Suspension Without Pay & Constructive Dismissal

Written on behalf of Peter McSherry

Constructive dismissal occurs when an employee is not terminated directly, but when their employer’s conduct indicates that the employer no longer wishes to be bound by the employment contract. In other words, when the employer creates a situation for the employee that is drastically different from that contemplated by the original employment agreement. This may include a severe reduction in pay or demotion, a significant change to an employee’s duties, or a situation in which an employee is being subjected to harassment or other violent behaviours without intervention on the employer’s part.

A finding of constructive dismissal often carries the same forms of damages associated with wrongful dismissal. An employee will generally receive pay for what the court deems to be an appropriate notice period. In addition, there may be a finding of punitive or aggravated damages against an employer if the conduct was particularly egregious.

Suspension Without Pay

When employees are accused of misconduct, it is common to hear that they have been suspended without pay, pending a full investigation of the accusations. A recent court decision has held that an employee who had been suspended without pay pending an investigation had in fact been constructively dismissed.

The employee was employed as a manager with Payukotayno James and Hudson Bay Family Services. She had entered into a two-year contract with her employer that was set to expire in March of 2018. In April 2017, the employee was informed that she was being placed on suspension pending an investigation into the death of a child. She was told that it was standard practice to place an employee on suspension without pay whenever an investigation was required.

Two weeks into the suspension, the employee’s lawyer sent a letter to the employer stating that the suspension was the equivalent of constructive dismissal. Shortly afterward, the employee’s benefits were terminated and then the employee was terminated from her role. The termination cited the investigation as the reason for termination, as well as the employee’s past conduct in the workplace. This conduct was unrelated to the matter being investigated and consisted of behaviour such as borrowing money from coworkers, breaching confidentiality by joining teleconferences with family members in the room, and other conduct.

Analyzing the Factors Relating to Constructive Dismissal

The court considered a two-prong test to determine whether the employee had been constructively dismissed:

1. Whether an express or implied term of the employment contract had been breached; and
2. Whether the breach was “sufficiently serious” to be considered constructive dismissal.

The court found that the employment contract did not contain any terms with respect to administrative leave or suspension with respect to investigations. As a result, the employer was in breach of the employment contract when it placed the employee on leave without pay. The suspension prevented the employee from performing the duties of her job and deprived her of an income on an indefinite basis.

The employer cited the other misconduct that had been mentioned in the termination letter, that was unrelated to the conduct subject to the investigation. The court held that the employer had been aware of this misconduct prior to the suspension but had only raised it in the letter of termination. Had the employer cited the misconduct prior to suspending the employee, it could have made a case for termination with cause. However, it was not permitted to retroactively cite reasons for termination that had not previously been raised.

As a result of the court’s findings, the employee was awarded the full outstanding balance of her employment contract, which amounted to over $100,000.00. Employers should take note. It is vital to include the possibility of suspension without pay in an employment contract before subjecting an employee to such drastic disciplinary action.

Let Legal Advice Guide Your Actions

Employees who have been made subject to unfair disciplinary action or warning letters should review their situation with an experienced employment lawyer. Contact the offices of Guelph employment lawyer Peter McSherry. We can guide you through the issues and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation.