Will an Administrative Suspension Result in a Constructive Dismissal Claim?

Employers in Vancouver who hand out an administrative suspension to an employee to investigate alleged misconduct must be aware of the risks they face in doing so.

According to a case heard in the Supreme Court of Canada some time ago, the risk of an administrative suspension being considered a constructive dismissal is real — and it can lead to serious legal issues for employers.

Let’s take a closer look at this case and consider how it might affect how BC employers handle future claims of misconduct against employees…

Potter v. New Brunswick Legal Aid Services Commission: Background

In 2006, lawyer David Potter was appointed as the Executive Director of the New Brunswick Legal Aid Services Commission on a seven-year contract.

In early 2009, Potter and the Board of the Commission started to negotiate a buyout of his contract. Then, in October of that year, Potter was advised by his doctor to take time off work for medical reasons.

Before the end of his leave, the Board decided (without informing Potter) that if a successful resolution could not be reached with the contract buyout, it would request permission to revoke Potter’s employment for cause.

In January 2010, the Board dismissed Potter for cause and replaced him. Potter was advised that he would continue to be paid but should not return to work until he received further direction. Potter’s request for clarification was not responded to.

Potter then took legal action against the Commission for constructive dismissal. The Board viewed this as a resignation and stopped his salary and benefits.

At the trial, the judge found that the Board was justified in placing Potter on an administrative suspension with pay and rejected the constructive dismissal claim. The Court of Appeal agreed — but the case went to the Supreme Court of Canada.

What is an administrative suspension in BC?

Administrative suspensions are usually paid suspensions used when employers want to investigate an allegation of workplace misconduct against an employee.

If the suspension is reasonable and temporary, it may be considered lawful in BC but, in some circumstances, it can be challenged. For instance:

• If it is not necessary to protect legitimate business interests
• If the employer does not act in good faith
• If the suspension is unnecessarily long

What is constructive dismissal in BC?

Constructive dismissal is a type of wrongful dismissal. It applies to a situation where an employer substantially changes the terms of an employment contract without first obtaining the consent of the employee.

A sudden material change to the contract without warning or even gradual changes that make the workplace intolerable may cause the employee to resign his/her position. The employee is effectively “forced out”, which is unlawful under the Employment Standards for B.C and the Canada Labour Code.

To prove constructive dismissal, you must demonstrate either of the following:

1. Breach of contract, which requires identifying the express or implied term of the contract that has been breached and determining whether the breach was sufficiently serious to constitute a constructive dismissal.
2. Cumulative past acts, whereby the employer’s cumulative past acts reasonably show that it no longer intends to be bound by the contract.

The Supreme Court’s decision on administrative suspension/constructive dismissal

When the Potter v. New Brunswick Legal Aid Services Commission case made it to the Supreme Court of Canada, the court disagreed with the lower courts.

The panel reviewed the law of constructive dismissal, stating that where an employer’s conduct shows an intention to no longer be bound by the employment contract, the employee only has two choices:

1. To accept the change or
2. Treat the change as a repudiation of the contract and sue for constructive dismissal

The ruling meant that Potter was entitled to sue for damages in lieu of notice under a breach of contract.

In administrative suspension cases, the burden is on the employer to prove that the suspension is explicitly authorized or is reasonable and justified. An administrative suspension will be authorized if it is explicitly permitted in the employment contract.

If it is not explicitly permitted in the employment contract, the employer must show that the power of administrative suspension implied in the contract is both reasonable and justified (i.e., the suspension was necessary, the employer acted in good faith and the duration of the suspension had a minimal impact on the employee).

The Supreme Court found that the contract between Potter and the Commission did not grant the power of administrative suspension. It also found that the Commission failed to show that the administrative suspension was reasonable because it was for an indefinite period or that it was justified, due to a serious lack of communication and the withholding of the reasons for the suspension.

Administrative suspension takeaways for BC employers

The case outlined above should be a lesson for BC employers. Suspending an employer administratively is a major step to take and you should be aware of your legal position before doing so.

The key takeaways for BC employers from the Potter case are as follows:

YOUR CONDUCT AS AN EMPLOYER WILL BE CLOSELY SCRUTINIZED

Even if you suspend an employee with pay, make sure you have a legitimate business reason for the administrative suspension. Your conduct will be scrutinized so be sure to act in good faith, only suspend the employee as long as necessary and try to find a solution in the best interests of all parties concerned in the workplace investigation.

GOOD COMMUNICATION IS ESSENTIAL

An employer’s good faith includes an obligation to retain good communication with the suspended employee. Ideally, provide the employee with reasons for the suspension and an estimate of its length. Also, provide an opportunity for the employee to ask questions.

GETTING THE EMPLOYMENT CONTRACT RIGHT IS ESSENTIAL

You need to draft employment contracts carefully to protect your business from liability. Include a provision for an administrative suspension and set out the conditions under which it may be imposed. If the New Brunswick Legal Aid Services Commission had done this, Potter would likely have lost his constructive dismissal case.

THE BURDEN OF PROOF IS YOURS

The burden of proof to show that an administrative suspension is reasonable and justified rests with you, the employer. Make sure you document the reasons for and circumstances of the suspension and work with an experienced employment lawyer if necessary — as you may end up in court.

The employment lawyers at Taylor Janis LLP Vancouver have helped many employers in BC navigate the risks associated with suspending employees.

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