Constructive Dismissal

Admin Suspension – Modern Cases

The three modern decisions, in chronological order, have further considered this issue. They are that of the Supreme Court of Canada in Cabiakman, the Ontario Superior Court in Carscallen and the Supreme Court of Canada in Potter. Cabiakman and Potter considered the issue of an administrative suspension while Carscallen centered on a disciplinary suspension. A further Ontario Court of Appeal decision in Felixe dealt with a contractual right to effect an administrative suspension.

The end result of these cases is, in substance, the reasons as delivered in MacKay.

S.C.C. 2004 Administrative Suspension

The Supreme Court of Canada considered the issue of an unpaid administrative suspension in its 2004 decision of Cabiakman v Industrial Alliance Life Insurance. This was a case which came from Quebec which has certain differences in the Civil Code from common law jurisdictions.

The plaintiff had been employed with the defendant for a period of three months as its sales manager, when he was charged with the criminal offence of attempted extortion by seeking money from his securities broker. The employer suspended without pay, which was described as an “administrative suspension”. Following his acquittal from the criminal charge two years later, the employer reinstated but without payment of wage arrears, for which the plaintiff sued.

The trial judge in the Quebec trial court allowed the claim, holding that there was a right of suspension but not an unpaid one. The Court of Appeal agreed, but varied the sum awarded for unrelated reasons.

The issue before the Court was defined by it as whether the employer may suspend for administrative reasons connected with its legitimate business interest:

In order to be perfectly clear, we would therefore reiterate that the only question raised by this appeal relates to the unilateral power to suspend an employee against whom criminal charges have been laid, for purely administrative reasons connected with the interests of the business.

Clearly, the case involved a reference to the Civil Code, which parenthetically, did allow for a disciplinary suspension. The Code, however, did not deal with this specific issue of an administrative suspension. It is submitted that the reasons may well be applicable to common law jurisdictions, where there is no such specific term previously agreed.

The Court stated the test for an unpaid administrative suspension, which is the substance of the case for this analysis, as follows:

  1. There must be a legitimate business interest of the employer which it seeks to protect;
  2. The employer must act in good faith;
  3. The suspension must be for a relatively short period of time;
  4. The suspension must be with pay, barring exceptional circumstances.

MacKay was not referenced but this decision followed exactly the same reasons.

The Court added that even if there has been an administrative suspension with pay, this could evolve into a constructive dismissal, should the employee not be reinstated or the time period of the suspension becomes indefinite or excessive. 1 2

Further the Court noted that the power to suspend, once established, does not provide the right to do so as unpaid:

However, it would seem to be appropriate to note that, as a rule, the power to suspend for administrative reasons does not entail, as a corollary, the right to suspend the payment of salary. The employer cannot unilaterally, and without further cause, avoid the obligation to pay the employee's salary if it denies the employee an opportunity to perform the work. 3

Devlin BCSC 2010

Devlin was the CEO of the defendant public company. A proxy fight took place, one was based on the allegations of an unsavory nature against Devlin. Devlin was aware that given the success of this event, as did occur, it was likely that his employment would be short lived. The case went to trial which found that Devlin had been constructively terminated.

In the course of the reasons, trial judge noted these issues to be relevant to the determination of whether the employer’s conduct in effecting a suspension may satisfy be a constructive dismissal. 4: 5

  1. The duration of the suspension;
  2. Whether someone was appointed to replace the person suspended;
  3. Whether the suspension was paid or unpaid;
  4. Whether there was evidence that the employer intended to terminate at that time;
  5. Whether there was a bona fide business reason for the suspension.

This decision quoted the passage from Carscallen above to the effect that where the suspension is with pay, it is more likely that a court will find no dismissal. That may be so but this is only one component of the test.

S.C.C. 2015 Administrative Suspension

More directly on point, the Supreme Court also considered the issue of an implied term allowing an administrative suspension in its 2015 decision. 6 Potter, who held the position of Executive Director of the New Brunswick Legal Aid, was instructed to stay home. The employer delegated his authorities to someone else. This was agreed by all parties that this conduct amounted to an “administrative suspension”. A point of note in the Supreme Court decision was that there was no reason given by the employer for this action.

Prior to this action which took place in January of 2010, Potter had previously met with the Board in the spring of 2009 to discuss a “buy out of his contract”. The trial judge found that, given this fact and the ongoing negotiations, an administrative suspension was consistent with the status of the existing relationship. This conduct resulted in the position taken by Potter that he had been constructively dismissed. The trial judge found otherwise and dismissed the action.

The Supreme Court stated that, even should the trial judge’s analysis of the purpose of the suspension have been correct, there was no right of the employer to take such action. It upheld the assertion that Potter had been constructively dismissed.

The Supreme Court continued to observe that even if the employer had the implied right to remove from Potter some of all of his duties, such a right would not be unfettered. This action would require as an underpinning “a basic requirement of business justification”.

The possibility that such a term may be implied into the employment relationship was noted by the Supreme Court. 7

As I mentioned above, the question whether a suspension amounts to a breach will often require a more careful analysis than might be necessary in constructive dismissal cases involving other types of changes. This is because, unlike with such unilateral changes as a demotion, a reduction in wages or a modification to the pay structure, an employer’s ability to suspend an employee can be found to be implied in the contract.

A review of the context of the terms of suspension and other factors would then be expected to follow to determine if there may be such an implied right. This passage above did not state that there was always such a right. The Supreme Court noted that in the Ontario case referenced above, there was consideration given to the fact that the suspension was without pay and indefinite. 8 A Quebec case was also noted in which the notice sent to employees advising of the suspension was examined as well as the fact that the company credit card and use of the vehicle was revoked. 9

The individual context of the case must be reviewed with the objective of asking the question of whether a reasonable person would have concluded that the “employer was acting in good faith to protect a legitimate business interest, and that the employer’s act had a minimal impact on him or her in terms of the duration of the suspension”. The "minimal impact" had not been specifically referenced in MacKay but it state words to the same effect, namely, that the time period of the suspension should be brief and with pay.

The facts of Potter took a unique turn as the Supreme Court found that the employer acted in bad faith. Prior to the directive to Potter to stay home, it had resolved to terminate Potter for cause. This fact was not known to Potter.

This conduct passed both tests for constructive dismissal set by the Court in this case. This conduct was not authorized as an implied term and it also was a substantial change to the essential terms of the contract.