Finding the disciplinary middle ground

Suspensions may be a legitimate option for discipline in non-unionized workplaces

Suspensions becoming an disciplinary option

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 employee misconduct at issue must be serious enough to make the continuation of the employment relationship unworkable.

In addition, it is very common for relatively serious acts of employee misconduct to go undocumented. This lack of documentation allows an employee to dispute the alleged misconduct and creates a situation where the employee can say she was not aware the misconduct was of a seriousness that her continued employment was in jeopardy.

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 who might feel they have no other choice in dealing with the problem.

However, there is a middle ground which appears to be gaining increasing support from the courts — disciplinary suspensions.

Traditionally, courts have held that, in the absence of an express or implied term in the contract of employment, it is generally not open to an employer to suspend without pay as a means of disciplining an employee 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 duration of a few days, the employer will have committed a fundamental and unilateral change to the employment contract. This is usually found to amount to a constructive dismissal, leaving the employer on the hook for damages.

In a number of recent decisions, the courts have suggested employers ought to consider using the middle ground of a suspension as part of a system of progressive discipline. As always seems to be the case, however, employers must be careful to ensure they have the contractual right to institute such discipline.

Courts open to possibility of suspensions without pay

The case of Carscallen v. FRI Corp. provides an instructive example of where an employer was found to have improperly used 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 in a non-unionized workplace.

Christina Carscallen, 43, was a marketing executive for FRI. The 14-year employee worked directly with FRI's president and CEO, Eligio Gaudio. 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 the marketing and product materials did not arrive in time to be used for the trade show. Gaudio was understandably distressed. Gaudio and Carscallen engaged a series of heated e-mails as they tried to salvage the situation. Echlin characterized the tone and content of Carscallen’s e-mails as “out of line,” saying she ought to have been aware they would anger Gaudio.

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 a week later, when she was presented with a detailed memorandum that indicated in addition to the week-long unpaid suspension she had already served, 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 took the position she had been constructively dismissed.

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. He found the combination of these actions by FRI were 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 notes that both the Ontario Court of Appeal and the Supreme Court of Canada have recently hinted that 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 that “having regard to the inclusion of progressive discipline powers in virtually all collective agreements, the flexibility such an implied term would add to the employer-employee relationship and the incorporation into employment contracts, a case could be made for implying a term providing for reasonable discipline into employment contracts.”

Court supports progressive discipline

In a similar vein, Justice Frank Iacobucci, on behalf of a unanimous Supreme Court of Canada in McKinley v. BC Tel, indicated disciplinary measures short of dismissal may be a reasonable course of action 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,” Iacobucci said. “This is one of several disciplinary measures an employer may take in these circumstances.”

Although it is questionable whether Justice Iaccobuci 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.

Ensuring suspensions aren’t constructive dismissal

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 — the length of the suspension, and whether it is with or without pay, 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 — typically, suspension is not reasonable for first time offences and there should be written warnings preceeding the suspension (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 and not to be punitive or be designed to humiliate; and
•know that where misconduct would clearly allow for a dismissal for just cause, 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.

Employers who are looking to take steps to change their 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 LLP, an employment and labour law firm in Toronto. Chris can be reached at (416) 640-1550 or [email protected].

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