Suspension equals constructive dismissal

Progressive discipline scheme sunk by store’s decision to suspend employee without pay


Progressive discipline and corrective action policies are an effective tool in ensuring employees are given a chance to improve performance before being terminated for cause. But a single misstep by an employer during such an action can sink the program and lead to a successful claim for damages.

A recent decision by the Saskatchewan Court of Queen’s Bench shows how one mistake can lead to a significant damage award and underlines the fact that a suspension without pay can lead to a finding of constructive dismissal.

The case: Henderson v. Saan Stores Ltd.

Brian Henderson started working for Saan in March 1976 as a manager and trainer in Brandon, Man. In August 1976 he was transferred to Weyburn, Sask. as a manager and worked there until June 1978.

He resigned at that time to pursue other opportunities, but returned to Saan in September 1983. Between 1983 and 1992 he worked in a managerial capacity for the defendant at several locations in Western Canada.

In May 1992 he was promoted to manage the company’s flagship store in the Sherwood Mall in Regina and, later that year, was given additional managerial responsibilities for a second store on Broadway Avenue in Regina. In February 2000 a demoted senior employee of Saan was named manager of the Sherwood Mall store. Henderson continued to have managerial responsibilities for the Broadway Avenue store as well as a store in Avonhurst Mall.

Henderson’s employment continued until Nov. 20, 2001, when he resigned rather than submit to certain disciplinary procedures. In 1999 a new president was appointed for Saan. The new president implemented a new sales and service program for all managers known as WOW. The program changed Saan from an operationally driven organization (one driven by selling merchandise to consumers) to a customer-service driven organization (one driven by developing a rapport and relationship with customers to increase their loyalty to Saan.)

Progressive discipline started

According to Saan, Henderson had trouble adjusting to the concept of the new program. James McGuire, his district sales manager, said Henderson did not like the changes that had taken place with the new program.

“For example, part of the WOW program was to work as a team with his assistant manager, Shirley Howie, and the staff,” said McGuire in an affidavit. “Instead of working with Shirley, she was relegated to more of a ‘head cashier’ position. Shirley was also supposed to be involved in training the staff in WOW. Brian appeared to take the view that the store was ‘his’, and he did not like anyone intruding on that.”

As a result of Henderson’s difficulty in implementing and following the provisions of the new program, he became subject to the “Progressive Discipline/ Corrective Action Program” of Saan. (For more on this program, see the sidebar at the bottom of this page.)

Henderson received a verbal reprimand followed by written reprimands for his failure to implement specific policies contained in the WOW program. In November 2001 Henderson, following a conversation with an official at the Saskatchewan Department of Labour, decided to implement holiday hours on Monday, Nov. 12 — the day after Remembrance Day.

This was not in accord with Saan’s policy with respect to store hours for Remembrance Day and the day following. This was set out in Saan’s operations manual which had been sent to Henderson. McGuire, the district sales manager, only learned of Henderson’s decision when he made a routine call to the Avonhurst Mall store at about 10 a.m. on Nov. 12. The call was not answered.

McGuire contacted another employee, which resulted in the store being opened at 11 a.m. McGuire met with Henderson on Nov. 14 at which time he told Henderson he had made a serious mistake by not following company policy. Henderson was suspended immediately for one week with pay.

Probation letter

On Nov. 20 Henderson met with McGuire again. McGuire told him he was being suspended for five days, this time without pay, and thereafter would be placed on probation for 90 days. A letter containing the terms of the probation and the reasons for it was given to Henderson. It gave the following reasons:

•Failure to follow normal business operating hours, specifically the normal business operating hours for the store on Nov. 12, 2001. Henderson failed to seek his supervisor’s guidance before unilaterally changing the normal operating hours of 9 a.m. to 9 p.m. to noon to 5 p.m.

•Failure to post the employee work schedule two weeks in advance for the week of Nov. 11 to Nov. 17. The work schedule was not created until Nov. 9.

•Failure to respond to directives given by management, specifically dealing with delinquent layaways. This concern was to be addressed by Nov. 1 and still remained a problem.

The letter also pointed out that a letter was sent to all stores clearly stating Remembrance Day was to be observed on Nov. 11 and normal operating hours would be in effect on Nov. 12.

“During this probationary period, I will schedule regular meetings with you to assess your progress and provide support and resources available to you,” the letter stated. “These meetings will take place each month for the duration of your probationary period. Failure to correct the above concerns within the specified time frame or if the above concerns should reoccur in the future, your services with Saan Stores Ltd. will be terminated without notice or pay in lieu of notice.”

Henderson was asked to sign the letter but refused and tendered his resignation instead. He then took the position that he had been constructively dismissed.

Probation okay, suspension not

Justice Malone said the imposition of the probation period was appropriate in the circumstances and that it did not substantially alter Henderson’s contract of employment.

“Henderson had already been subject to verbal and written reprimands in accordance with the progressive discipline/ corrective action program of the defendant, which he accepted,” Justice Malone said. “Probation was simply the next step within the program prior to the termination of employment.”

But the court could not support Saan’s decision to suspend Henderson without pay, even though it was for a short period of time. Suspension without pay was not an express provision of the progressive discipline program.

“Furthermore a suspension without pay cannot be considered an implied term of (Henderson’s) employment contract on the basis of (Saan’s) past practice,” said Justice Malone, because the company had not used this form of discipline in the past with any of its employees.

Therefore the suspension without pay was a “unilateral and fundamental change to a term or condition” of Henderson’s employment and amounted to constructive dismissal, the court said. Henderson was entitled to treat the contract of employment as being wrongfully terminated and tender his resignation.

The court awarded Henderson 15 months’ pay in lieu of notice based on his 18 years of continuous service in a managerial capacity and his earlier employment with Saan. At the time of dismissal Henderson was earning $34,000 per year or $2,833.33 per month. The court awarded him $42,499.99 and deducted $10,548 he had earned during the notice period for a net award of $31,951.95.

For more information see:

Henderson v. Saan Stores Ltd., 2005 CarswellSask 56 (Sask. Q.B.)

Saan’s progressive discipline policy

The purpose of the program, according to material filed by Saan in court, was to ensure employees are given the opportunity and support to correct or improve their level of performance or behaviour to an acceptable level.

The objective of Saan’s progressive discipline/corrective action program is to:

•correct unsatisfactory work performance and behaviour;

•help employees become more productive;

•assure adherence to policies and procedures;

•protect the employer’s investment in training and replacement costs; and

•make all employees aware of the company’s intentions to maintain positive discipline and a high level of work performance.

Saan said progressive discipline should be considered a “preventative” and “corrective” measure. It is a positive management tool to encourage compliance with organization standards and expectations.

In the event of poor work performance or behaviour, Saan said, normally, the following steps should be taken:

•step one: verbal reprimand;

•step two: written reprimand;

•step three: written probation; and

•step four: termination of employment.

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