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Suspending employees without pay

Any contract should be clear about what will happen if that employee is suspended
employment law
The Ontario Court of Appeal decided Complex Services in Niagara Falls, Ont., acted too quickly when it suspended an employee without pay who was being investigated by the OPP for workplace theft, but had not yet been charged. Shutterstock

By Stuart Rudner

Employers often assume that they have the right to suspend employees as a form of discipline. That belief is bolstered by the fact that suspension is commonly provided for in collective agreements. But do all employers have the right to impose suspensions? Generally speaking, they do not. And doing so can cost an unwitting employer.

It is also often common, and advisable, to impose an administrative suspension or leave while an investigation takes place. For example, if an employee is accused of misconduct, the employer should investigate before taking action. Removing the employee from the workplace is often a reasonable, temporary decision. But not paying them while they are still presumed innocent is harder to justify.

This issue arose in a recent Ontario Court of Appeal decision. In Filice v Complex Services Inc., the court determined that an employer acted too quickly when it suspended an employee without pay who was being investigated by the OPP for workplace theft, but had not yet been charged.

The background

The employee was a security shift supervisor at Complex Services, which ran Casino Niagara and Fallsview Casino. In his role, he had to be registered with the Alcohol and Gaming Commission of Ontario (AGCO) to legally work.

At some point during the employee’s time with Complex Services, the OPP notified the company that they were investigating the employee for theft in the workplace, but that no charges had yet been laid. The company immediately suspended the employee without pay, even though he had not been charged.

The employee was subsequently was charged and his AGCO registration was suspended, meaning he couldn’t legally work in the casino. The charges were eventually withdrawn or dismissed, and the employee voluntarily surrendered his gaming registration and the AGCO cancelled it. He couldn’t reapply for registration for at least two years. When Complex Services found out the employee had surrendered his registration, they told him that he could no longer work there.

A few months later, the employee sued for constructive dismissal, dating back 17 months to when he was first suspended without pay. The original trial judge agreed with the claim and awarded the employee the equivalent of 17 months’ lost wages, $100,000 punitive damages and $82,600 in costs.

Complex Services appealed the decision,  and the Court of Appeal set aside the punitive damages award and reduced the quantum of damages in lieu of notice. However, it upheld the finding that there had been a constructive dismissal.

According to the Court of Appeal, the test for determining whether there has been a constructive dismissal “.involves two branches.  The first branch of the test applies where there has been a single act by the employer that may constitute a breach of the contract of employment.  The second branch applies where there has been a continuing course of conduct by the employer that may, collectively, give rise to a finding that the contract of employment has been breached.  It is the first branch of the test for constructive dismissal that is engaged here.

“The first branch of the test for constructive dismissal requires a review of the specific terms of the contract of employment.  It involves two steps that must be considered independently of each other: Potter, at para. 38.  The first step is to identify an express or implied contractual term that has been breached.  The second step is to then determine if the breach is sufficiently serious to constitute constructive dismissal. The first step is assessed on an objective basis, whereas the second step is analyzed on a modified objective standard of a reasonable employee in similar circumstances: Chapman v. GPM Investment Management, 2017 ONCA 227 (CanLII), at paras. 16-17.

“In this case, the respondent was suspended without pay.  That would normally involve a breach of the contract of employment unless it was an express or implied term of the contract that the employer could suspend an employee without pay…

“The burden of establishing constructive dismissal lies on the employee.  However, where an administrative suspension is involved, the burden shifts to the employer to show that the suspension is justified…”
“Given the content of the appellant’s policies and Handbook, which the parties seem to have treated as forming part of the contract of employment, the appellant had the contractual right to suspend the respondent.  However, absent express language in the employment contract stipulating that any suspension would be without pay, the burden rests on the appellant to establish that a suspension without pay was justified.  If the appellant cannot justify a suspension without pay, then taking that step amounts to a unilateral change in the employment relationship that constitutes a breach of the contract of employment.”

The takeaway

The case demonstrates how careful employers must be when they’re considering whether to suspend an employee. In this case, the contract between the employee and employer set out conditions for when employees could be suspended, but didn’t specifically mention suspension without pay. Rather, that decision was left to the employer, leaving the courts to determine whether the employer acted reasonably when it suspended the employee without pay. The appeal court ruled it was difficult to see how Complex Services “could reasonably have concluded that suspension without pay was warranted.”

The Court of Appeal ruled that when the employer suspended the employee without pay before charges had been laid, it effectively breached the employment contract, amounting to constructive dismissal.

If you’re an employer, the case is a reminder that any contract you have with an employee should be clear about what will happen if that employee is suspended and when an employee could be suspended without pay. Employers should also be aware of what it may mean legally when they suspend employees without pay.

© Copyright Canadian HR Reporter, HAB Press. All rights reserved.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
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