Right of Suspension Pending the Investigation

The statement in Geluch, referenced in the due process review, advocated that the employer should have the right to suspend the employee with pay pending the investigation. Allegations had been made against Geluch of sexual harassment. The trial judge stated that the defendant should have placed the plaintiff on an administrative suspension while it investigated the complaint:

When the Board learned about the allegations of Anne Taylor, it should have directed that an independent person be retained to investigate the matter fully.  Instead, the Board chose to protect a former employee rather than confront its senior executive and afford him an opportunity to respond.  Mr. Geluch should have been suspended with pay pending a full investigation and given an opportunity to respond to the allegations.

The decision went on to state that where such investigative steps are taken, procedural safeguards should be in place.

Depending on the context, it may be possible to imply such a term into the employment relationship.

There are three significant modern decisions dealing with this issue of whether the employer has the implied right of suspension. These cases make these issues:

1. Was the suspension disciplinary or administrative?
2. If disciplinary, was there just cause for termination in any event?
3. If administrative, was in effected in good faith and for a legitimate business purpose?
4. In either event, was the suspension with or without pay?
5. Upon which party is the obligation to show a legitimate business purpose?

Typically, in the course of a workplace investigation, a suspension will be an administrative one and not disciplinary.

The question of the right of the employer to suspend usually arises in a claim for constructive dismissal. This issue is then considered in the application of the first branch of the constructive dismissal test as set out in the 2015 Supreme Court decision of Potter, discussed here.

Administrative Suspension

An early decision, early as in 1996, the Prince Edward Island Supreme Court considered the right of the employer to effect a paid administrative leave. The court refused to find a constructive dismissal and upheld the employer’s action. ¹ At the time of suspension, MacKay was employed as a branch manager and had been employed for 20 years with Avco. The company had received a “litany of complaints” with respect to the plaintiff’s management style. MacKay was suspended with pay pending its investigation of issues at the branch on June 3. The suspension was stated to be for one week with full pay and benefits. The company also offered him the services of its employer assistance program.

Mackay took a medical leave on June 13. He sought a return to work by August 1. The company chose to defer the decision as to whether he may return to work in his former position until January 13 of the following year. In the interim, MacKay was requested to report to another office on a temporary assignment as Assistant Manager to the existing Branch Manager as of September 1, which was then revised to September 16. His position in his branch remained unfilled. MacKay refused the temporary assignment and sued.

The court refused to see any of these actions, individually or collectively, to be a constructive dismissal.

As to the issue reviewed presently, the court did not see the suspension letter, viewed in isolation, as  terminating the relationship as it had been effected in good faith, for legitimate business reasons, for a short term and with full compensation:

On consideration of the evidence, I have determined that Avco made its decision to suspend MacKay in good faith and based on information that was sound and sufficient in the circumstances. The Company acted only when it did because senior management was not previously aware of the problem.  The litany of employee complaints came as a surprise. For bona fide ² business reasons which embraced reasonable consideration of all employees including MacKay, the situation in the Branch required immediate action.  Cox was concerned that there be an immediate separation between Manager and staff since the employees had by then exposed their particular concerns and the issue was then wide open. In his assessment, which he made in consultation with his acting District Manager, who was experienced in human resources matters, the scenario of the employees in the Branch continuing to work under MacKay’s supervision was rendered untenable for the time being, and at least until the matter was explored and some form of action could be taken. When it was invoked, Cox did not characterize the one-week suspension as being either disciplinary or non-disciplinary.  It was short duration and without loss of pay or benefits.  It was designed to provide an opportunity to investigate, explore options, and respond.

The court noted that there may well be, on other facts, support for the proposition that such an administrative suspension ³ may be challenged, should such action be founded "without good reason, or for improper motivation", or where made in good faith, yet effected in a "cavalier manner or without due regard for the repercussions on the employee":

A suspension like the one in this case could amount to constructive dismissal.  If an employer acted without good reason, or for improper motivation, or even with good reason and in good faith but in a cavalier manner or without due regard for the repercussions on the employee, it could then be foreseeable that the employer act or omission could trigger most unfortunate consequences which  would render untenable continued performance by the employee. The employment relationship could then be viewed as having been fundamentally destroyed by the employer’s unilateral action.

These principles, as noted by a review of the following cases, remain in good stead today.

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 centred 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 same as 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. ^{4 5}

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. ⁶

Disciplinary Suspension Carscallen 2005

The plaintiff in this case was suspended due to the content of an email exchange with her immediate superior. She was not told whether the suspension was to be paid or otherwise, nor the duration of it. One week later she was, in addition to the suspension, demoted to the position of Marketing Manager, her flex hours were removed, she lost her office and was assigned to share a cubicle with a subordinate. She was not paid for the week of suspension. ⁷

Echlin, J. reviewed the case law on a disciplinary and administrative suspensions. He concluded that the common law did not provide an implied term to suspend without pay as a term of discipline:

Nevertheless, the vast majority of cases in this area have determined that a disciplinary suspension may amount to a constructive dismissal

That being said, he also noted that, given just cause to dismiss, the employer may choose instead to suspend in this manner, as opposed to terminating employment.

However, he also noted that an administrative suspension with pay may take a different turn. In that instance, he stated that it is “more likely” that a court will find against a constructive dismissal claim, referring to MacKay. While this may be so, the fact that the suspension in MacKay was with pay was only one factor assessed by the trial judge. The test is not as straightforward as this passage suggests.

Progressive Discipline as an Implied Term

Echlin, J., noted that the Supreme Court in McKinley spoke to the possible interpretation of an implied right to invoke lesser sanctions which may vary with the degree of misconduct. He quoted this passage: ⁸

[41This is not to say that there cannot be lesser sanctions for less serious types of misconduct.  For example, an employer may be justified in docking an employee’s pay for any loss incurred by a minor misuse of company property.  This is one of several disciplinary measures an employer may take in these circumstances.

A similar passage was cited in this decision from the Ontario Court of Appeal in which Doherty, J.A. spoke parenthetically to the possibility of implying into the employment relationship the right of the employer, akin to a unionized environment, of effecting graduated levels of progressive discipline. ⁹

Echlin. J. offered further musings on this issue. The decision noted that any such implied term for middle managers should be subject to an internal appeal process. Senior managers, he stated, should not be subjected to such an implied term. ¹⁰

These observations were very much obiter.

Suspension as an Implied Term

Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express.  In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1)  it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict an express term of the contract.

There were two reasons given for denying the implied term to suspend in this instance.

The first was that there was no need to imply such a term, following the passage above:

[66]      Finally, in referencing Lord Simon’s “it goes without saying” test, I find that these facts do not pass that test.  Indeed, the English Court of Appeal described such test in Reigate v. Union Mfg. Co. (Ramsbottom) Ltd., [1918] 1 K.B. 592 (C.A.) at p. 605, as a reply along the lines of, “of course, so and so will happen; we did not trouble to say that; it is too clear.”  In this instance, I have no doubt that that conclusion would not have been reached and therefore cannot and do not imply a term into this employment relationship permitting FRI to indefinitely suspend without pay.

The second reason dealt with the existing policy manual.

In this case the employer did have a policy document which allowed for “fair and constructive disciplinary guidelines” which spoke to a proper investigation. The company was found to be in violation of its policies, which also did not specifically allow for the right of suspension.

For these reasons, it was found that there was no such right in this instance:

Given an express company policy which was not followed, an absence of any express agreement regarding suspensions between FRI and Carscallen, and based upon the legal principles relating to when implied terms can be added to a contract of employment, I find that terms relating to the right to suspend on an unpaid basis cannot be implied in this instance.

The case may be qualified by these facts. The decision denied the right of a disciplinary suspension based on the legal principles and the company’s own policy document. Further to do so, was not necessary to “give business efficacy to the contract”, this being an important step to imply a term into the employment relationship.

The conclusion in this instance was that a disciplinary suspension, without pay, of an indeterminate length, requires a contractual foundation and cannot be considered an implied term.

The same conclusion was reached in an Alberta decision in 2022, ¹² in which the court spoke in a global sense that an unpaid disciplinary suspension is not an implied term:

Absent there being just cause to dismiss an employee, the common law provides “if there [is] no agreement to such an effect, no employer [has] a right to suspend an employee for a breach of a term of his employment and deprive him of his wages for the period of his suspension”: ....

Devlin B.C.S.C. 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. ¹³: ¹⁴

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. ¹⁵ 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. ¹⁶

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. ¹⁷ 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. ¹⁸

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.

OCA 2018 Administrative Suspension as a Contract Term

The Ontario Court of Appeal reviewed this issue in its 2018 decision. ¹⁹ The plaintiff was employed as a Security Shift Supervisor in the defendant’s casino in Niagara Falls. The plaintiff 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. ²⁰ 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. ²¹

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. ²² This conduct was then considered sufficient to meet the first step of the Potter test of constructive dismissal. The second step was also found. ²³

Conclusions

The synthesis of these cases then is as follows. To succeed on the argument of the administrative suspension as an implied term, it must be shown that:

1. The Employer is acting in good faith;
2. There is a legitimate business reason, which is reviewed at the time of the suspension;
3. The suspension is for a short term;
4. The suspension is effected with pay.
5. The above two criteria are intended to reflect that the suspension has minimal impact upon the employee.
6. Given the above, the law may imply the right to effect a suspension as an implied term.
7. In exceptional circumstances, the onus of proof being on the employer, the suspension may be without pay.
8. Should the contract of employment allow such a suspension without pay, it must be effected in good faith.

These issues will answer the question of whether there is an implied right to suspend.

Where such an implied right is found, or expressly contracted, the employer must be then further prepared to show its actions were justified. The factors to be considered will include:

1. Is there a sufficient connection between the alleged offensive conduct and the kind of employment held;
2. The actual nature of the charges;
3. Whether there are reasonable grounds to believe that the status quo may, even temporarily, be prejudicial to the employer's interest; and
4. Whether there are immediate and significant adverse effects that cannot be offset by other actions such as a temporary assignment to another position.

If the suspension is disciplinary:

1. It is unlikely a court will imply into the employment relationship an implied term to invoke an unpaid disciplinary suspension.
2. If there is otherwise just cause for termination, the same reasons may be used to effect the disciplinary suspension.

Anecdotal Review

OSC 2019 Unpaid Admin Suspension Not Allowed

This issue was considered in a 2019 decision of the Ontario court. ²⁴ The employer placed the plaintiff on leave pending an investigation into a child death. The suspension was without pay. The plaintiff asserted that such conduct was a constructive dismissal. There was no contract in place which allowed for the right of administrative suspension. There was no attempt made by the employer to raise a legitimate business interest submission. In fact, the employer attempted unsuccessfully to argue that the letter of suspension was disciplinary and not administrative. The plaintiff’s case succeeded.

OSC 2016 Injunction to End Suspension Fails

The Ontario Superior Court considered and dismissed an application for interlocutory injunctive relief in the context of a workplace investigation and administrative suspension. ²⁵

The plaintiff was a renowned pediatric surgeon dealing with congenital deformities. Issues had arisen with respect to his behaviour. The Hospital placed him on a paid administrative leave, pending the completion of its investigation.

The court applied the tests as set out above and concluded that the administrative suspension was fair.The employer acted to protect the functionality of a critical unit, the suspension was for a relatively short period, the conditions imposed were minimal and did not limit the plaintiff's clinical, research or teachign practice. There was no issue found as to the good faith component.

The application failed.

The court stated that the implied power to suspend was always a part of the employment relationship, which, respectfully stated, is an overstatement. The right of suspension is subject to the tests set out above.

N.S.C.A. 2023

The plaintiff succeeded at trial and on appeal on the assertion that the employer's conduct in suspending the plaintiff on June 4, allegedly for disciplinary issues. He was instructed twice more within days, not to report to work and he would be recalled "if something came up". The truck used by the plaintiff was also repossessed. The suspension was for unpaid and for an indeterminate period.

The Court of Appeal agreed that the employer failed to justify this action, as is required. This court referenced the trial judge's decision as stated: ²⁶

It is clear from these findings that Mr. Hiltz’s employment was suspended as of June 4, 2020 for alleged performance problems. Elmsdale did not call evidence at trial to establish justification for the suspension. Its evidence that Mr. Hiltz was laid off for lack of work was not accepted. It is obvious the trial judge found Elmsdale’s explanation to be a pretext, which was given in order to avoid potential liability for Mr. Hiltz’s claim

  ... It was clear that Mr. Hiltz specifically was not to be recalled to work, even as work was available.  Taken together, I am satisfied the plaintiff has proven bad faith in its dismissal of Mr. Hiltz.