managing C-Suite Misconduct

ELISA SCALI: I think now's a good time to get started. Good afternoon again. My name is Elisa Scali. I'm a Partner with Gowling WLG. I'm practicing in the Employment, Labor, and Equalities Group, what we like to call the ELE Group. And on behalf of the ELE team, I'd like to welcome you, and thank you for joining our program today.

Before we begin our program, I'd like to acknowledge that because all-- we are all based in different cities, provinces, and territories across Canada. We are located in different traditional Indigenous territories, some of which are covered by treaties.

I encourage us all to take a moment to reflect upon and acknowledge the land upon which we are living. If there are Indigenous people attending this webinar today, please feel welcome to share your home community so that we may also recognize you.

So this is our first webinar of our 2026 webinar series. So this is very exciting. And for the first webinar, we will be discussing what might be considered a sensitive topic of managing C-suite misconduct. To guide us through this discussion, we are joined by Tushar and Anandasagar and Cedric Marsan-Lafond. Both are experienced and valued members of our ELE team.

Tushar practices in Ontario, and Cedric practices from Quebec. So we'll be getting two perspectives today. They've prepared a very engaging, informative session for you. But before we get started, there are just a few administrative housekeeping items that I'd like to go over with everyone.

You will see a PowerPoint presentation today which will be distributed following the webinar. The session is also being recorded, and the recording will also be shared with you following the webinar. If you have questions, please submit your questions by clicking on the Q&A icon at the bottom of your screen. There will be time at the end of the program to address as many questions as we possibly can that you might submit during the session.

So thank you once again for joining us. We hope you find today's webinar both informative and engaging. And now over to you, Tushar.

TUSHAR ANANDASAGAR: Thank you so much, Elisa. And good morning or good afternoon, depending on where in the country you are, everybody. I'm Tushar Anandasagar, and joining me today is my colleague Cedric Marsan-Lafond. Thank you once again so much for being here.

Our topic today is a juicy one, managing misconduct in the C-suite. When a senior leader crosses the line, the impact is immediate. Employees, clients, sometimes investors, the media, they can react before the facts are clear. And so today we're going to focus on what you actually can and should do in those first couple of hours and days.

Cedric and I will be tag teaming throughout. And so let's get us-- let's get us started. Over on to the next slide before we get into the nitty gritty, just a very brief disclaimer. Today's session is for information and education purposes only. This is not legal advice.

Every situation, especially these types of situations, they do turn on their own facts. And so if you are facing a live issue, please speak with counsel of your choice. We will do our level best to dedicate the end of this presentation to some live Q&A. We ask that you please keep your questions general rather than fact specific because this is a public forum.

Again, if you would like to discuss a particular specific matter, we would be happy to take that discussion offline and connect with you after the session. And so with that, let's chat a little bit about this presentation. We're going to keep this national in scope. We're going to cover the common law and civil law rules across the provinces.

The federal requirements and investigation steps that have been tried and tested and will hold up. We're also going to work through a live scenario together so that you can see how these discussions will play out in real time. So with that, over to you, Cedric. Please take it away

CEDRIC MARSAN-LAFOND: Thanks, Tushar. And good afternoon to everyone on the call today. The content of the presentation, we're going to talk about investigation, all kinds of investigation, including harassment investigation. And the content of the presentation, 90% will apply to all your investigation

However, there's a few specific elements that are particularly important when we're talking about C-suite officers. And we'll raise those along the way. First of all, let's start with why C-suite misconduct is different? Well, first of all, you have the reputational risk that is linked with a C-suite investigation

C-suite officers are the highest member of the company. They're known throughout the company, and external stakeholders are particularly interested in what happened with their employment. So if you have a C-suite misconduct, you might receive a call from your investors, from your board, from the media

This is why those investigations are really sensitive. And we need to focus on confidentiality and resolving the issues thoroughly and quickly. The power imbalance is also to be considered in the process. C-suite officers are the highest member of the company. As such, they have power over pretty much everybody under them

This is why it's hard for some employees to come forward and to make complaints about officers. Oftentimes, they will want to preserve anonymity, and they will not want to do a complaint where they are named. So this is another topic that we'll address today

There is also the brand amplification of harm. C-suite officers are the face of the company. If you have an officer that is dismissed, or even if external stakeholders learn that the officer's under investigation, it could affect the whole brand, it could also affect the value of the stocks, it could have a whole lot of effects

And this will oftentimes, practically speaking, impact how companies treat those situations, although it should not. We can go on the next slide please, where we will see more about that. We see here a balance, right? Where on the one side, you have your legal compliance, what needs to be done

And on the other side, you have your interference. This is why C-suite investigations are so sensitive. Because of the risk we mentioned. The brand risk. The question for the media. The external stakeholder question. The external pressure

All of this, as illustrated in this picture, can tip the balance over to the side. And the company may want to, for example, resolve the situation quickly. And they might have a bias to conclude that complaints are not founded, and the C-suite officers should not be sanctioned

However, in doing those quick assessment, sometimes legal compliance is left aside. And it should not, because it will create problems down the line. You might have some costly litigation that could arise from those quick assessments that are made to preserve the brand, preserve the image of the company

What we need to do is lock down evidence and run proper investigation when needed. You need to confirm the facts, preserve the evidence, run an independent investigation, where you meet with the plaintiff, you meet with the respondents, you meet with the relevant witness, you gather evidence. And then afterwards, be very careful about how you communicate the different steps and the result of those investigation internally and externally

We can see that the disclosure is quite sensitive. Here we have a few example of the disclosure that could happen during that process. So you have first of all, privacy compliance on the left side of the chart here. As you may be aware, in different jurisdiction in Canada, there is some privacy legislation that protects employees and individuals, including C-suite officers

You gather personal data on them, and you can be limited on how to use and disclose that data. That includes the investigation. So you will not go publicly and speak about your investigation, as you're managing some very confidential topics, including employee data

However, there are situations where you may be under the obligation to share some information. So we have the regulatory scrutiny here part of the chart. So if you learn something that's, for example, illegal in an investigation, you might need to do some disclosure to the authorities

For example, if you learn that there's a crime that has been committed, that there is a problem with securities, you might need to reach out to the securities regulator in your province. So this is a disclosure to be mindful of

You will also have some media attention if the information is leaking outside of the company. You should-- and we'll talk more about this later on in the presentation. But you shouldn't talk to the media until the matter is resolved

And even then, the message should be controlled. So you would only say that you have no comments because you want to preserve the confidentiality of your process, and you want to respect the rights of everybody that's involved in the investigation

You may also need to notify your insurer

So, for example, if you have an insurer that insures you for legal matters. And as legal insurers, you might have the obligation to give them a notice if you're made aware of illegal acts or acts that could evolve in litigation

You might also want to pull in the board. As we will see, senior officers are at the top of the organization chart. And who sits above them? It is the board of directors. They will most likely be the one managing those investigations with the help of external counsel and external investigator as well. So this is another disclosure to be mindful

As you see, there are some information that should not be shared, information that will need to be shared with different external organization. As such, this is a balance that will be hard to reach, but you need to be careful when navigating it

With this, we can go to the next slide and see how those general principle applies to the different jurisdictions. Starting with common law jurisdiction, and over to Tushar on this part of the presentation

TUSHAR ANANDASAGAR: Thanks once again, Cedric. So, folks, when we're dealing with C-suite misconduct in a common law jurisdiction, the starting point is simple. Cedric, you mentioned this, and I think it rings true, that the statutory rules really do not bend for seniority or higher authority

The same harassment, sexual harassment, violence, and discrimination laws apply to executives exactly as they apply to every other employee. There are no carve outs. There's no softening. There's no special consideration

So once the organization becomes aware of a potential incident or an issue, the territorial or jurisdictional legislation, there might be some wrinkles, but they generally require that an investigation that is appropriate in the circumstances be conducted

That trigger is actually based on awareness, not on whether anyone is willing to file a complaint, or whether someone is willing to put the complaint in writing. And with executives, this matters particularly because silence from direct reports is a very common issue, and the statute actually anticipates that

So each provincial or territorial statute builds in a basic architecture of the investigation. Prompt intake, confidentiality protocols, non-retaliation or anti-reprisal protections, whatever the name might be. Interviews of the right people involved, witnesses, complainant, respondent. Proper documentation, record keeping, and an outcome communication that lines up with the legislation and company policy

So none of these steps can be skipped or fast tracked or somehow manipulated because of the respondent's title, whether they're C-suite or otherwise. And so again, there might be some wrinkles by jurisdiction, certain definitions, timing expectations, and record keeping requirements

So we should check there and start there before we launch and make sure that the rule book in the jurisdiction that we're operating in is studied, and we're aware of the rules. But really, the core obligations repeat across the common law jurisdictions, everywhere except for Quebec

Investigate, protect the participants, record the process, and close the loop within a reasonable period of time. Policies, codes of conduct, executive contracts, they can help to bring the statutory framework to life, but they really cannot dilute the statutory protections that are put in place or the obligations of an employer

And if an internal document conflicts with the legislation, the legislation is going to win in that standoff every time. So in the C-suite context, the message is clear. The statutory rules are the same, the duties are the same, the required outcomes are the same, and there are no real shortcuts, exemptions, special treatment because of seniority

Now, there is a wrinkle, an additional wrinkle in the common law jurisdictions. And we'll go over to the next slide and chat about federally regulated employers. So this is unique. When a respondent is a C-suite executive in a federally regulated workplace, the investigation is not just HR driven or policy driven, it's actually a regulated workflow. So it's a little bit different

So once a notice of occurrence lands, the Canada Labor Code and the Workplace Harassment and Violence Prevention Regulations push the file effectively onto rails. A designated recipient will acknowledge. There is early resolution, and there's a test

And if it's needed, a qualified, impartial investigator is appointed. The emphasis here is on compliance, not so much on creativity. So what changes when the respondent in a federal workplace is a CEO or a direct report to the board? Two things

First, independence and optics are really not negotiable. Counsel should structure the file, in our view, and the investigator's qualifications and neutrality must be unimpeachable. Second, the workplace and policy committee is part of the federal process design

It helps to set the policy, it can impact the assessment and the investigation, the investigator qualification assessment steps. And so there's a built-in check that you don't see in most provincial processes unless an employer opts in

Records and reporting are heavier in the federal sector. So every occurrence means a formal OHS class record, a maintained investigation file, an annual reporting to the labor program. In the common law jurisdictions, you'll document things diligently, and you'll keep things for a period of time, but you generally won't be filing an annual harassment and violence report with a regulator

The tempo and discretion afforded to an employer also are different. So federally speaking, the progression, it goes from negotiation to a form of conciliation, and then investigation is spelled out. Whereas in provincial and territorial files, you may have more room to actually tailor your route to get to destination

In the federal world, you really need to show your work against this regulated sequence and the timelines. So the bottom line for executives in provincial matters and territorial matters, the question is often was the process fair and proportionate? Whereas in federal matters, it becomes did you follow the regulated sequence cleanly, on time, and with the right people doing the right things at those points in time? And again, did you manage the executive optics? If we check these boxes, the file can stay tight and defensible under the federal rules before we go into potential common law concerns

I'm going to scoot over to the next slide to talk about some other key points. Oh. Sorry. I shouldn't tell you how that-- there you go. So we know, we know that these particular cases carry a high risk and high exposure

And there are some other key principles, although not contained in statute, which come from the common law, from the case law, and our litigation experience in the common law jurisdictions. Again, everywhere except for Quebec

I'm going to focus on five key takeaways here. The big one for us is independence and role clarity. So this is point number one. With executive misconduct, independence has to run through the whole process, not just the investigation itself

If HR sits anywhere in the respondent's reporting line, just an example, and a complaint comes into HR, or if the respondent is someone HR works closely with, it's important to acknowledge that dynamic and deal with it early on

So we regularly advise our clients that when HR recognizes these conflicts, the file should be moving upstream, and it should be moving quickly, usually to the board or the delegate of the board. That shift sets the tone for anything that comes afterwards

The people overseeing the process have the authority and the distance to make decisions that will not be second guessed internally. It also keeps the process on track. So when oversight sits with the board, there's a lot less risk that senior leaders or their peers, other members of the C-suite, can shape or stall or quietly influence things that are going to happen next

Decisions about scope, timing, communications, interim measures, they stay clean, and they stay insulated from the organization because they're above the organization. So put simply, once that C-suite is involved, independence is about who runs the process, not just who interviews the witnesses. That is a fact that's often missed

A second key takeaway here is about privilege. So again, we regularly advise our clients to assert privilege at the outset, as maybe even step one. Retain external counsel and route sensitive steps through counsel. Doing so protects legal advice and certain communications, potentially even with the investigator, while the facts develop

And it allows counsel, not the company, to retain the investigator. Privilege, it won't replace the statutory duties, for instance, notifying parties about the outcome of an investigation, and it's not going to guarantee that an investigation report is not producible. But it does give your organization an important lever to potentially resist premature disclosure, and it also creates some breathing room while the situation is evolving

A third key point from the case law is paid leave versus unpaid suspension. So we generally recommend defaulting to paid administrative leave where an interim period of separation is necessary. So separation might be necessary to preserve neutrality, but paid leave protects the investigation, essentially. And it avoids punitive optics that accompany an unpaid suspension

So unpaid suspension or unpaid leave, in our view, should be reserved for narrow circumstances where there is clear statutory or contractual authority that exists, and only after legal review. And when we're using these types of concepts, the exposure is high. So we do, do strongly recommend going into discussion with counsel

Even with paid leave, we regularly advise our clients to be mindful of the Supreme Court's guidance in the Potter versus New Brunswick case. We need to state the non-disciplinary purpose of the leave. Innocent until proven guilty is a key piece of that communication

We need to set clear expectations. There can be no contact with witnesses, we need to preserve data, comply with IT and security directions. We need to apply only the minimum restrictions that are needed. So there needs to be an element of proportionality

And we need to confirm this in neutral written terms. Even a paid leave can become contentious if it drags on and on. So the investigation needs to move promptly. And in our view, the executive should receive periodic and neutral status updates

Moving onward, we talked a little bit about the reluctant-- sorry, still on the previous slide. The reluctant complainant conundrum. The C-suite cases that we deal with often involve silence, fear, or second thoughts from people who are affected

And many times, the complainant will come in the form of an internal whistleblower complaint mechanism, or via some form of an anonymous online platform. Again, this does not remove the employer's duty to investigate. The trigger is the employer's awareness of the potential incident or issue, not whether someone is willing to write it down and stay involved

Executives are uniquely positioned to deter or suppress complaints, which is why the courts have made it clear that reluctance by a complainant does not end the discussion. Ignoring the issue will only multiply the risk

Finally, I think on this slide, executives, they are fiduciaries. And they need to be held to a higher standard, and the courts recognize this. They have duties of loyalty, honesty, candor, and avoidance of conflict. Courts evaluate both the alleged misconduct, but also another piece that is frequently missed, how the executive conducts themselves during the process

In practice, this means that if an executive is being completely unreasonable, recalcitrant, or uncooperative, an investigation may need to expand to address that non-cooperation, ignored board directions or other behavior that is fundamentally inconsistent with the executive's fiduciary duties

These issues become part of the current assessment, or in some instances, maybe even necessitate a separate investigation. We're going to talk about that a little bit later on. And now we'll go over to the next slide and chat about some unique features for Ontario, and I will say New Brunswick-- sorry, Nova Scotia as well. But primarily Ontario because this is where most of the case law is coming from

So we have this case in Ontario called Render versus Thyssenkrupp. This is not a new case, but it's directly relevant to this analysis. In this case, the employer had a long service manager who was actually responsible for enforcing the company's antiharassment policies

At a work event, he engages in a series of sexualized acts towards a subordinate. He leaned his face toward her chest, slapped her buttocks in front of coworkers, and made an explicit comment about wanting to motorboat her breasts

He joked about it afterwards, offering colleagues the chance to shake his hand for $10. There was no remorse, there was no contrition, there was no recognition of the impact on the complainant. Because he was in a position of authority, the power imbalance made everything much worse

So the employer terminates him for cause and gives him $0. Most employers assume that misconduct this serious automatically disentitles someone from damages and common law reasonable notice. This Render decision says not so fast

The Court of Appeal in Ontario drew a hard line between two legal tests. One is the common law of just cause, which wipes out common law notice. Another one is ESA willful misconduct, which is a completely different, much higher threshold

So you can win the cause argument like this employer did, but you can still owe an employee ESA termination pay and severance because the conduct wasn't considered willful in the eyes of the court. So in Render, the behavior was outrageous. But the court said it wasn't preplanned, premeditated, therefore, it was not willful

I wholeheartedly disagree with this decision. But I'm not a member of the court. So the ESA minimum still had to be paid. Practically speaking, for Ontario and as well as Nova Scotia, what feels like a clean cause case can still come with a statutory price tag. And sometimes a significant one

Plaintiffs now by rote argue that there's no willfulness as a matter of routine. Because if they win that argument, even if an employer wins the cause argument, then the ESA minimums are still owed. And so we have been adjusting our approach on executive files. Because of this Render decision, we have to assess both tests

Do we have cause? Do we have willful misconduct, particularly in these jurisdictions? And we have to build the intent record. So there have to be policies, training, warnings, past behavior, repeated issues, anything that really speaks to deliberateness, that is now a requirement in these provinces, and that leads into to exit planning

So Render changed the rule book for Ontario and Nova Scotia. Cause still exists, but it no longer necessarily guarantees a $0 outcome. I think Ontario and Nova Scotia, to this morning at least, stand alone in creating this second hurdle of willful misconduct

While the frequency of litigation in Ontario is certainly higher, the statutory features have made executive risk management in both of these jurisdictions uniquely technical and uniquely risky. So for you employers operating in the rest of the nation, please count yourself lucky that you don't have to navigate this extra layer of fun. I'll now pass over to Cedric to circle us back to Quebec

CEDRIC MARSAN-LAFOND: Thank you, Tushar. Most of the principles explained by Tushar will also apply to Quebec. But just to do a quick overview of what's the legal framework? Of course, the most important legislation when we're talking about harassment investigation is going to be your Act respecting labor standards

As an employer, you have two clear obligations. One, take reasonable action to prevent harassment. This includes having a policy, having measures to ensure that harassment doesn't-- is not generated in the workplace. And two, stop harassment when you're made aware of the behavior. This is where you need to do an investigation and take corrective action if needed

In addition to the Act respecting labor standards, there's also health and safety obligations. So the employer needs to ensure that every one of its employees is safe physically and mentally. This includes harassment, violence, discrimination, and it applies to every employee

The employer, when investigating employees, regardless of their level of C-suite or not, must also act in good faith. This is an obligation provided by our civil code, in which every individual, company or individual, has an obligation to act in good faith

So in the context of an investigation, this means giving the opportunity to every party to explain their version of the events and give their documentation before a decision is made. Finally, there's also the privacy obligation that we mentioned previously under Privacy Act. And that will create some restriction on how and when information can be communicated. We can go to the next slide, please

In Quebec, it's going to be very important for you to identify who is your senior managerial personnel. The reason why is because your legal risk, if you are to terminate an employee, are different if we can qualify an employee as a senior managerial personnel or not

The distinction is made by case law. A senior managerial personnel is somebody that's a higher ranking member of the organization. Oftentimes, they have a direct relation with the owner or the president or the board, and they are responsible of taking decisions that can affect the company

They have some autonomy and can have a decision making process on the general orientation of the company. Their working condition, of course, are important. We're talking about high salary, bonuses, equity, et cetera. And they have a high degree of autonomy

When you have senior managerial personnel, they are not entitled to the recourse for dismissal without good and sufficient cause that is provided for in the Act respecting labor standards. This is a very special recourse in Quebec, where employers that have employees with two years of seniority or more have to demonstrate a good and sufficient cause to terminate employment of those employees

If they fail to do so, these employees can be reinstated. So when managing those situation, it's going to be important to know if the specific employees fall in the definition of a senior managerial personnel or not

Also important to note that case law is very clear that senior employees have an increased duty of loyalty towards the employer, and especially in investigation purposes, you want to be able to rely on those individuals, and they need to be truthful and cooperate in the investigation process

We can go to the next slide, please. So this is a bit the same scheme as was explained by Tushar. So you need to do your investigation under the Act respecting labor standards. Then afterwards, you will have a conclusion, and you will need to give the conclusion of the investigation to the plaintiff and the respondent

Maybe you'll need to do some reporting also to different authorities. For example, the securities authority, if there's a problem on that end, the police if there's a criminal act, or things of that sort. And then afterwards, you need to establish do we have enough to terminate? Is this some fact pattern that leads to termination? And you'll need to analyze this both under the Act respecting labor standards and the civil code. Civil code, which is the equivalent of the common law in different provinces, where you will also have different thresholds

Now, on the next slide, we'll talk about some key principles of the investigation. A lot of the process that Tushar explained applies to Quebec also. So I didn't want to repeat those notions, but I wanted to raise a few points of interest when dealing with investigation and talking to you about a few cases that apply to those points of interest in Quebec

First of all, as Tushar mentioned, when you are doing an investigation for harassment, and the allegations are serious, and there's a possibility of termination, your first reflex should be to suspend the person that's being investigated if needed

That suspension should, of course, be with pay, because if you are suspending without pay, and then afterwards doing another sanction, for example, terminating, it could be interpreted by a court as a double sanction, and it could affect the validity of the second sanction, for example, termination, because a court doesn't want sanction twice for the same events

The suspension should be for a limited duration. So you should really, in that investigation letter saying that the person is going to be suspended, you should put a duration. For example, we expect the investigation to take one or two months because this is the Cabiakman decision that was rendered at the Supreme Court level that informs us that this is a requirement of the suspension with pay

If you're not able to meet that deadline because the investigation is ongoing, you should just keep communication open with the respondent and inform them as you go. We often receive the question of, do we need to allow the respondent to have an attorney with them during the investigation? The response to that question is that when you're doing an internal investigation, you are not a court of law. There's not a constitutional right to have a lawyer by their side. Of course, oftentimes lawyers are tolerated in a regulated manner because it will allow the respondent to come, give his version of the events. You have a more complete investigation

But if you allow lawyers, you should put a framework around the participation. They should be there as an observer, not to do representation. You're not arguing with them. You are the one asking the question, and the respondent is answering the question of the investigator

The lawyer is there as a witness and can give advice to his client privately, but during the investigation process, he should remain silent and be more in an observer role. We have a decision there Ségun contra Dessau, where the respondent was a project manager in a company and did some sexual harassment towards an employee in a relationship that he believed they had a relationship but was clearly not mutual

The employee tried to meet with the respondent a few occasions. He wouldn't give any details. And he would refuse to talk without the presence of his lawyer. The employer refused to have a meeting with him and his lawyer and rendered a decision based on the other testimonies and documentation he received

And the tribunal in that case said, well, the employer didn't have the duty to allow you to have your lawyer with you in the room, and they took a decision based on the information that they had, and they had enough to take that decision. So just to illustrate that lawyer's participation is not required in all circumstances

As we mentioned, the employer must act in good faith. And another question we often receive is, do we have to disclose the investigation report? So you come to the end of the investigation, you have that report. What typically the investigator will send to the plaintiff and the respondent is a letter saying if the allegations are substantiated or not

But beside those letters, you have investigation reports where all the evidence is documented, where the reasoning of the investigator is documented. And should you share that? You should not share it upfront. And the question is, if it's requested in front of a tribunal, are you obligated to do so? There are several arguments that can be raised to avoid the disclosure of the investigation report, including solicitor client privilege. Oftentimes, this is not enforced because if the investigator is retained by external counsel, the investigator is not directly in contact with the client. So it's not like they're providing legal advice

However, one of the privileges that may apply is the privilege on litigation. So in Quebec, when you have an actual or perceived litigation that may arise in the future, all documents that are prepared as part of the preparation to that litigation are confidential, and a court cannot force you to share those documents

And it has been ruled in some decisions that investigation report, when there's a complaint of harassment, can fall in that category. This was the case in the Boutin decision, where it was a police officer that was dismissed because of harassment complaint

He asked the court to force the employer to produce their harassment report. And they refused to order to do so because the court felt that it was part of litigation privilege. So there's a lot of arguments, and it's really a case by case analysis at this point

We can go to the next slide, please. A key takeaway for Quebec is that harassment legislation has changed quite recently. And you should be aware that your policy need to be updated. As of September 2024, there's new requirements that are required by legislation, and Gowling can help you in reviewing those policies. So if you need some help, feel free to reach out

What needs to be in the harassment policy is method and technique for identifying, controlling, and eliminating risk of harassment. So we're talking about definitions, we're talking about example of a, b, c can constitute harassment, et cetera

Training provided by the employer. So since 2024, your policy needs to clearly identify what is the training that's provided. It doesn't say what kind of training you need to provide, but you need to say in your policy what you want to provide

So usually we recommend onboarding training when you have new employees and recurring refreshers every one or two years to make sure that everybody is on the same page. This is also something we can assist with

The rules applicable to social activities. It's not because you're not in the physical workplace that harassment doesn't apply. So if you're in a happy hour, Christmas party, seminar, conferences, harassment can also arise in those situations. So your policy needs to address that

The complaint process and handling. And that's really important for C-suite employees. Who should I contact if I'm an employee and I want to file a complaint against a C-suite officer? You need to think about those considerations

Should that employee go directly to the board? Do you have an external phone line that the employee can call on an anonymous basis so they can file a complaint? These are considerations that need to be taken care of

If we go to the next slide, we also see that you need to have measures to protect from reprisal. You need to detail your investigation process. You should have an informal process resolution, an option to mediate, and then formal resolution where you detail who will be met, when, and what documents will be considered in the process

Then the measure to ensure the confidentiality of that process and the document retention period, which is two years after the events-- after the report is made in Quebec. Now, if we move to the next slide, we just wanted to do a quick recap of the different measures that you should put in place when doing those kind of investigation on a timeline

First step is establishing privilege. As soon as possible, in your first communication, you should copy your external counsel preferably, and if not, your internal counsel, to establish privilege and try to make sure that those communication are not part of disclosure later on in the process

You should also establish an independent investigation. Especially for those C-suite officers, you don't want somebody that's a report-- a subordinate of them doing the investigation. These are scenario where external investigation are important to maintain the independence or appearance of independence on the part of the investigator

You want your external counsel, and in the ideal structure, the board would be in communication with an external counsel, which will retain the services of an investigator. The investigator will do the investigation process, and the board with the external counsel will discuss together what is the corrective action to be taken afterwards

Statutory requirements. Be sure to verify in each jurisdiction what you need to do legally to be sure that you're respecting the process. The answer in Quebec is just to investigate. There's no further legal specificities. The interim measures. As we've seen, reprisal is a real risk when we're talking about C-suite employees. So what do you put in place to be sure that there's no reprisal? Is that a leave-- a suspension with pay of the person that's being investigated? Is it for a period of time for that person not being able to make decisions related to the individual that made the complaint or to the department in which the individual that made the complaint is part of? Or this decision being reviewed by the board of directors? There's a whole lot of interim measures that can be put in place during the investigation process

Then you have your procedural fairness, where you have your investigation, the respondent, the plaintiff, the witnesses are met, corrective action, and where the board and the external counsel will have a discussion to determine what's the best action and how to implement the conclusion of the investigation

And then you need to do compliance reporting. Depends on the jurisdiction. Now we'll move to a piece of the presentation I'm sure you'll be very interesting on, which is the fact pattern that we created for you. And going over to Tushar to present the facts here

TUSHAR ANANDASAGAR: Thanks again, Cedric. OK. So we're shifting into a fact pattern. This is where we take everything we've talked about and drop it into a situation that will probably feel pretty real for many organizations. So we're going to visit Smallville AI. This is a fast growing, high visibility company that is heavily dependent on the credibility of its leadership team

This is the kind of organization where the behavior of one executive can ripple instantly across clients, employees, and investors. What we want to watch out for is, as we go through this, is how quickly an executive level incident can escalate

These files never really stay small for very long. So Cedric and I will walk you through the scenario step by step, and we'll cue you, Cedric, at key points. So we can pause, assess the decision tree, and talk about what good process looks like in real time

So here's the org chart for Smallville AI. I want you to take a moment and look at the reporting relationships, because this is where most executive level investigations start to get complicated even before they start. You'll notice immediately that HR reports directly to Lana Lang, the Chief People Officer. And Lana Lang, in turn reports directly to Clark Kent, the CEO

This is a classic structural problem. So a function that would normally run the process is potentially compromised if the impugned executives are named respondents. And that means that HR cannot necessarily lead this particular file. Not because they are incapable, but because of optics and structural conflicts. These are inherent and truly impossible to manage lawfully

So this is also exactly why privilege and independence are those first steps that Cedric and I had mentioned. At this level, the first question is not what happened? It is, who has the authority to handle this so that we can survive scrutiny down the line? And in this chart, the answer is not necessarily internal HR. So we're going to move to the next slide and talk about a very serious incident. But keep the chart in mind as we go forward. Every single complication flows directly from that setup

OK. So let's look at the incident itself, because this is where everything accelerates. We have Clark, the CEO, verbally and repeatedly berating Chris, an analyst, in front of multiple clients and several internal witnesses at a golf tournament

This is not an internal dispute. It's out in the open. It's in a commercial setting, a public setting with multiple third party observers. That immediately raises both workplace harassment implications and reputational exposure. We also have an anonymous whistleblower email landing in HR's inbox. And to make matters more complicated for you, Cedric, the target, Chris, wants nothing to do with the process. Basically wants to stay out of it

So we have high visibility misconduct, a reluctant complainant, an anonymous whistleblower wanting to sound the alarm while trying to protect themselves. Why don't we pause here, Cedric, and why don't you walk us through what first moves and considerations look like from this standpoint? CEDRIC MARSAN-LAFOND: Absolutely. So these are serious allegations. Which are not necessarily harassment but could potentially be harassment, right? So you have a CEO yelling against an employee in a public setting. Here we're at a golf tournament. But clearly, there's a relationship with work. They're with clients. So it's not because you're out of the workplace, it can't be a harassment

You have a duty to investigate. Now, Lois, HR, should not be the one doing this investigation, because she is reporting to the CPO who is reporting to the CEO. So she's too little below the CEO, and she's not the right person to do that investigation

Who needs to be aware of the situation? Is the person above the CEO. And who's above the CEO? It is the board of the company. Lois should raise that issue with the CPO, which is probably the one that would contact the Board in the situation to denounce the situation and request an investigation if needed

First thing that Lois should do also is make sure that they copy external or internal counsel on communication to ensure that privilege is maintained. Now, Chris King, the analyst, the person that was confronted by the CEO on the green, wants nothing to do with this investigation

Regardless of if the plaintiffs or the victim in this case wants or not to participate, the employer still has a duty to investigate and make sure that corrective action, if needed, are put in place. So regardless if they participate or not, and the investigation should move forward

TUSHAR ANANDASAGAR: Yeah, this is-- it has the potential to become quite an explosive situation. So let's go over to the next slide because we have a new wrinkle to talk about. So Lois, Cedric, she reaches out to Lana Lang, the CPO, the Chief People Officer, for guidance. And Lana immediately responds with a message that downplays the incident and signals her personal relationship with Clark

This presents us with a problem. So let's look at the content of this email. Thank you for escalating. We're not going to investigate. I'm personally aware. The employee is known to be a whiner. Chris King, the target. This is not a matter that requires further action, and I don't really want to pull a number of our top clients into this

At this point, I would say HR really can't treat Lana as a neutral advisor. Her involvement creates conflict. I think it undermines independence. And it risks contaminating the process. It also raises concerns about whether internal reporting lines can be trusted in this case

And so this is the moment when this decision making needs to shift away from the normal HR chain and toward a structure that is insulated from what could be both respondents here. Cedric, anything else to add on this front? CEDRIC MARSAN-LAFOND: Yeah, exactly. This is what were talking about in the previous slide. So at this stage, Lois, HR, is made aware that Lana doesn't want to investigate an event that should be investigated because it is serious. So she should reach out to the board, which is the person above the CEO and the CPO also, and inform them of the situation

This is one of the specificities of C-suite investigation. Oftentimes, as we said, the consequences of investigating an officer are high because of the reputational risk, because they are the face of the company. So you might have a reluctance from other officers to start investigation when they should be started

Here, Lois is not the one that will do the investigation. She's in a conflict of interest or appearance of conflict of interest because she's directly reporting to Lana. And so it's really up to the board to take the matter and manage that with the help of external counsel and also of an external investigator

TUSHAR ANANDASAGAR: Absolutely. And I think from the board's standpoint, it's really important that the board members be trained on this in advance so that they know what to do if and when the situation comes up. They do not want to be shooting from the hip in this type of a scenario

Let's pop over to the next slide. So things we're going to see they actually escalate further. So the board chair does step in, Cedric. And the board chair directs Lois to conduct due diligence and an IT audit. So Lois runs this IT audit, uncovers additional concerning behavior

So apparently, Clark and Lana go way back. And apparently, she has been burying some of his old skeletons. And so at this point, this file stops being a single incident, single complaint matter. And it's now evolving into a broader, almost like an integrity review

So the board chair also ratchets up the process when he sees what the results of the audit show. We can see that Lana was going into employee file for Clark Kent under the subfolder complaints, and then delete delete, delete. So four deletions in just this 2023 window in quick succession

So the board chair is not impressed. And they ratchet up the pressure. And the board chair says that he wants both Clark and gone-- Clark and Lana gone yesterday. HR can't really jump to termination based on board frustration

We still need due diligence, independence, and evidence before we make employment decisions, especially at the C-suite level, as we talked about. OK. So Cedric, how do we manage this potential scope expansion? And what are your thoughts on the board exerting pressure? CEDRIC MARSAN-LAFOND: Yeah. And this is a fact pattern when the board really needs to step in and take the decision. They're not going to go back to the HR manager, which is build a CPO to take a decision. She should not be involved anymore. They should manage that directly. And you always have the choice to do an internal or external investigation

How do you choose when going externally? I think there's two situations that you really need to consider an external investigation. Here, clearly, we are in this situation. It's when you're talking about senior executives, because you need some credibility, you need to have some impartiality in the investigation, and when you're talking about complex situation, for example, cross complaints or harassment or things like that

The board should reach out to external counsel which will manage investigation with an external investigator. And keeping privilege in that decision. So it needs to be properly investigated. Now you're extending the scope of the investigation because you're not just talking about potential harassment of the CEO with the employee on the green, you're also talking about misbehaviors from the CPO, which is burying evidence, deleting files that should have been investigated

So you have to look did she investigate? Did we meet with those plaintiffs? Did we ask the right question at the time? And why is she deleting all those reports right now? That would be more disciplinary. It's not a harassment investigation for Lana. It is a disciplinary investigation. And you'll have to confirm if the external investigator's able to do both, or do you need to also retain another investigator to do that disciplinary investigation

TUSHAR ANANDASAGAR: Yeah. These are all fair points. And I think part of the reason why when you are crossing these thresholds, each of these decision points, you want to be having a conversation about, OK, what are the options? And should I be doing anything differently? Because when the process is moving so quickly, you can see that simple missteps. I'm just thinking of, Cedric, the IT people who are running this audit, right? Are they bound to strict confidentiality? Why am I doing this? So there are questions that are raised throughout. And certain aspects could be run externally rather than pulling additional witnesses and employees in when there are confidentiality issues at stake

So over to the next slide. The situation is going to jump into yet another tier. So the board brings in external counsel finally. And counsel immediately recommends an external investigator. And that's the first sign that the file has formally moved out of HR hands and into more of like a governance level response

So Clark and Lana are both placed on paid admin leave. Internally, that's already a seismic event. So two of the top leaders are gone from the building. But the shift really happens when the outside world starts to find out. A client who was attending the golf tournament posts a video from the golf course on social media

So overnight, this internal issue becomes a public one. And employees are sharing it, clients are calling, and now Lois's phone is ringing with a media inquiry. Cedric, I'm going to stop here and hand it over to you to talk about what this moment truly requires. Who's answering? How quickly? How do we keep this-- how do we keep this train on the tracks? CEDRIC MARSAN-LAFOND: What a day for Lois, right? TUSHAR ANANDASAGAR: Yeah

CEDRIC MARSAN-LAFOND: So she would need to go back to the board. The board should be the one managing the response. And the board should-- there's several options for them. They should probably ask their external counsel to reach out to the media to give the statement, or a PR firm at this stage

The answer is going to be pretty simple, is that there's no comments right now. As we've seen before, there's privacy obligation on the investigation process. There's privacy legislation that may apply in the jurisdiction. So they should not comment in the media this ongoing investigation

There's also the question of the client posting the video, if that's a problem. And the company can ask the client to take down the video politely. If they refuse to do so, well, you'll have to look in the message on social media to see what's the content of the message, to see if you have any grounds of action to ask for the message to be taken down

But if it's just publishing the video, it might have to stay on the internet. And they might have to live with the video of the client

TUSHAR ANANDASAGAR: Truly. And you can see-- and great point, Cedric. You can see why when these things start, we want to preset everything so that if and when these events happen, we're in a better position to roll out strategy and deploy solutions

I mean, the investigation's barely started. The board wants answers and is exerting pressure. The executives are sidelined. So the company's reeling. And now someone outside the organization is trying to shape the narrative. So you do not want to be creatively making up a solution. You want tried and tested solutions that are established from the outset. You want to build a submarine so it's going to withstand the pressure

So we'll pop over to the next slide here and talk about some other investigation issues that have come up. So the external investigator is now up to speed. I love that graphic, by the way. Notices have gone to witnesses. And both Clark and Lana are pushing back

They refuse to participate unless their lawyer is present. This is interesting. They've retained the same lawyer. So that tells us a couple of things. This is not really normal routine intake investigation situation. This seems like it's a coordinated defense strategy

And then secondly, we may have a structural challenge. We have dual representation, and someone who's potentially sitting in on multiple investigation meetings, participating in document review and production, et cetera

So their counsel follows up with an aggressive demand letter calling the investigation a sham and threatening a multi-million dollar claim. They've put $2.5 million on this one, Cedric. This is a classic play. The goal is to knock everybody off balance and to force the shortcuts

So let's walk through it, Cedric. How do we handle this voracious advocate and respond to the sham allegation and keep things moving along? CEDRIC MARSAN-LAFOND: Well, Lois should transfer the letter to the board, and the board, with the help of external counsel, should draft a response for the lawyer, saying basically that they won't pay, and that they are investigating serious events that were raised. And that they want to meet with the respondents here that are Clark and Lana

And they can allow the presence of the lawyer, even though we saw earlier that there's no obligation to do so. But they can allow it to avoid a legal debate down the road and make sure that there's no motives for Clark and Lana to refuse to go to the investigation

But they should put a framework on the presence of the lawyer and saying that he only acts as an observer. He's not there to make representation, and he'll only attend as an observer the meeting, the investigation meeting

TUSHAR ANANDASAGAR: Yeah. We certainly don't want him jumping up and down. OK. We'll go over to the next slide here and talk about the end of the investigation. So we've finally reached the end. The independent investigator has delivered the report to the board chair

They talk about a balance of probabilities. So 51% or more of the evidence is justifying the conclusion. And the findings are adverse for both Clark and Lana. So this is where the pressure peaks. The chair approaches Lois with a proposed outcome. We're going to fire Lana, but we're going to give Clark a last chance agreement

So, Cedric, can you walk us through how to navigate these divergent outcomes and their significance? And how we proceed forward

CEDRIC MARSAN-LAFOND: Yeah. So you have here a report that's provided by an investigator. The investigator will also provide letters, should provide letters saying to the plaintiff and respondent, I've done my investigation. The allegations are substantiated here. And the decision will come from the company, right? And then the board chair, what he needs to do is not to go to Lana-- to Lois. They should go to external counsel, discuss what measures should be implemented, and then the board chair, with the help of counsel, should draw that letter and directly send it to Clark and Lana

And then you will want to see what were the substantiated elements. Is it enough for termination? Typically, as we said before, those senior executives have a higher duty of loyalty and not to misbehave. The company needs to trust their action

So you might have some form of coaching there, you might have a written warning, and you might have termination. And termination sometimes can happen easier than with other position because they have such a high requirement to be able to be trusted by a company

So the last chance agreement is something we see less often for those senior position, but it needs to be assessed depending on what were those findings. And this is an element that we'll also discuss during our next presentation on trouble in paradise, which will focus on termination as well

TUSHAR ANANDASAGAR: Yes, absolutely. And I think one last point to raise about the last chance agreement, the board, the company, et cetera, this opportunity may not come up again. We have pretty unequivocal evidence because of the video of what happened. And maybe not what was specifically said to Chris, but you have a bird in hand. So you want to think carefully about whether a last chance agreement is appropriate in the circumstances

So that brings us to the end of the fact pattern and to the end of our programming today. Elisa, I'm going to ask if you can just speak to a couple points on the back end and wrap us up. We hope that everyone was entertained and enlightened by the exercise. And yeah, if I can pass over to Lisa, that would be great

ELISA SCALI: Thank you. So we actually don't have any questions. And we are right on time. So we will conclude the presentation here. I'd like to thank our speakers for sharing their expertise today. If anyone has any questions that they come up with following the webinar, please feel free to reach out to Tushar or Cedric or any ELE Gowling counsel that you are currently working with

As Cedric mentioned, this is part of a two-part series, this webinar. So part two is coming up. It's called terminating a C-suite employee. That will be coming up April 1. The session will cover the unique risks and complexities that arise when ending C-suite employment relationships. So watch your inbox. The invitation should be coming out soon

So before you leave today, we kindly ask that you take a few minutes just to complete our survey. Your feedback on our webinars is important to us and does help us to improve our webinars in the future. You can access the survey by scanning the QR code that you see on your screen

So if you take a few minutes to do that, we would truly appreciate it. And I'd just like to thank you again for joining us, and I hope to see everyone or have everyone join us for part two on April 1. Have a great day

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