Canada: Suspension Without Pay And Constructive Dismissal: A Refresher

Last Updated: October 15 2018
Article by Julia Robinson

On July 10, 2018, the Ontario Court of Appeal released its decision in Filice v. Complex Services Inc. (PDF).

The decision is a good reminder of the principles governing suspension without pay during an investigation into the misconduct of an employee. Both the trial judge and the Court of Appeal concluded that the suspension without pay of Mr. Filice by his employer was a constructive dismissal. The Court of Appeal, however, reversed the award of the trial judge on the questions of the damages and discussed whether there was an obligation to offer alternate employment.

The Facts

The employer, Complex Services Inc. (Complex), operates a casino. The casino maintains a Security Department responsible for, among other things, managing the lost and found processes, including a collection of property and money from its facilities. Mr. Filice was employed as a Security Shift Supervisor.

On December 17, 2007, Complex was informed that the Alcohol and Gaming Commission of Ontario (the AGCO) had performed a routine audit of the casino’s lost and found logs and identified several discrepancies. Those discrepancies corresponded with entries made by Mr. Filice. Two days later, Mr. Filice was escorted to a meeting conducted by police officers of the AGCO Enforcement Unit. At the conclusion of the meeting, Mr. Filice was again escorted by police officers, this time, to his supervisor’s office. The supervisor was advised that Mr. Filice was under investigation for theft in the workplace. No charges had yet been laid and the investigation was ongoing.

That same day, the supervisor informed Mr. Filice that he was being placed on an investigative suspension without pay pursuant to casino policies. He was immediately escorted from the premises and prohibited from returning. 

On January 21, 2008, Mr. Filice was charged with four counts of theft under $5,000 and one count of breach of trust. Three of these charges were later withdrawn and the remaining two were dismissed after the Crown was precluded by the trial judge from relying on certain business record to prove its case against Mr. Filice. Shortly afterwards, Mr. Filice surrendered his gaming registration, the possession of which is a condition of employment for all employees in the casino’s security Department. On May 20, 2009, Mr. Filice was informed by the casino that, in light of his failure to maintain a valid gaming registration, his employment was terminated.

Mr. Filice commenced an action against Complex for, among other things, constructive dismissal. The trial judge found in his favour and awarded him $75,723.64 in damages for constructive dismissal, which represented the amount of pay that had been withheld from him during his 17 month suspension without pay. The Court of Appeal agreed with the trial judge that the suspension should have been with pay. However, the Court of Appeal disagreed on the issue of damages.

A Suspension Without Pay Will Often Amount to Constructive Dismissal

When an employee is placed on “administrative suspension” pending the completion of an investigation, the employer bears the burden of showing that the suspension is justified. As a general rule, a suspension without pay constitutes a unilateral change in the employment relationship and a breach of the contract of employment, unless the employer has the right (whether explicitly or implicitly) to suspend an employee without pay. Even when this is the case, that discretion must be exercised reasonably.

In the case at bar, the employers’ policies and Handbook made it clear that such discretion existed, and the parties had treated the policies and Handbook as forming part of the employment contract. The problem lied elsewhere: the employer never turned its mind as to whether Mr. Filice’s suspension should be with or without pay.

The circumstances in which an employer can deny an employee both the opportunity to perform the work and his or her salary without leading to constructive dismissal are exceptional. The power to suspend for administrative reasons does not entail the right to also suspend the salary. In the present case, the Court of Appeal was of the opinion that there might have been a point later in time when a suspension without pay would have been justified, but that moment had not arrived yet for the employer in this case.

Damages for Constructive Dismissal are the Same as Damages for Wrongful Dismissal

The trial judge awarded the equivalent of 17 months of salary to Mr. Filice as compensatory damages for constructive dismissal. He treated the entire period of suspension as constituting the loss for which Mr. Filice had to be compensated. That was a mistake. Damages for constructive dismissal are the same as damages are for wrongful dismissal. Here, Mr. Filice’s length of service was 8 years and 8 months, he was 50 years old and earned approximately $50,000. The appropriate notice period was seven months according to the Court of Appeal, and Mr. Filice’s damages were reduced accordingly.

No Duty to Offer Alternative Employment

The Court of Appeal also rejected the idea that the employer had an obligation to offer Mr. Filice another job (not requiring a gaming registration) within its organization before dismissing him. The parties where not bound by a collective bargaining agreement subject to a labour law scheme and, in that context, an obligation to offer alternate employment would run “contrary to the fundamental principles of individual agency, freedom of contract, and tantamount to binding the parties to a specific performance obligation for employment which has long been rejected by the common law, except perhaps in the rarest of circumstances, none of which are present here”.

Takeaway

Employers should ensure their policies and/or employee handbook provide them with the necessary latitude to deal with employees during investigations. Employment contracts should incorporate those policies and/or handbook by reference or contain a standalone provision regarding the right to suspend an employee with or without pay. When suspending an employee, an employer should always turn its mind to the question of whether the suspension should be with or without pay. Most often, or at least initially, the suspension will be with pay.

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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