Employers frequently ask us whether they are allowed to suspend
an employee, and, if they do so, whether there is a risk that the
employee may sue for constructive dismissal. In a Supreme Court of
Canada judgment released on Friday, the main issue was, in what
circumstances may a non-unionized employee who is suspended
indefinitely with pay claim to have been constructively dismissed?
This article will focus on the majority reasons of the Court.
In the case,
Potter v. New Brunswick Legal Aid Services Commission, the
employee was appointed under the Legal Aid Act as the
Executive Director of the New Brunswick Legal Aid Services
Commission (the "employer") for a seven-year term.
Halfway through the term, the employment relationship started to
deteriorate and discussions began between the employee and employer
regarding buying out the remainder of the employee's fixed term
contract. The employee went on sick leave.
During his sick leave, the employee was advised that the
employer was suspending him indefinitely, with pay, and delegating
his duties to another person. Unbeknownst to the employee at the
time, the employer wrote to the Lieutenant-Governor in Council
recommending the revocation of the employee's appointment for
cause, which was possible under the Legal Aid Act. Eight
weeks into the suspension, the employee commenced a claim for
constructive dismissal. The employer argued that in suing his
employer, the employee had resigned. The trial judge found in
favour of the employer, as did the Court of Appeal.
The Supreme Court of Canada allowed the appeal and held that the
employee had been constructively dismissed. The Court clarified
that there are two types of constructive dismissal:
Serious Unilateral Change (two-part test): (1)
A breach of an essential term of the contract by the employer (2)
that was sufficiently serious to cause a reasonable person in the
employee's position to feel that the employer had substantially
changed an essential term of the employment contract.
Cumulative Acts: A series of acts that, taken
together, show that the employer no longer intended to be bound by
the contract. This means that an employee can prove constructive
dismissal without identifying a specific term that was breached if
the employer's treatment of the employee, viewed objectively,
made continued employment intolerable.
The Court held that the facts of this case met the test for the
first type of constructive dismissal. Other than in the context of
a disciplinary suspension, an employer does not, as a matter of
law, have an implied authority to suspend an employee without
legitimate business reasons. The employer did not have legitimate
business reasons for the suspension, it was not acting in good
faith, and it failed to minimize the duration of the suspension.
The Court said "in most cases in which a breach of an
employment contract results from an unauthorized [non-disciplinary]
suspension, a finding that the suspension amounted to a substantial
change is inevitable". Overall, the suspension amounted to a
constructive dismissal of the employee.
This case provides a cautionary example to employers that
suspensions, even suspensions with full pay and benefits, may
amount to constructive dismissal. Prior to suspending an employee,
be sure to consider any terms of the employee's contract
including, if applicable, any discipline policy. If you are going
to suspend an employee, inform them of the reasons for the
suspension, which did not occur in this case and was a factor
weighing against the employer.
This case will likely have a significant impact on current
constructive dismissal cases before the courts. For instance, for
our clients in the North, while the trial decision of
Kucera v. Qulliq Energy Corporation, 2014 NUCJ 2, was
favourable to the employer as it held there was no constructive
dismissal, this Supreme Court of Canada case may have an impact on
the impending decision of the Court of Appeal, which is currently
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.
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Labour and employment law had some interesting developments in 2016. What follows are a few highlights from the last year and an introduction to an issue that may attract significant attention in 2017.
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