When one thinks about constructive dismissals, unilateral pay
cuts and demotions typically spring to mind. But is a paid
administrative suspension in a non-unionized workplace a
constructive dismissal? According to the Supreme Court of Canada,
the answer to this question is "Maybe" depending upon the
In Potter v. New Brunswick, 2015 SCC 10
(Potter), the employer unilaterally placed its Executive
Director on an indefinite paid suspension while the parties
negotiated a buy-out to his seven-year statutory appointment.
The employer delivered the news to Potter approximately one week
prior to his scheduled return to work from an approved medical
leave. Unbeknownst to Potter, at the time the employer
communicated the suspension news, the employer had, among other
things, already planned to terminate his employment for just cause
if a buyout was not agreed to. Shortly after receiving the
suspension news, Potter resigned from his employment and pursued a
constructive dismissal claim.
The Supreme Court of Canada agreed with Potter, finding that the
employer did not have the authority to suspend him with pay for the
reasons it provided and awarded Potter damages for wrongful
In finding that the employer had constructively dismissed Potter
from his employment, the Supreme Court of Canada confirmed
the standard for establishing a constructive dismissal remains
the same— a constructive dismissal will only exist if a
reasonable person in the employee's situation would interpret
the employer's actions as showing an intention to no longer be
bound by the employment contract with the employee;
only substantial changes to the employment contract that are
detrimental to the employee will constitute a constructive
if an express or implied term in the employment contract
already gives the employer the right to make the change, or if the
employee consents or acquiesces to the change, then no constructive
whether a paid administrative suspension amounts to a
constructive dismissal depends upon whether an express or implied
term of the contract authorizes the suspension and, if not, whether
the suspension could reasonably be perceived as having
substantially changed the essential terms of the contract; and
an administrative suspension imposed in good faith to protect
the employer's legitimate business interests that have a
minimal impact on the employee in terms of duration will not
constitute a constructive dismissal;
an administrative suspension that is neither reasonable nor
justified can amount to a constructive dismissal.
In Potter, the indefinite duration of the suspension,
the employer's failure to act in good faith by withholding
valid business reasons from Potter, and the employer's
concealment of its intention to terminate his employment, were
fatal to the employer's defense.
It remains to be seen how adjudicators will apply
Potter. Although the decision is unlikely to affect
paid suspensions reasonably imposed as part of a legitimate
disciplinary investigation, there may be other circumstances that
adjudicators will find less clear and this may lead to increase
constructive dismissal findings.
Non-unionized employers wishing to limit their liability as much
as possible should consider incorporating express terms in their
employment policies and contracts giving them the right to suspend
employees for disciplinary and administrative reasons and then only
exercise that right when it is reasonable and justified.
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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