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Being Paid to Stay Home: Constructive Dismissal or a Dream Come True?

May 14th, 2015   Authored by Jennifer Joss and Chad Babiuk

Although many employees may not always appreciate the drudgery of their daily grind, work is more than merely getting paid. Canadian courts have long recognized that work is “an essential component of [an employee’s] sense of identity, self-worth and emotional well-being”.[1] So, while an administrative suspension with pay may seem like a dream come true to many people, in some circumstances it may lead to termination of the employment relationship whether intended or not.

In a recent Supreme Court of Canada decision, Potter v New Brunswick Legal Aid Society, 2015 SCC 10, Wagner J. reviewed an employer’s obligations in the context of an administrative suspension with pay, which, if breached, may give rise to a claim for constructive dismissal by the employee.

Mr. Potter was appointed Executive Director of the New Brunswick Legal Aid Society by the Lieutenant-Governor in Council for a 7-year term. The Board of Directors had broad authority to supervise Mr. Potter’s employment and, after 4 years and several issues concerning his performance had arisen, the Board and Mr. Potter entered into negotiations for the Board to buyout Mr. Potter’s remaining employment contract.

Some months later, Mr. Potter took sick leave from work and while on leave he received a letter from the Board indicating that he was suspended with pay indefinitely. No reasons for his suspension were provided. On that same day and unbeknownst to him, the board sent a letter to the Lieutenant-Governor in Council requesting that Mr. Potter’s appointment be terminated. Eight weeks later, Mr. Potter started an action for constructive dismissal. The board responded by asserting that Mr. Potter resigned and terminated his salary and benefits.

The trial judge found that Mr. Potter was not constructively dismissed as he did not know about the board’s move to terminate his employment and the board had not done anything that “could be construed by a reasonable person as a repudiation of the contract”.[2] The New Brunswick Court of Appeal also found that an indefinite suspension with full pay, given the surrounding circumstances, did not constitute constructive dismissal.[3]

The SCC disagreed. Wagner J. for the majority noted that while employers have the implicit power to suspend employees with pay for administrative reasons, that power is limited to instances where it is reasonable and justified to do so.[4] Whether such a suspension is reasonable and justified depends upon “the duration of the suspension, whether the suspension is with pay, and good faith on the employer’s part, including the demonstration of legitimate business reasons”.[5]

Legitimate business reasons for a suspension are to be grounded in the reasons actually provided to the employee: it is not an ad hoc exercise to justify the suspension.[6] Failure to provide reasons will typically constitute a breach of the employer’s duty of good faith.[7] Since Mr. Potter was not provided any reasons for the suspension and it was of indefinite duration, the suspension did not meet the standard of being reasonable and justified.

On this basis, Wagner J. found it unlikely that “a reasonable employee would not have felt that [the employer’s] unreasonable and unjustified acts evinced an intention no longer to be bound by the contract”.[8] As a result, Mr. Potter was found to have been constructively dismissed, and was awarded the balance of his salary and benefits owing under the fixed-term employment contract.

In sum, to avoid the liability for constructive dismissal, an employer who administratively suspends an employee with pay must act in good faith, provide a legitimate business reason to that employee, and minimize the duration of the suspension. For an employee, these conditions will help ensure that time off with pay is closer to a dream come true and less of a blow to their self-worth or emotional well-being.

[1] Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10 at para 83 [Potter] citing Reference re Public Service Employee Relations Act (Alta), [1987] 1 SCR 313 at p. 368. [2] Potter v New Brunswick Legal Aid Services Commission, 2011 NBQB 296 at para 44. [3] Potter v New Brunswick Legal Aid Services Commission, 2013 NBCA 27 at para 92. [4] Potter supra note 1 at para 97. [5] Ibid. [6] Ibid at para 99. [7] Ibid. [8] Ibid at para 106.