Canada: Suspensions: Caution Required

Last Updated: July 24 2018
Article by Stringer LLP

Suspensions are an important disciplinary measure for employers, often bridging the gap between less significant discipline and termination.  However, in some circumstances they can unintentionally result in a constructive dismissal, leading to significant liability for the employer.

A recent case from the Ontario Court of Appeal highlights the risks of using suspensions, particularly unpaid ones, but also provides insight as to how employers may implement them.

The Plaintiff in Filice v Complex Services Inc was a security supervisor at a casino.  As required by law, he held a provincial gaming registration.

After a routine audit, the Alcohol and Gaming Commission of Ontario determined that there were discrepancies between the records of the property in the lost and found, and the actual contents of the lost and found.  It appeared to the AGCO that the Plaintiff may have been involved in or responsible for those discrepancies.

The employer and regulatory authorities began an investigation.  The Plaintiff was suspended, without pay, pending the outcome of that investigation.  Criminal charges were brought against the Plaintiff but were ultimately dismissed.

Seventeen months after the unpaid suspension began, and after the dismissal of the criminal charges against him, the Plaintiff voluntarily forfeited his gaming registration.  The employer terminated his employment as he could no longer legally perform the duties of the position.

The Plaintiff brought a wrongful dismissal action, alleging that by suspending him without pay, the Employer had constructively dismissed him prior to the termination which was ultimately implemented.

After a trial, the Court found that the long-term suspension without pay was a constructive dismissal.  Further, the Court found that the employer's representatives had made bad faith comments and had not disclosed exculpatory information about the Plaintiff to the police during their investigation.

As a result, the trial judge awarded the Plaintiff $100,000 in punitive damages.  In addition, the Plaintiff was awarded 17 months of notice, equal to the length of the unpaid suspension.

The employer appealed, arguing that the unpaid suspension was not a constructive dismissal, but if it were then the damages awarded were too high.

The Court of Appeal agreed with the employer that a suspension was justified.  The employer's policies permitted a suspension, and further permitted that it could be without pay.  The Court of Appeal also found that, given the seriousness of the allegations against the Plaintiff, a suspension was warranted.

However, the Court of Appeal took issue with the employer's decision to suspend the Plaintiff without pay.

In cases of suspensions without pay, the employer must show that the suspension is justified, or else the suspension will likely be a constructive dismissal.  It was not clear that the employer ever considered whether a suspension with pay could be appropriate instead. 

The Court of Appeal found that the employer's policy required the employer to assess the context of the alleged misconduct in determining whether the suspension should be paid or unpaid.  However, the employer treated the policy as automatically imposing a suspension without pay.  By failing to undertake the analysis required by its policy, the employer could not justify the suspension without pay.

Since the employer could not prove the suspension without pay was justified, it constituted a dismissal.  The plaintiff was, therefore, entitled to reasonable notice.

The Court of Appeal overturned the trial judge's calculation of that notice.  The trial judge had awarded 17 months of notice, equivalent to the length of the unpaid suspension.

However, when it examined the relevant factors to the Plaintiff's entitlement to notice, the Court of Appeal found that the Plaintiff was only entitled to 8 months of notice.  There was no reason to extend the notice period to account for the suspension, since the crux of the Plaintiff's case was that the termination occurred because of his unpaid suspension.  The time period that followed the imposition of the suspension, therefore, was irrelevant, as the Plaintiff's entitlement to notice was fixed at the time of termination.

In respect of the trial judge's award of punitive damages, the Court of Appeal also found that the trial judge had misapprehended some facts and had provided insufficient reasons for the award.  That aspect of the award was overturned and the claim for punitive damages dismissed.

It should be noted that the question of whether the employee had condoned the suspension, which would bar him from a claim of constructive dismissal, was not argued.  The employer did not raise the defence of condonation at trial, and the Court of Appeal was unwilling to allow the employer to raise it on appeal.

The Takeaway

It is difficult not to feel sympathy for an employer faced with such a situation.  The employer was faced with credible allegations from a regulator which, if substantiated, could have rendered the employee's continued employment illegal and would likely constitute just cause for termination.  The actual investigation took a very long time.  A paid suspension would have been extremely lengthy and costly, and, pursuant to case law, might have constituted an unjust dismissal depending on the other relevant factors.  The employer was, to put it mildly, between the proverbial rock and hard place.

However, there are some valuable lessons to be gleaned from the case.

This case underscores the extreme care that should be taken in implementing a suspension in a non-unionized workplace.  Even in cases where an interim suspension is implemented in respect of allegations of serious misconduct, such a suspension may be a constructive dismissal regardless of the outcome of the investigation.  Employers should be aware of that principle, and determine whether in some cases, different action, such as a without cause termination, may be a more reasonable course of action.

Employers may want to review our previous posts on the topic of suspensions.

The Court also confirmed that having a policy that allowed for unpaid suspensions could allow an employer to institute them as a disciplinary or interim measure.  Such policies must be flexible and should have clear guidelines differentiating the circumstances under which a paid or unpaid suspension may be appropriate.  If followed, an employer may be able to justify a suspension without pay.  However, a failure to follow the policy, once implemented, would likely jeopardize the availability of that option and enhance the risk that the suspension would be deemed 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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