Don't assume you can suspend or temporarily lay off employees

Many employers have complained — understandably — they're 'damned if they do and damned if they don't'

Stuart Rudner

By Stuart Rudner

I am very excited to announce that my book on summary dismissal, You’re Fired: Just Cause for Dismissal in Canada, is now available from Carswell. For more information, visit Carswell's website.

One of the overriding themes of the text is that even when an employee has engaged in misconduct (which can include poor performance), summary dismissal is not always warranted. As discussed in previous posts, an employer will also have to satisfy a court that the employment relationship has been irreparably harmed before the court will agree the employer was entitled to terminate the employment relationship.

In the course of this analysis, the courts will undertake a contextual approach, which considers all aspects of the employment relationship. Furthermore, proportionality is required — the punishment must fit the crime, and it will only be the most egregious of offences that will warrant summary dismissal. In many cases, Canadian courts have held that while the employee may be guilty of misconduct, summary dismissal was too harsh a punishment and some lesser form of discipline was appropriate.

The inevitable question is what other forms of discipline an employer can resort to if it’s not confident just cause for dismissal exists. Unfortunately, employers in Canada are extremely limited in this context. Generally speaking, when people think of disciplining employees, they think of warnings (verbal or written), suspensions and demotions.

However, the law has historically been that suspensions, particularly unpaid ones, constitute a constructive dismissal. Canadian courts have found employers do not have an automatic right to suspend employees for any reason, paid or otherwise. As a result, if they do so, they breach the employment contract and constructively dismiss the employee, who would then be entitled to all of the damages she would otherwise receive if she was dismissed in the usual manner. The courts have treated demotions in a similar fashion, holding it is not an option available in most cases.

Many employers have complained, understandably, they are “damned if they do and damned if they don’t.”

On the one hand, they are told they should avoid dismissal in all but the most extreme circumstances. But, on the other hand, they are told they do not have any options other than verbal or written warnings. Notably, in recent years, there have been a small number of court decisions that recognized the right of an employer to suspend an employee in circumstances where misconduct was shown but dismissal was not warranted.

The law continues to evolve in that area, and it’s quite possible that in the future we will be able to say more confidently an employer can suspend an employee in the right circumstances. It is always open to the parties to agree the employer will have the right to suspend an employee, and I generally advise clients to include such wording, where appropriate, in written contracts of employment.

On a related note, many employers assume they have the right to lay workers off temporarily in situations where there is a shortage of work. In Ontario, this misconception is perhaps exacerbated by the fact the Employment Standards Act sets out various parameters for temporary layoffs. However, it does not give employers the right to temporarily lay employees off. It only sets out the parameters of what they can do if they already have that right.

In order to be entitled to lay workers off temporarily, there must be an explicit or implicit agreement. The best way to show such an agreement is to have clear and unambiguous wording in a written contract of employment. Alternatively, some employers will be able to show that within their company, or their industry, it is implied and understood that temporarily layoffs are a possibility. The construction industry would be a good example. However, in the absence of an express or implied right to temporarily lay employees off, employers cannot do so. If they do, it can constitute a constructive dismissal.

The bottom line is employers should think twice, and obtain appropriate advice, before taking any significant steps, including dismissal, discipline or layoffs.

Stuart Rudner is a partner with Miller Thomson LLP in Ontario, specializing in employment law. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at (905) 415-6767 or [email protected]. You can also follow him on Twitter @CanadianHRLaw, join his Canadian Employment Law Group on LinkedIn, and connect with him on Google+.


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