Constructive Dismissal

Admin Suspension as a Contract Term

Contractual Foundation

It is likely that a policy manual or similar document which proposes to allow the employer a right of suspension which differs from the common law will need to obey the same rules of contract formation as with any similar term of employment. This issue is reviewed here in more detail.

The analysis will then be what is the implied right of the employer and then to examine how the policy manual differs from these rules. The case discussed below, Felixe, in the Ontario Court of Appeal did contain a parenthetical foreword on this subject:

Given the content of the appellant’s policies and Handbook, which the parties seem to have treated as forming part of the contract of employment, the appellant had the contractual right to suspend the respondent.

OCA 2018 Administrative Suspension as a Contract Term

The Ontario Court of Appeal reviewed this issue in its 2018 decision. 1 The plaintiff was employed as a Security Shift Supervisor in the defendant’s casino in Niagara Falls. He was interviewed by the Ontario Provincial Police relating to discrepancies in the lost and found records of the defendant. Following the interview, the officers advised the plaintiff’s superior that the plaintiff was under investigation for theft, that the investigation was ongoing and that no charges as of that date had been laid.

The facts showed that the parties had agreed that there was an employment agreement determined by a policy manual which allowed the right of an investigative suspension. It did not deal with whether the suspension was to be paid or unpaid. Ultimately, the Court of Appeal read into this context an obligation upon the employer to consider the issue of paid or unpaid in good faith as an implied term, a test which the employer failed to show.

The Casino maintained a handbook which stated:

Investigative Suspension may be used as part of the coaching and counselling process to verify allegations of misconduct.  During an investigation, the Associate may be prohibited from working.  If a decision is made to separate the Associate’s employment, he or she may not be reimbursed for time spent on Investigative Suspension.

The employer had a discipline policy to the same end.

Following the advice from the OPP, the plaintiff was advised that he had been placed on an investigative suspension. He was escorted from the premises, and prohibited from returning. His suspension was without pay. This took place on December 19, 2007.

In January of 2008, the plaintiff was charged with four counts of theft under $5,000 and one count of breach of trust. The regulator suspended his gaming registration which was necessary for his employment.

On March 7, 2008, the employer advised the plaintiff that it considered that the workplace investigation and the criminal proceedings were distinct. It also stated that pending the disposition of the criminal charges, it would be in the interests of all parties to defer the workplace investigation. The plaintiff did not respond to this letter.

A hearing had been set with the provincial regulator to hear the plaintiff’s appeal of his registration suspension in May of 2008. This was adjourned at the request of the plaintiff as he preferred to deal with the criminal case first.

In November of 2008, three of the five criminal charges were withdrawn. In February of 2009, the remaining charges were dismissed.

In May of 2009, the plaintiff surrendered his gaming registration which had been pending his appeal. He was then precluded from reapplying for at least two years.

Following this event, on May 29, 2009, the employer advised his employment was terminated due to the license issue.

The plaintiff sued for constructive dismissal. He was successful at trial and was awarded 17 months of lost income attributable to the period of suspension of $75,000 and $100,000 as punitive damages. The employer appealed.

The Court of Appeal looked first to the employer's right to effect an administrative suspension. The employer, it noted, has the burden of showing that the suspension is justified. 2 The factors to be considered were stated as follows:

A number of factors are to be considered in determining whether a suspension is justified, some of which were outlined in Cabiakman v. Industrial Alliance Life Insurance Co., 2004 SCC 55, [2004] 3 S.C.R. 195, at para. 65 where LeBel and Fish JJ. said:

For example, the courts may consider the following factors: whether there is a sufficient connection between the act with which the employee is charged and the kind of employment the employee holds; the actual nature of the charges; whether there are reasonable grounds for believing that maintaining the employment relationship, even temporarily, would be prejudicial to the business or to the employer's reputation; and whether there are immediate and significant adverse effects that cannot practically be counteracted by other measures (such as assigning the employee to another position).

Given the position held as a Security Supervisor, the allegations made and the fact of the highly regulated business of a casino, the Court of Appeal found that the suspension was justified.

The issue of a suspension effected as unpaid was a different issue. The right to suspend was not founded on the implied term but on the basis of the contract of employment. To allow for a suspension without pay, which the policy manual did not specifically authorize, the onus was put to the employer to justify this. Absent such a finding, the conduct was to be seen as a constructive dismissal:

     Given the content of the appellant’s policies and Handbook, which the parties seem to have treated as forming part of the contract of employment, the appellant had the contractual right to suspend the respondent.  However, absent express language in the employment contract stipulating that any suspension would be without pay, the burden rests on the appellant to establish that a suspension without pay was justified.  If the appellant cannot justify a suspension without pay, then taking that step amounts to a unilateral change in the employment relationship that constitutes a breach of the contract of employment.

The court concluded that its reading of the policy manual left the issue of a paid or unpaid suspension was within the discretion of the employer. The manual did not consider this issue. To use such discretion, the employer must be seen to be acting reasonably. In this instance, the appellate court found that the employer did not turn its mind to this issue but rather acted “automatically”.

This court did note that there may well be situations where  it would be fair to allow for such an unpaid administrative suspension, but such cases must be seen as “exceptional”, referring to the passage from Cabiakman referenced above. 3

The Court of Appeal concluded that the facts showed that there was no reason to suspend without pay when it did in December. The fact that the employer acted reflexively would appear to have been sufficient, yet the Court nonetheless inserted its own review of the status of events as of that date to state that there was no reasonable basis for such an unpaid suspension. 4 This conduct was then considered sufficient to meet the first step of the Potter test of constructive dismissal. The second step was also found. 5