Suspensions an emerging option for discipline in non-unionized workplaces
Establishing just cause for dismissal can be a daunting prospect for employers. Courts and arbitrators consider the termination of an employee for just cause to be the “capital punishment” of employment law. The misconduct at issue must be significantly serious to make the continuation of the employment relationship unworkable.
On the other hand, it is very common for relatively serious acts of employee misconduct to go undocumented. This allows an employee to say she was not aware the misconduct was so serious as to jeopardize her continued employment.
In the face of this difficult backdrop, many employers simply choose to terminate the employment relationship without cause and provide an employee with pay in lieu of notice. Understandably, this leaves a bitter taste in the mouth of many employers.
However, there is a middle ground that appears to be gaining increasing support from the common law courts — the disciplinary suspension.
Traditionally, courts have held that in the absence of an express or implied term in the contract of employment, an employer cannot suspend an employee without pay to discipline him for misconduct. This is because the right to work in exchange for pay is viewed as a fundamental aspect of the employment contract. When the employer unilaterally determines the employee will stop performing services — and pay ceases — even for a few days, the employer has committed a fundamental and unilateral change to the employment contract, which can amount to a constructive dismissal.
In a number of recent decisions, the courts have suggested employers consider using a suspension as part of a system of progressive discipline. However, employers must be careful to ensure the contractual right exists to institute such discipline.
An improper suspension
The case of Carscallen v. FRI Corp. provides an instructive example of an employer improperly using a disciplinary suspension. Fortunately for employers, Justice Randall Echlin of the Ontario Superior Court of Justice gave some instruction about how progressive discipline can be properly employed. (See sidebar.)
Christina Carscallen, 43, was a marketing executive for FRI, a provider of securities valuation services. The 14-year employee worked directly with Eligio Gaudio, FRI’s president and chief executive officer. The court heard the relationship between Gaudio and Carscallen was “familiar,” they had “heated arguments” from time to time, Gaudio was a “shouter” by nature and he was “demanding of his employees, especially the senior people.”
Carscallen was responsible for organizing a trade show in Barcelona, Spain, that Gaudio attended. Due to a number of logistical issues, FRI’s booth and all associated marketing and product materials did not arrive in time for the trade show. Gaudio was understandably distressed and he engaged in a series of heated e-mail exchanges with Carscallen.
As a result of the trade show fiasco and the e-mails, Gaudio instructed human resources to suspend Carscallen immediately until further notice. Carscallen was not told of the duration of the suspension, nor whether her salary would be continued.
She was asked to come to FRI one week later, when she was presented with a detailed memorandum that indicated, in addition to the unpaid suspension, FRI proposed to demote her to manager of marketing, revoke her flex hours, take away her office and assign her to a cubicle shared with a subordinate. Carscallen claimed constructive dismissal.
Justice Echlin agreed Carscallen had been constructively dismissed. He said FRI did not have a contractual agreement or communicated policy that permitted suspensions without pay. He also found the suspension was accompanied by a disciplinary demotion and removal of other benefits. The combination of these actions was punitive, mean-spirited and designed to humiliate Carscallen. As a result, she had been constructively dismissed.
Despite these findings, Echlin’s decision provides some hope for employers. In his examination of the ability of an employer to suspend an employee, he said both the Ontario Court of Appeal and the Supreme Court of Canada have recently hinted suspensions in the context of a non-unionized progressive discipline policy may well be warranted.
In Haldane v. Shelbar Enterprises Ltd., Justice David Doherty of the Ontario Court of Appeal observed “the flexibility that (progressive discipline powers) would add to the employer-employee relationship and the incorporation into employment contracts as a matter of law of a provision requiring reasonable notice absent just cause for termination, a case could be made for implying a term providing for reasonable discipline into employment contracts.”
In a similar vein, Justice Frank Iacobucci, on behalf of a unanimous Supreme Court of Canada decision in McKinley v. BC Tel, indicated disciplinary measures short of dismissal may be appropriate in a non-unionized setting:
“This is not to say that there cannot be lesser sanctions for less serious types of misconduct. For example, an employer may be justified in docking an employee’s pay for any loss incurred by a minor misuse of company property,” said Iacobucci. “This is one of several disciplinary measures an employer may take in these circumstances.”
Although it is questionable whether Justice Iacobucci is correct in his statement that an employer can dock an employee’s pay for “any losses incurred,” the court’s preference for the use of progressive discipline short of termination for cause is unmistakable.
Employers looking to take steps to change policies and procedures to allow for the right to suspend should consult legal counsel to ensure the new contract or policy will be enforceable.
For more information see:
•Carscallen v. FRI Corp., 2005 CarswellOnt 2394 (Ont. S.C.J.).
•Haldane v. Shelbar Enterprises Ltd., 1999 CarswellOnt 3305 (Ont. C.A.).
•McKinley v. BC Tel, 2001 CarswellBC 1336 (S.C.C.).
Chris Foulon is a partner with Israel Foulon, an employment and labour law firm in Toronto. Chris can be reached at (416) 640-1550 or [email protected].
Avoiding Constructive Dismissal
Making it safe to suspend
How can an employer ensure a suspension will not result in a constructive dismissal finding? Using Carscallen as a basis, employers should:
• have a contractual agreement with an employee or an agreed-to policy that provides the right for the employer to suspend;
• ensure the contract or policy expressly provides for the right to suspend with or without pay;
• ensure the suspension is for a finite and reasonable period of time that should be communicated to the employee at the time it is imposed;
• provide some mechanism to have the suspension reviewed by someone other than the supervisor who ordered the suspension to ensure it is reasonable;
• ensure the suspension is proportional to the misconduct, not for first-time offences and preceded by written warnings — although very serious first-time misconduct may warrant a suspension;
• remember suspensions with pay are less likely to result in a constructive dismissal;
• use suspensions as part of a progressive discipline program, not as punishment or to humiliate; and
• know a suspension, even in the absence of a contract or policy that allows for suspension, can likely be supported because the employer is using a lesser form of discipline than it is entitled to invoke, even where misconduct would clearly allow for a dismissal for just cause.
On the other hand, it is very common for relatively serious acts of employee misconduct to go undocumented. This allows an employee to say she was not aware the misconduct was so serious as to jeopardize her continued employment.
In the face of this difficult backdrop, many employers simply choose to terminate the employment relationship without cause and provide an employee with pay in lieu of notice. Understandably, this leaves a bitter taste in the mouth of many employers.
However, there is a middle ground that appears to be gaining increasing support from the common law courts — the disciplinary suspension.
Traditionally, courts have held that in the absence of an express or implied term in the contract of employment, an employer cannot suspend an employee without pay to discipline him for misconduct. This is because the right to work in exchange for pay is viewed as a fundamental aspect of the employment contract. When the employer unilaterally determines the employee will stop performing services — and pay ceases — even for a few days, the employer has committed a fundamental and unilateral change to the employment contract, which can amount to a constructive dismissal.
In a number of recent decisions, the courts have suggested employers consider using a suspension as part of a system of progressive discipline. However, employers must be careful to ensure the contractual right exists to institute such discipline.
An improper suspension
The case of Carscallen v. FRI Corp. provides an instructive example of an employer improperly using a disciplinary suspension. Fortunately for employers, Justice Randall Echlin of the Ontario Superior Court of Justice gave some instruction about how progressive discipline can be properly employed. (See sidebar.)
Christina Carscallen, 43, was a marketing executive for FRI, a provider of securities valuation services. The 14-year employee worked directly with Eligio Gaudio, FRI’s president and chief executive officer. The court heard the relationship between Gaudio and Carscallen was “familiar,” they had “heated arguments” from time to time, Gaudio was a “shouter” by nature and he was “demanding of his employees, especially the senior people.”
Carscallen was responsible for organizing a trade show in Barcelona, Spain, that Gaudio attended. Due to a number of logistical issues, FRI’s booth and all associated marketing and product materials did not arrive in time for the trade show. Gaudio was understandably distressed and he engaged in a series of heated e-mail exchanges with Carscallen.
As a result of the trade show fiasco and the e-mails, Gaudio instructed human resources to suspend Carscallen immediately until further notice. Carscallen was not told of the duration of the suspension, nor whether her salary would be continued.
She was asked to come to FRI one week later, when she was presented with a detailed memorandum that indicated, in addition to the unpaid suspension, FRI proposed to demote her to manager of marketing, revoke her flex hours, take away her office and assign her to a cubicle shared with a subordinate. Carscallen claimed constructive dismissal.
Justice Echlin agreed Carscallen had been constructively dismissed. He said FRI did not have a contractual agreement or communicated policy that permitted suspensions without pay. He also found the suspension was accompanied by a disciplinary demotion and removal of other benefits. The combination of these actions was punitive, mean-spirited and designed to humiliate Carscallen. As a result, she had been constructively dismissed.
Despite these findings, Echlin’s decision provides some hope for employers. In his examination of the ability of an employer to suspend an employee, he said both the Ontario Court of Appeal and the Supreme Court of Canada have recently hinted suspensions in the context of a non-unionized progressive discipline policy may well be warranted.
In Haldane v. Shelbar Enterprises Ltd., Justice David Doherty of the Ontario Court of Appeal observed “the flexibility that (progressive discipline powers) would add to the employer-employee relationship and the incorporation into employment contracts as a matter of law of a provision requiring reasonable notice absent just cause for termination, a case could be made for implying a term providing for reasonable discipline into employment contracts.”
In a similar vein, Justice Frank Iacobucci, on behalf of a unanimous Supreme Court of Canada decision in McKinley v. BC Tel, indicated disciplinary measures short of dismissal may be appropriate in a non-unionized setting:
“This is not to say that there cannot be lesser sanctions for less serious types of misconduct. For example, an employer may be justified in docking an employee’s pay for any loss incurred by a minor misuse of company property,” said Iacobucci. “This is one of several disciplinary measures an employer may take in these circumstances.”
Although it is questionable whether Justice Iacobucci is correct in his statement that an employer can dock an employee’s pay for “any losses incurred,” the court’s preference for the use of progressive discipline short of termination for cause is unmistakable.
Employers looking to take steps to change policies and procedures to allow for the right to suspend should consult legal counsel to ensure the new contract or policy will be enforceable.
For more information see:
•Carscallen v. FRI Corp., 2005 CarswellOnt 2394 (Ont. S.C.J.).
•Haldane v. Shelbar Enterprises Ltd., 1999 CarswellOnt 3305 (Ont. C.A.).
•McKinley v. BC Tel, 2001 CarswellBC 1336 (S.C.C.).
Chris Foulon is a partner with Israel Foulon, an employment and labour law firm in Toronto. Chris can be reached at (416) 640-1550 or [email protected].
Avoiding Constructive Dismissal
Making it safe to suspend
How can an employer ensure a suspension will not result in a constructive dismissal finding? Using Carscallen as a basis, employers should:
• have a contractual agreement with an employee or an agreed-to policy that provides the right for the employer to suspend;
• ensure the contract or policy expressly provides for the right to suspend with or without pay;
• ensure the suspension is for a finite and reasonable period of time that should be communicated to the employee at the time it is imposed;
• provide some mechanism to have the suspension reviewed by someone other than the supervisor who ordered the suspension to ensure it is reasonable;
• ensure the suspension is proportional to the misconduct, not for first-time offences and preceded by written warnings — although very serious first-time misconduct may warrant a suspension;
• remember suspensions with pay are less likely to result in a constructive dismissal;
• use suspensions as part of a progressive discipline program, not as punishment or to humiliate; and
• know a suspension, even in the absence of a contract or policy that allows for suspension, can likely be supported because the employer is using a lesser form of discipline than it is entitled to invoke, even where misconduct would clearly allow for a dismissal for just cause.
