If you are an employer and are considering using suspension as a disciplinary measure, be aware that the Supreme Court of Canada has indicated that employers do not have unfettered authority to withhold work from their employees and that legitimate business reasons must be shown in the context of any administrative suspension. Absent such reasons, an administrative suspension—even with pay—may be found to be a constructive dismissal.
In Potter v. New Brunswick (Legal Aid Services Commission), the Supreme Court held that an administrative suspension, even with pay, can constitute constructive dismissal. In this case, the employee was appointed to serve a seven-year term as the executive director of the commission. During the first few years of his term, his relationship with the commission deteriorated, and the commission began negotiating a buy-out of his contract. Before terms were finalized, the employee went on sick leave. Prior to his return, the commission put him on an indefinite administrative suspension with full pay and benefits, and assigned his powers and duties to another employee. At the same time, the commission recommended that the Minister of Justice terminate his employment for cause. The employee alleged constructive dismissal. Both the trial judge and the Court of Appeal found in favour of the commission.
The Supreme Court allowed the employee’s appeal and found that he was constructively dismissed. The terms and conditions of his employment did not expressly or impliedly authorize the commission to suspend his employment indefinitely with pay, and therefore the suspension constituted a breach of the employment contract. The suspension substantially altered an essential term of his employment in that:
(a) The commission was not acting in good faith to protect a legitimate business interest.
(b) The suspension did not have minimal impact on the employee in terms of its duration.
(c) The employee’s powers and duties were reassigned during his suspension, effectively replacing him.
The breach was sufficiently serious to constitute constructive dismissal.
In considering this case, the Court applied the reasoning in Bhasin v. Hrynew, a landmark ruling in which the Supreme Court held that there is an implied duty to perform contracts in good faith.
To avoid this situation, you should consider including terms in employment contracts expressly allowing for administrative suspensions in certain circumstances. When imposing an administrative suspension, ensure that the suspension is executed in good faith, such as by providing the employee with reasons for the suspension.
STP has recently published an update to its publication Employment Law: Solutions for the Canadian Workplace and also publishes the following related guides:
