SCC Finds Indefinite Suspension with Pay = Constructive Dismissal
March 11, 2015
On March 6, 2015, the Supreme Court of Canada unanimously overturned the New Brunswick Court of Appeal and the trial judge’s decisions which had concluded that the Employee, the Executive Director of the New Brunswick Legal Aid Services Commission, was not constructively dismissed. The Supreme Court seized the opportunity to provide some guidance on the application of the doctrine of constructive dismissal in the context of an administrative suspension of a supervisor.
During the course of the Employee’s seven year contractual term, there was a breakdown in the employment relationship. The Employer entered into negotiations with the Employee to buyout his contract. During this process, the Employee took a sick leave. Before negotiations were complete, the Employee was indefinitely suspended with pay. The evidence at trial revealed that the Employer concealed its intentions to terminate the Employee for cause. All of the Employee’s powers and responsibilities were transferred to another person. The Employer provided no reason for the indefinite suspension and the parties did not resolve the terms for exit.
The Employee took the position that he was constructively dismissed and commenced a lawsuit. The Employer argued that the Employee’s conduct constituted a voluntary resignation. The trial judge found for the Employer, as did the Court of Appeal, holding that the Employee had resigned.
In assessing whether an administrative suspension is wrongful, the Court will consider a number of non-exhaustive factors including whether the suspension:
(a) resulted in someone replacing the suspended employee;
(b) is for a limited, lengthy, or indefinite duration;
(c) is with or without pay and benefits;
(d) is defensible by legitimate business reasons;
(e) was undertaken in good faith.
These factors assist the court to determine if in context the suspension was reasonable and justified. In this case, the Supreme Court of Canada held that the Employer’s unilateral decision to indefinitely suspend, without supplying any reasons to the Employee, was not justified and was undertaken in bad faith. The Employer failed to adhere to the basis requirement of good faith contractual dealings to be honest, candid, and forthright.
The Employee was replaced during his suspension, and therefore, lost all of his duties and responsibilities as an Executive Director. The indefinite suspension was a wrongful breach of the employment agreement which represented a substantial change to the essential terms of the employment agreement, namely, the duty to provide work. As such, the Employee was wrongfully dismissed and was entitled to damages representing his salary and benefits that would have been received but for the constructive dismissal.
An employee should seek legal advice whether to treat the employment agreement as repudiated, and sue for constructive dismissal. In circumstances where it is unclear whether the Court will find that an employee has been constructively dismissed, it is important to canvass whether an employee should continue working under protest thereby also mitigating his or her damages if the constructive dismissal lawsuit is ultimately unsuccessful. This is a factually specific determination that must be carefully considered on a case by case basis.
Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10