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Supreme Court of Canada Rules that Administrative Suspension is a Constructive Dismissal

An administrative suspension can be an effective tool for an employer to invoke when it needs to temporarily remove an employee from the workplace.  It is not used without risk however.  The Supreme Court of Canada recently released its decision in Potter v. New Brunswick (Legal Aid Services Commission) 2015 SCC 10, and in it, the Court ruled that the administrative suspension constituted a constructive dismissal.

Potter was the Executive Director of the Commission in this case, and had signed a seven year contract to fill that position.  In the Spring of 2009, the Commission and Potter began to negotiate a buyout package in exchange for Potter’s early resignation.  In October 2009 Potter had to take a leave of absence due to illness.  The Commission determined that it would seek to have Potter’s appointment to Executive Director rescinded, and advised Potter that he was not to return to work until further notice.  The Commission did not give reasons for the suspension, did not set a return date, but did maintain his pay.

Potter claimed that the suspension constituted a constructive dismissal, and began his complaint for wrongful dismissal damages.  In Response, the Commission claimed that by initiating legal proceedings against it, Potter had voluntarily resigned his employment.

While lower courts favoured the Commission, the Supreme Court of Canada was unanimous in finding that Potter had been constructively dismissed.  It stated that constructive dismissal can take two forms:

• a single unilateral act by the employer that breaches an essential term of an employee’s employment contract; or
• a series of acts by the employer that, taken together, show the employer no longer intends to be bound by the employment contract.

By placing Potter on suspension without providing adequate reasons, the Commission was found to have constructively dismissed him.  The Court also found that if the employer had an implied contractual authority to suspend Potter, it bore the onus to show that the suspension was reasonable and justified considering the following factors:

• the duration of the suspension;
• whether the suspension is with pay; and
• whether the employer demonstrated good faith, including the demonstration of legitimate business reasons for the suspension.

By failing to provide reasons for the suspension, the Commission failed to act in good faith, and was not authorized to place Potter on an administrative suspension.

While the Commission fell short of its good faith obligations in this case, it does not mean that employers cannot place employees on administrative suspension in the proper contexts.  The most common need for an administrative suspension occurs in the context of carrying out workplace investigations into allegations of employee misconduct.  It may be appropriate, and indeed necessary, to remove an employee from the workplace once allegations of misconduct are raised against that employee, so that a full and untainted investigation may be carried out.

In terms of assessing the administrative suspension, it ought to be done in writing to explain the purpose and reasons for the administrative suspension.  The employee ought to receive all pay and benefits that they would be entitled to if they were working, and an anticipated return to work date should be included, where possible.

Failing to reasonably justify an administrative suspension may be seen as an act of bad faith, which can lead the employee to successfully seek wrongful dismissal damages.  If you require advice or guidance with removing an employee from the workplace please click HERE.