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Does a Paid Suspension Constitute Constructive Dismissal?

Whitten and Lublin | Apr 16, 2015

Constructive dismissal claims are established by proving that a fundamental change in employment has occurred (i.e., working conditions, duties and compensation).  Most notably, a recent court ruling established a paid (non-disciplinary) suspension can constitute constrictive dismissal.

In Potter v. New Brunswick Legal Aid Services Commission, Mr. Potter went on sick leave before the employer completed negotiations to end his contract. During sick leave, the employer recommended that his employment be terminated for cause. Subsequently, Mr. Potter was advised not to return to work and was suspended indefinitely without pay. As a result, he began litigation.

It is normal practice that an employee has an obligation to meet a two (2) part test to prove constructive dismissal:

  1. To prove that there was a breach of contract; and
  2. To prove that the employer shows that they no longer intend to honor the employment contract.

However, the Supreme Court of Canada (SCC) outlined that administrative suspensions are different in that the burden of proof shifts to the employer who must prove that it had authority to suspend the employee. The SCC found that:

a)   The employer did not have authority to suspend Mr. Potter. In fact, they breached the contract since it was an implied obligation that they provide him with work and they failed to act in good faith;

b)    It was reasonable for Mr. Potter to perceive his indefinite and unexplained suspension as an adverse and fundamental change to his contract.

This case comes as a warning to employers who wish to impose an administrative suspension- take extra caution, it can amount to a constructive dismissal claim. In order for employers to protect themselves they should follow these basic guidelines:

  • Ensure that you have the implied authority to give a suspension and that there is a justified and reasonable business reason for giving the suspension;
  • Explain why the suspension is being given; and
  • Reserve your power to withhold work and suspend employees indefinitely for administrative purposes by carefully including this language in employee handbooks, offer letter/employment contract.