April 22, 2015
By Brad Smith
In Potter v. New Brunswick Legal Aid Services the Supreme Court of Canada identifies when an administrative suspension is a constructive dismissal.
The court concluded the employee was dismissed because the suspension was indefinite, the employer’s bad faith and its intention terminate him. The employer was required to pay out the remainder of the employment contract.
This case demonstrates the difficulty and risk for both the employee and the employer when a constructive dismissal arises. The risk to an employer is that a change or a series of changes to an employee’s terms of employment may be constructive dismissal. If this occurs, the employer may lose the services of a valued employee and have to pay compensation.
Alleging constructive dismissal is also risky for an employee. An employee must decide how to respond to an alleged constructive dismissal. An employee can accept the changes and thus continue employment under the new terms. An employee may accept the constructive dismissal and start a court action. But if there is no constructive dismissal, the employee will be out of work and not receive compensation. Further, even if the employee was constructively dismissed, and depending upon the circumstances, the employee may have an obligation to reduce his or her loss and continue to work for the employer while not accepting the new terms of employment.
It is best that an employee or employer review and analyze the circumstances with the aid of legal advice before taking a course of action that may be regretted.
Some take aways regarding suspensions from Potter v. New Brunswick Legal Aid Services:
- An employer should ensure it has right to suspend an employee. It is better to make it express rather rely on an implicit right to suspend.
- An implied authority to suspend is not unfettered. Some factors used to determine if a suspension was reasonable and justified: the existence of legitimate business reasons, good faith, the duration of the suspension, whether the suspension was with pay, whether the employee was replaced, whether the employee returned keys, whether the employee received benefits and whether the employer intended to terminate.
- An administrative suspension will require a basic level of communication to the employee.
- An employer should not indefinitely suspend an employee or run the risk of a constructive dismissal.
- The employer should act in good faith and be honest, reasonable, candid and forthright.
- Suspension with pay will be a breach of the contact of employment for certain employees such as employees paid commission or receive a reputational benefit from the performance of work.