Unpaid Workplace Suspension – Is it a Constructive Dismissal in Ontario Employment Law?

As an employment lawyer, I have assisted many employees (and employers) where a dispute arose because of a company’s decision to place an employee on a unpaid administrative suspension. Is it permissible for an employer to suspend an employee for administrative reasons without pay (such as to conduct a workplace harassment investigation)? 

To answer this question, we turn to a few court decisions where the courts have had to decide whether a suspension from work is a constructive dismissal. Most recently, the Ontario Court of Appeal in Filice v. Complex Service Inc., 2018 ONCA 625 confirmed that suspending an employee without pay (sometimes called an “administrative suspension”) can constitute constructive dismissal under common law. Most importantly, the court also provided some guidance in determining how and when employers can place an employee on an administrative suspension. As this decision made clear, employers do not have absolute freedom to impose administrative suspension anytime they wish; otherwise, they may face legitimate constructive dismissal claims from employees seeking a financial severance package.

Background Facts in Filice v. Complex Service Inc.

This case involved a security shift supervisor working at Fallsview and Niagara Casinos. As part an investigation on workplace misconduct, the employer placed the employee on an unpaid “investigative suspension” as it conducted a workplace investigation. To support its decision to place him on a suspension, the employer relied on its discipline policy and employee handbook, which stated:

“Investigative Suspension may be used as part of the coaching and counselling process to verify allegations of misconduct. During an investigation, the Associate may be prohibited from working. If a decision is made to separate the Associate’s employment, he or she may not be reimbursed for time spent on Investigative Suspension.”

Court Decision

The Ontario Court of Appeal found that the employer’s unilateral decision to suspend the employee without pay during the investigation was a “substantial change” to the essential terms of his employment contract. As such, the employee was successful in his claim of constructive dismissal, and was entitled to a severance package.

Interestingly, the court found that while the employer did have a contractual right to suspend employees without pay in certain circumstances, it did not exercise that power reasonably in this case. Specifically, the court held that before the employer decided to impose a suspension, it did not have any other information to suggest misconduct. While suspending the employee during the course of the investigation was appropriate, withholding his salary before any element of misconduct was established was not warranted. In other words, it was the employer’s decision not to pay the employee’s salary during the administrative suspension was not reasonable and resulted in the employee’s constructive dismissal.

In making its decision, the court affirmed a few key legal principles that employees and employers should keep in mind when facing a decision to place an employee on an administrative suspension. Specifically, while an employer generally has the power to suspend employees for administrative reasons, it must be justified by proving:

• there is a sufficient connection between the employee’s misconduct and the kind of employment the employee holds
• the actual nature of the misconduct
• there are reasonable grounds for believing that maintaining the employment relationship (even temporarily), would be harmful or prejudicial to the the employer’s business or reputation, or to protect the public. In other words, the suspension is necessary to protect a legitimate business interest
• whether there are immediate and significant adverse effects that cannot practically be counteracted by other measures (such as assigning the employee to another position)
• the employer’s motives and conduct during the term of the suspension
• the absence of intent to harass or discriminate against the employee
• the employer is acting in good faith and fairly
• the suspension must be for a relatively short time period and a fixed term
• unpaid administrative suspensions can only be unpaid in “exceptional situations”
• whether an employer can rely on an employment contract or workplace policy to impose an administrative suspension