Canada: Supreme Court Of Canada: Paid "Administrative" Employee Suspension Amounts To Constructive Dismissal

Last Updated: April 10 2015
Article by Jonathan Edge

In a recent ruling, the Supreme Court of Canada (SCC) has clarified whether and in what circumstances a non-unionized employee who is suspended with pay may claim constructive dismissal.

In Potter v. New Brunswick Legal Aid Services, the SCC held that: (i) courts must take a flexible approach in determining whether a constructive dismissal has occurred; (ii) the imposition of an administrative suspension must be authorized by the contract of employment or be based upon legitimate business reasons; and (iii) the implied duty of good faith in contractual dealings requires that an employer be honest, reasonable, candid and forthright with its employees.


The plaintiff, David Potter, was appointed Executive Director of the New Brunswick Legal Aid Services Commission (the "Commission") for a seven-year term in 2006. However, Mr. Potter's relationship with the Commission deteriorated after only a few years and both parties began negotiating a buyout of his employment contract. The negotiations were ongoing when Mr. Potter went on sick leave. Unbeknownst to Mr. Potter, during this sick leave, the Commission decided to terminate his employment for just cause and recommended this course of action to the province's Minister of Justice. With a view to facilitating a buy-out of the balance of Mr. Potter's employment contract, the Commission placed Mr. Potter on indefinite suspension with pay and temporarily delegated his responsibilities to another employee. Mr. Potter did not return to work, and commenced litigation against the Commission claiming he had been constructively dismissed. In response, the Commission stopped Mr. Potter's salary and benefits, alleging that the litigation effectively constituted a resignation.

The Commission was successful at trial before the New Brunswick Court of Queen's Bench and at the Court of Appeal. Both courts held that the Commission had legal authority to suspend Mr. Potter with pay and that the appointment of an interim replacement did not constitute a repudiation of the employment contract between them. Both courts agreed with the Commission that, by commencing litigation against his employer, Mr. Potter had effectively resigned from his position by making untenable the continuation of the employment relationship.

Supreme Court of Canada Decision

The SCC reversed the lower courts' decisions.

In ruling in favour of Mr. Potter, the SCC held that, as the Commission lacked the authority to suspend the plaintiff for the reasons it gave, he had been constructively dismissed and was entitled to damages for wrongful dismissal. In arriving at this decision, the SCC provided the following commentary on the law of constructive dismissal and the implied duty of good faith in employment contracts:

  1. Constructive dismissal is a legal construct arising when actions of the employer evince an intention no longer to be bound by the employment contract. The burden of establishing constructive dismissal rests on the employee. If successful, the employee is entitled to damages in lieu of reasonable notice of termination.
  2. Courts must take a flexible approach in making findings of constructive dismissal. Unilateral action by the employer breaching an express or implied term of the employment contract, such as changes to the employee's compensation, work assignments or place of work, may constitute constructive dismissal. The test is whether the breach substantially alters an essential term of employment. The court must ask whether "at the time the breach occurred, a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed." This test also applies to a series of actions if the cumulative effect over time results in continued employment becoming intolerable and demonstrates that the employer no longer intends to be bound by the employment contract.
  3. In cases involving administrative suspension, the employee must first demonstrate that the suspension constitutes a fundamental or substantial change to the employment contract. The burden will then necessarily shift to the employer, who must show that the suspension is both reasonable and justified based on either an express or implied grant of authority in the employment contract. There is no rigid framework for determining whether a particular administrative suspension is wrongful. The factors to be considered will vary and depend on the nature and circumstances of the suspension.
  4. An administrative suspension not authorized explicitly within the employment contact will amount to constructive dismissal - even if paid - unless it is based on "good faith business justifications" and "legitimate business reasons". According to the implied duty of good faith in contractual dealings, recently established by the SCC in Bhasin v. Hrynew, an employer must be honest, reasonable, candid and forthright with its employees. In most circumstances, a suspension will not be reasonable or justified without a basic level of communication with the employee.
  5. Commencing litigation against one's employer will not necessarily amount to resignation or other repudiation by the employee as long as the employment relationship has not become untenable or if the employee continues to work under protest. Employees have a duty to mitigate their damages by remaining in the workplace if doing so would not be objectively unreasonable.

Key Points for Employers

The SCC stated, "No employer is at liberty to withhold work from an employee either in bad faith or without justification." In so doing and in ruling that administrative suspensions even with pay of non-unionized employees may amount to constructive dismissal, the SCC has effectively restricted the unqualified use of such an approach by employers.

Employers should carefully consider the terms of the relevant employment contract before suspending a particular employee and may wish to mitigate exposure to constructive dismissal by adding explicit authorization for suspensions into future employment contracts. If administrative suspension is not expressly provided for within the employment contract, an employer should only proceed with the suspension if it is clearly reasonable and justifiable based legitimate business reasons.

While the full ramifications of the SCC applying the implied duty of good faith to employment contracts are as yet unknown, employers must be honest, reasonable, candid and forthright. This means maintaining open communication with employees and, in the context of administrative suspension, providing the suspended employee with clear justification for its actions. This may, depending on the circumstances, require investigation before the employer takes any steps.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions