On Friday morning the Supreme Court of Canada released its
decision in Potter v. New Brunswick Legal Aid Services
Commission. The decision related to whether and in what
circumstances an employee is deemed to be constructively dismissed
when suspended with pay. Overturning the decision of the New
Brunswick Court of Appeal, which upheld the lower court decision,
the Supreme Court unanimously determined (with concurring reasons)
that David Potter was constructively dismissed from his position as
the Executive Director of Legal Aid.
Mr. Potter was initially hired for a seven-year term. Roughly
half way into his seven-year term, Mr. Potter and the Board of
Directors had entered into discussions to negotiate a buyout of his
contract. However, before negotiations were completed, Mr. Potter
went on sick leave. Shortly before he was to return from sick
leave, the Board informed him that he "ought not" to
return to the workplace. Upon seeking clarification, Mr. Potter was
told that he was not to report to work until further notice. Eight
weeks after he was put on indefinite suspension, Mr. Potter
commenced an action for constructive dismissal arguing that, in
suspending him, the Board had breached a fundamental term of his
employment contract. The Board then took the position that by
taking legal action Mr. Potter had effectively resigned from his
position and they stopped paying his salary and benefits.
The Court determined that Mr. Potter was constructively
dismissed when he was suspended with pay for an indefinite period
of time. Of particular concern to the Court was the fact that he
was not told the reasons for his suspension. As a result of the
constructive dismissal, the Court awarded Mr. Potter his salary for
the balance of the term of his employment agreement.
The Court's analysis included a number of interesting
comments and clarifications relating to administrative
(non-disciplinary) suspensions. The Court noted that an
administrative suspension will almost certainly amount to
constructive dismissal unless it is either expressly or impliedly
permitted under the employment contract. Whether the power to
administratively suspend is an express term is fairly
straightforward, however an administrative suspension will only be
considered an implied term of an employment contract if it is
reasonable and justified.
The Court explained that a number of factors may be relevant in
determining whether a suspension is reasonable and justified, but
it will always be relevant to consider the duration of the
suspension whether it was with pay and whether it was in done good
faith with a legitimate business reason. Though the significance of
these factors will depend on the circumstances, an employer will
not have the implied authority to suspend an employee unless there
is a legitimate business reason.
Finally, the Court provided some guidance on whether an employee
bringing an action for constructive dismissal is thereby resigning.
Under traditional principles of employment law such an employee
would ordinarily be found to have repudiated his/her employment
contract. However, the Court indicated that when an employee
continues to work under protest (instead of resigning) following
changes to his/her employment contract, so long as the relationship
has not become untenable, it is not evident that the employee
should be deemed to have resigned just because they sue for
Although this decision was perhaps intended to clarify this area
of the law, some would say that the result causes greater
uncertainty. We would say that rigid rules are impossible when
dealing with such a complex and discretionary question as
constructive dismissal. At least the Supreme Court has now clearly
identified the tests to be applied.
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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