Business Law, Employer

Have I Been Fired?

Mar 23rd, 2015

By Barry Landy

Administrative Suspensions and Constructive Dismissal, or HAVE I BEEN FIRED?

On March 6, 2015, the Supreme Court of Canada released reasons for judgment in Potter v. New Brunswick Legal Aid Commission (2015 SCC 10) which dealt with the notion of constructive dismissal in the case where a non-unionized employee had been suspended after the relationship between the parties had deteriorated.

On the reported facts of the case, Mr. Potter had been indefinitely suspended by his employer in the context where the employer and employee were negotiating the termination of his employment. Mr. Potter took the position that he had been constructively dismissed without cause. The employer took the position that Mr. Potter had been suspended.

Here is what the Supreme Court of Canada had to say, in terms of the applicable legal analysis and the all-important burden of proof:

The first step is to determine if a suspension amounts to a breach of the employment contract. At this level of the test, the question to ask is whether the employment contract allowed the employer to impose a suspension on the employee as a remedy for dealing with some breach of the employee’s duties that would not be a serious reason for dismissal. In the case where the parties have signed a written employment contract, obviously one would look to the terms of the contract to see if the parties had agreed to a suspension mechanism. In the case of a verbal agreement, more often than not, it will be difficult for the employer to establish that the employment contract permitted administrative suspensions.

The next step is this: If the employer has unilaterally imposed a suspension, the court must consider whether a reasonable person, in the employee’s circumstances would have perceived that the employer was acting in good faith to protect a legitimate business interest and that the employer’s act had a minimal impact in terms of the duration of the suspension. Regarding this branch of the test, it is the employer who has the burden of proof, meaning that the employer must show that it was more likely than not that it met this branch of the test. In other words, the employer has a burden at this level to prove the suspension was justified. If the employer succeeds at this level, then the analysis ends. There has been no breach of the employment contract, and no constructive dismissal.

The third step kicks in where the employer has not been able to show that the suspension was justified. Then the burden of proof reverts back to the employee. He must show on the balance of probabilities that the conduct of the employer, when viewed in the light of all of the circumstances, would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the employment agreement, that is, that the employer was intending to substantially modify the terms of the employment contract.

It is also worth noting that in the Potter case, it was clear that his suspension was not motivated by economic reasons such as a shortage of work. Nor was he suspended for disciplinary reasons. The evidence appeared to show that Mr. Potter was suspended for an indefinite duration pending the outcome of negotiations to pay him a severance package.

Of course, every instance of constructive dismissal is highly-fact driven but some simple truths can be derived from the Potter case.

For example, written employment contracts should include language dealing with an employer’s right to impose administrative suspensions. Before a suspension is imposed, an employer should analyze if there exists a reasonable justification for doing so. The suspension, if justified, should have a term.

From the suspended employee’s perspective, it is insufficient to claim that a suspension in and of itself amounts to a constructive dismissal. It may, or may not, especially where the employer had a legitimate reason for the suspension (that is, a sufficient business interest) and the suspension is for a limited period or otherwise minimally impacts the employee.

In conclusion, the Potter case establishes a new framework and paradigm for analyzing employer-employee relations where a “suspension” as opposed to a dismissal is imposed by an employer and all persons who are confronted with this type of situation have to make a careful legal analysis before stepping on a potential legal landmine.

Barry Landy is a senior litigation lawyer at Spiegel Sohmer who focuses his practice on commercial litigation and is also experienced in the area of media law.