Employers are often surprised to
learn of the risks of constructive dismissal when suspending
non-unionized employees. In a recent decision, Potter v. New Brunswick
Legal Aid Services Commission, the Supreme Court of
Canada was asked to decide whether an indefinite suspension with
pay constituted a constructive dismissal.
The plaintiff, Mr. Potter, was
employed by the New Brunswick Legal Aid Services Commission as the
Executive Director, on a seven year term commencing in 2006 and set
to expire on December 12, 2012. Due to a souring of the
relationship, in the spring of 2009 there were discussions between
the parties of negotiating a buyout of the remainder of his
contract. However, Mr. Potter went on a leave of absence for
medical reasons prior to any agreement being reached.
Shortly before Mr. Potter's
return to work date, the Commission sent a letter to Mr.
Potter's legal counsel advising that he should not return to
work "until further direction" was provided by the
Commission. At this time, the Board of Directors of the Commission
also sent a letter to the Minister of Justice recommending that Mr.
Potter be dismissed for cause. Although Mr. Potter's legal
counsel requested more information on his suspension, none was
given. Eight weeks into the suspension Mr. Potter filed an action
for constructive dismissal.
The lower courts found that this
paid administrative suspension did not constitute a constructive
dismissal. This was overturned by the Supreme Court of Canada.
In coming to its decision, the
Supreme Court reviewed the law on constructive dismissal. The
Supreme Court noted that a constructive dismissal can take two
forms: a single unilateral breach of an essential term of the
contract of employment or a series of acts that taken together show
an intention by the employer to no longer be bound by the
It reasoned that there are two
branches of the constructive dismissal test:
The first branch applies where
there is an alleged breach of the specific terms of the contract. A
constructive dismissal will be found where: (1) there is a
unilateral change by the employer that constitutes a breach of the
employment contract, and (2) the breach substantially alters an
essential term of the contract. At this second step, the
court will determine whether a reasonable person in the same
situation as the employee would have felt that the essential terms
of the contract were being substantially altered.
The second branch focuses on the
conduct of the employer. It requires a more general analysis of
whether, when all the surrounding circumstances are considered, a
reasonable person would conclude that the employer no longer
intended to be bound by the terms of the contract.
Applied to Mr. Potter's case,
the Supreme Court found that there was no express or implied
contractual right to put Mr. Potter on an administrative
suspension. The Court determined that in order to find an implied
right to place an employee on an administrative suspension, the
employer's decision to suspend must be both reasonable and
justified. The employer must be able to demonstrate that they have
acted honestly and in good faith. The Court found that the
Commission's decision was not reasonable or justified. The
Commission failed to provide Mr. Potter with any reasons for the
suspension, the suspension was for an indefinite duration and the
Commission had taken steps to terminate his employment for
The Court also found that it was
reasonable for Mr. Potter to perceive the suspension as a
substantial change to the contract of employment, in light of the
fact that the suspension was for an indefinite duration and no
reasons were provided for it.
This case makes clear that an
employer must have a valid business reason for putting an employee
on a paid suspension. The fact that the employee continues to
receive pay does not on its own provide the employer with an
implied right to suspend. The case also emphasizes the need for
clear communication with the employee about the reasons for the
suspension. The employer must act honestly and in good faith.
Intentionally withholding the reason for the suspension or being
ambiguous about it could lead to a finding that the suspension was
The Supreme Court has not disturbed
the implicit right of employers to impose a reasonably short-term,
paid suspension pending investigation of a discernable issue or
incident, provided the employer is acting honestly and in good
faith. But this decision highlights the need for such
investigation to be handled with reasonable pace and in good faith,
lest the suspension be found a constructive dismissal.
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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