Suspending white-collar employees

An in-depth look at a recent case that shows why courts frown upon suspensions without pay. In this case the judge also commented on why it may never be practical to suspend a senior employee

Absent express language in the employment contract, employers don’t automatically have the right to suspend employees without pay. Doing so could lead to a successful claim for constructive dismissal by the employee.

“Historically, the common law has tended towards the view 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,” said Justice Randall Echlin in Carscallen v. FRI Corp., a recent decision by the Ontario Superior Court of Justice.

But that’s not to say suspensions without pay are off the table completely if the employment contract doesn’t specifically allow for it.

In Kellas v. CIP Inc., a 1990 decision, the British Columbia Supreme Court said that where an employer has cause to dismiss an employee, it may instead choose to suspend the employee.

Suspensions with pay, however, are a different matter. Justice Echlin said that if a suspension is made with pay, it is more likely a court will not find constructive dismissal has occurred.

In MacKay v. Avco Financial Services Canada Ltd., a 1996 decision, the Prince Edward Island Supreme Court approved of the manner in which the employer suspended and temporarily reassigned a branch manager on a paid basis after complaints about his management style.

In Pierce v. Canada Trust Retailer, a 1986 decision, an Ontario court concluded that a short suspension with full pay and benefits did not indicate an intention on the part of the employer to repudiate the employment contract.

Justice Echlin’s decision in Carscallen is interesting to employers for a variety of reasons — it shows how courts will react to a decision to suspend a worker without pay when the employer does not have just cause for dismissal and when courts tack on additional damages for the way the employer behaved.

The case: Carscallen v. FRI Corp.

Christine Carscallen, 43, worked for FRI Corporation as a marketing executive. She worked for the company, which specialized in software and data information for the securities industry, for 14 years. Her annual salary when she was dismissed was $80,000, including benefits and bonuses.

Her relationship with Eligio Gaudio, FRI’s president and chief executive officer, was described by the court as “familiar.” The two had heated arguments from time to time. Carscallen said Gaudio was a “shouter” by nature and that she stood up for herself and from time to time “had to fight back.”

Things came to a head in the spring of 2003. FRI decided to take part in a trade show in Barcelona, Spain. Carscallen was given the job of getting the company’s booth and materials from Toronto to Barcelona.

She sent the booth and all of the company materials in one package on Thursday, May 1, by FedEx. She felt confident it would arrive in time, given FedEx’s two business day delivery and the fact it was not required at the show until May 6.

On May 2 she checked FedEx online tracking and learned the booth had reached Paris. She did not check on its location on Monday, May 5.

Gaudio arrived in Barcelona on May 4. He could not find the booth and said he called her on May 5 to find out where the booth was. Carscallen said she did not receive a message from Gaudio that day.

On May 6, Carscallen arrived at her office and received a voice-mail from Gaudio. He was angry because the booth had not arrived. She checked FedEx tracking and it showed the booth was being held in Madrid for “regulatory clearance delay.” It would not arrive in time for the Barcelona show.

Heated e-mail exchange

A flurry of e-mails were exchanged between Carscallen and Gaudio. Gaudio said he was “extremely upset” and “took great exception to a couple of things she was saying.” He felt some of her responses were insubordinate.

Carscallen said she had no concern sending terse e-mails to Gaudio. In her words: “This is the way you dealt with him.” (For excerpts from the e-mail exchange between Carscallen and Gaudio, click here.)

She knew the tone of the e-mails and the failure of the booth to arrive on time could be problematic. On May 7, she found out how problematic. She was presented with a letter of suspension that stated, simply:

“Pursuant to your recent discussions and exchange of correspondence with Mr. Eligio Gaudio, president and CEO, we are hereby notifying you that you are suspended immediately and until further notice.”

Carscallen was not told of the duration of the suspension nor whether her salary would be continued. A week later she was asked to come to FRI. At that time she was presented with a detailed memo that indicated, in addition to the week long unpaid suspension she had already served, FRI proposed to demote her to the position of manager of marketing, that she would no longer be granted flex hours and she would lose her office and be assigned to a cubicle shared with a subordinate.

Carscallen left. FRI sent voice-mails and e-mails and a courier delivered a memo to her house advising of her obligation to return to work. If she did not return by May 22, FRI said her employment would be treated as having been abandoned or, alternatively, she would be treated as having been dismissed for just cause and neglect of duty.

Carscallen did not return. She sought legal advice and launched legal action against FRI.

Court critical of FRI’s actions

The court came down hard on FRI for the way it handled Carscallen.

“There appears to have been (an) ad hoc/knee jerk reaction approach to employee discipline applied by Gaudio,” said Justice Echlin. “The president and CEO was in his own words ‘pissed off’ when he had to scramble in Barcelona upon the non-arrival of the booth and materials and became even more infuriated when he received what he perceived to be an arrogant response e-mail.”

The court said there was more of an element of punishment in his actions than an attempt to implement the company’s “fair and constructive disciplinary guidelines allowing for rehabilitation in the workplace,” as professed in its policies and procedures.

Heavy-handed tactics not appropriate in the Canadian workplace

Justice Echlin said this view was enforced by the heavy-handed tactics FRI took in moving her out of her office, reducing her title and withdrawing flex hours. He said the move was mean-spirited and designed to punish and humiliate her.

He said FRI did not have just cause to dismiss Carscallen.

“Summary dismissal without notice or pay in lieu thereof is the most severe punishment known to Canadian employment law,” said Justice Echlin. “Only the most severe misconduct can justify it.”

He said it was “troubling” that FRI promoted an employment policy and procedures manual, but then completely ignored it in its treatment of Carscallen.

“No attempt was made to give warnings. No procedural fairness was present in levying an indefinite suspension without pay,” said Justice Echlin. “Carscallen was given no opportunity to state her position and have it independently considered. Rather, Gaudio simply ordered her departure while he was in Barcelona and dealt with her further by ‘sending her another message’ when he returned. Such corporate discipline is not appropriate in the Canadian workplace.”

The court awarded Carscallen nine months’ notice plus an additional three months for the way FRI handled the termination.

For more information see:

Carscallen v. FRI Corp., 2005 CarswellOnt 2394, 2005 WL 1331617 (Ont. S.C.J.)



Suspending senior executives

In making his ruling in Carscallen, Justice Echlin opined about the concept of suspending senior management.

“At the senior management level of companies, one wonders how appropriate it could ever be to suspend executives,” he said. “The long-term effects of such discipline can leave the disciplined executive as a ‘lame duck’ manager in the eyes of subordinates. A suspension signals to the underlings that the company has less than complete faith in the individual to whom they report. It can also affect the esteem with which the disciplinee is held in the eyes of peers and superiors. The ramifications are potentially far reaching.”

Suspensions in a union environment

Justice Echlin offered the following commentary on suspensions in unionized environments:

“In the unionized setting, employers and unions expressly bargain for suspension rights at the time of the formation of a collective agreement.

“Notably, most collective agreements containing the right to suspend also provide the employee with the right to grieve the fact or the nature of suspension.

“The parties, of relatively even bargaining power, jointly determine that a monitoring process containing a contemporaneous right of appeal should accompany the employer’s disciplinary rights.”

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E-mail exchange between Gaudio and Carscallen

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