Are you an employee who was recently suspended from your job without pay? Unfortunately, this is a situation some employees find themselves in these confusing situations and are unaware of their legal rights and options. To make matters worse, your employer may have described it as as a “disciplinary suspension,” “forced leave of absence,” “administrative suspension” or “administrative leave”? If you find yourself in such a situation, you may have a claim for constructive dismissal against your employer, allowing you to seek a financial severance package.
In this article, we briefly discuss what a legal claim called constructive dismissal, why a suspension without pay could result in constructive dismissal, and how our employment lawyer can help you navigate your options and protect your rights.
What is a Constructive Dismissal?
Constructive dismissal occurs when an employer makes a significant change to an employee’s terms and conditions of employment without the employee’s permission (see examples below). In those cases, an employee may be able to treat it as tantamount a wrongful dismissal, entitling the employee to receive compensation in the form of a severance package.
Essentially, a constructive dismissal can be claimed in two circumstances:
(a) the employer’s treatment of the employee (or its tolerance of offensive conduct) makes continued employment intolerable, and the employee is justified in resigning and claiming constructive dismissal. This is because the employer has breached its implied legal obligation to provide a workplace that is safe and non-hostile; or
(b) an employer makes a fundamental change to the employment agreement without the employee’s consent or without providing the employee with reasonable notice of the change. Fundamental change to an employment contract includes significant changes in job responsibilities or working conditions. When an employer makes such a change without unilaterally (that is, without the employee’s permission), Ontario employment law treats the situation as if the employer had fired the employee from their old job and rehired them in a new job. Under these circumstances, the employee is entitled to reasonable notice of dismissal or payment in lieu of notice.
Although claims for constructive dismissal are relatively rare (and difficult for employees to prove), both employees and employers should be aware of workplace changes that could initiate a constructive dismissal claim, including the following:
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- significant changes to benefit packages, including salary reduction, removal of bonus pay or shares, or other pay reductions,
- relocation of employees,
- alteration of duties and responsibilities of employees,
- changes in employees’ reporting structure,
- imposition of new obligations on employees, such as restrictive covenants (e.g., non-solicitation agreement),
- unpaid administrative leave or work suspension.
Usually, an employee who rejects a fundamental change to the terms of employment leaves the job and sues the employer for constructive dismissal damages, but that is not always the case. For instance, in Russ v. Kerr, the employee successfully sued the employer for constructive dismissal, even though he continued to work under the new terms of employment. In that case, the employee had been told that this annual compensation was being reduced from $144,000 to $60,000 (which was a significant pay reduction of nearly 60%), due to difficult economic conditions. In its ruling, the court held that because the employer allowed the employee to continue to work under the new employment terms, even after he objected and made it clear he did not accept the change, the employee was entitled to the difference in pay between the old and new terms during what would have been the reasonable notice period. During that period, the employee was in effect fulfilling his legal duty to mitigate his damages. However, where the employee stays beyond the reasonable notice period, they are deemed to have accepted the lower pay from that point forward.
It should be noted that constructive dismissal requires a significant change to an employment contract. So, for instance, a much smaller pay reduction (e.g., 5%) in an employee’s salary due to economic conditions may not constitute a constructive dismissal, especially if it were an across-the-board decrease that applied to all employees.
It is important to note that the onus is on the employee to prove that an employer’s actions constitute a constructive dismissal. The employee must prove on a balance of probabilities that the employer’s unilateral act breached the contract and that that breach substantially changed the essential terms of the contract. This is a crucial point. In fact, if an employee has quit work allegedly as a result of the employer’s actions but is unsuccessful in providing constructive dismissal, it would be deemed a voluntary resignation, which means the employee forfeits any right they may have to a severance package.
Unpaid Administrative Suspension or Disciplinary Suspension as a Constructive Dismissal
(a) Disciplinary Suspension
Under Ontario employment law, the courts have held that an employer’s right to suspend an employee with or without pay must be provided for in an employment contract: (a) express term in employment contract; (b) implied term (either on the basis of industry custom or past historical practice); or (c) in a workplace policy incorporated into the employment contract (Haldane v. Shelbar Enterprises Limited, 1999 CanLII 9248 (ON CA); Reininger v. Unique Personnel Canada Inc., [2002] O.J. No. 2826 (QL) (S.C.J.)). For instance, in one case, the court found evidence that, during the employee’s employment, it was common for the employer to use suspension without pay as a matter of discipline, and that the employee had been sanctioned in the past and agreed that she was aware of this policy. Accordingly, in the court’s view, the discipline could not be construed to be a fundamental change amounting to constructive dismissal.
As another exception, the courts today have also held that if an employer has just cause to terminate the employment relationship, it can decide to instead to impose an unpaid suspension as a lesser alternative form of discipline (Carscallen v. FRI Corporation, 2005 CanLII 20815 (ON SC). As the court held in one case:
If just cause exists, then the employer was within its rights to summarily end the relationship. If it had that right, by imposing an unpaid indefinite suspension (while admittedly offensive), [the employer] could be seen to be to imposing a lesser sanction upon [the employee] than that to which it was entitled. If this employer had the right to outright dismiss without notice, it may well have had the right to suspend. If so, the suspension might not be seen to be improper and ought not to form the foundation for an assertion of constructive dismissal.
(b) Administrative Suspension
An administrative suspension occurs when an employer suspends an employee for non-disciplinary reasons, usually as a preventive measure to protect the interests of its business, employees and/or customers. For example, an employer may place an employee on an administrative suspension while it investigates the employee regarding allegations of workplace harassment or misconduct, or if an employee has been charged with a serious criminal offence which is linked to her employment and the charges are still pending.
In a leading case called Potter v. New Brunswick Legal Aid Services Commission (“Potter“), the Supreme Court of Canada was asked to determine whether employers have a common law right to impose an “administrative suspension.” The Court held that, absent express terms to the contrary in an employment contract, an employer has an implied right to impose an administrative suspension (i.e., it would be deemed reasonable and justified in the circumstances), but only if:
- the administrative suspension is imposed in good faith and fair manner
- the administrative suspension is justified by legitimate business reasons
- the duration of the administrative suspension is reasonable (not too long)
- the administrative suspension was with pay (i.e., the employee continues to receive their regular salary, benefits, etc.)
- the employer communicates its reasons for the administrative suspension to the affected employee
As the Court in Potter noted:
[L]egitimate business reasons constitute a requirement for a finding that an administrative suspension based on an implied authority to suspend is not wrongful. Other than in the context of a disciplinary suspension, an employer does not, as a matter of law, have an implied authority to suspend an employee without such reasons. Legitimate business reasons must always be shown, although the nature or the importance of those reasons will vary with the circumstances of the suspension.
Contact Our Ontario Wrongful Dismissal Lawyer
If you are employee who has been suspended without pay and wish to know if you have a wrongful dismissal claim entitling you to a severance package, or an employer who believes you have grounds to suspend one of your employees, please contact our experienced employment lawyer at Bune Law can help. Contact us by phone 647-822-5492 or fill out the contact form to to the side. We would be happy to assist in your employment law matter as quickly as possible.
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