On March 6, 2015, the Supreme Court of Canada handed down a major decision involving constructive dismissal.
Almost twenty years after Farber v. Royal Trust Co. , the case of Potter v. New Brunswick Legal Aid Services Commission confirms that, in the absence of legitimate business reasons, a suspension with pay more often than not constitutes constructive dismissal.
THE FACTS
Mr. Potter was officially appointed as the Executive Director of the New Brunswick Legal Aid Services Commission (the “Commission”) on December 16, 2006 for a seven (7)-year term which was to end on December 12, 2012.
During the spring of 2009, after the relationship between Mr. Potter and his employer (the “Parties”) had deteriorated, they began negotiating a buyout of Mr. Potter’s employment contract. However, in October 2009 Mr. Potter was compelled to take sick leave, which was extended to January 18, 2010.
In the meantime, negotiations between the Parties continued. On January 5, 2010, unbeknownst to Mr. Potter, the Commission decided that, if they were unable to negotiate an agreement with Mr. Potter by January 11, 2010, a request would be made to revoke his appointment for cause.
As an agreement was not reached by the date in question, the Commission sent Mr. Potter a letter on January 11, 2010 advising him that he was not to return to work until further notice.
On March 9, 2010, as he had still not received any information despite his request for clarifications, Mr. Potter commenced an action for constructive dismissal against the Commission.
SUPREME COURT OF CANADA DECISION
The Supreme Court quashed the decision rendered by the lower courts, ruling that Mr. Potter had in fact been constructively dismissed.
It is important to note that Justice Wagner pointed out that Mr. Potter was not the subject of a disciplinary suspension. (1) THE NOTION OF CONSTRUCTIVE DISMISSAL
Justice Wagner defines constructive dismissal as follows :
“WHEN AN EMPLOYER’S CONDUCT EVINCES AN INTENTION NO LONGER TO BE BOUND BY THE EMPLOYMENT CONTRACT, THE EMPLOYEE HAS THE CHOICE OF EITHER ACCEPTING THAT CONDUCT OR CHANGES MADE BY THE EMPLOYER, OR TREATING THE CONDUCT OR CHANGES AS A REPUDIATION OF THE CONTRACT BY THE EMPLOYER AND SUING FOR WRONGFUL DISMISSAL. SINCE THE EMPLOYEE HAS NOT BEEN FORMALLY DISMISSED, THE EMPLOYER’S ACT IS REFERRED TO AS “CONSTRUCTIVE DISMISSAL”.
Justice Wagner pursued his analysis, stating that constructive dismissal can take two forms: (i) the breach of an express or implied term of the employment contract; or (ii) a series of acts that show that the employer no longer intends to be bound by the contract.
In analyzing a breach of an express or implied term of the contract, two conditions must be met to confirm the presence of constructive dismissal. First, the employer’s unilateral change must be found to substantially alter an essential term of the employment contract and, in the affirmative, the court must determine whether “at the time the [breach occurred], a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed”.
The analysis relating to the second form of constructive dismissal consists of determining whether, through its acts, the employer evinces a clear intention to no longer to be bound by the contract.
(2) APPLICATION TO THE FACTS
Addressing the Commission’s authority to suspend Mr. Potter indefinitely with pay for administrative reasons, Justice Wagner was of the opinion that the Commission did not have the authority, whether express or implied, to suspend Mr. Potter in order to facilitate the negotiation of a buyout of his contract.
In this regard, Justice Wagner notes the important role of work for any individual and, accordingly, challenges any power of the employer to withhold work in bad faith or without justification. Justice Wagner addresses this issue as follows: “IT [THE EMPLOYER] MAY REDUCE AN EMPLOYEE’S WORKLOAD OR ABOLISH HIS OR HER POSITION FOR LEGITIMATE BUSINESS REASONS, AS WAS DONE IN SULEMAN, IN WHICH THE EMPLOYEE’S WORKLOAD WAS REDUCED PENDING HER TERMINATION OWING TO A SHORTAGE OF WORK. HOWEVER, I REJECT THE PROPOSITION THAT AN EMPLOYER CAN REFUSE TO PROVIDE WORK TO AN EMPLOYEE TO WHOM THE EXCEPTIONS DISCUSSED ABOVE DO NOT APPLY — LET ALONE SUSPEND AND REPLACE SUCH AN EMPLOYEE — FOR JUST ANY REASON.”
Asked to determine whether the administrative suspension imposed by the Commission was reasonable or justified, Justice Wagner confirmed that, other than in the context of a disciplinary suspension, an employer does not have the authority, whether express or implied, to suspend an employee without legitimate business reasons. In this case, the employer did not give any reason for the suspension. Justice Wagner also notes that the fact that Mr. Potter was replaced and that the duration of his suspension was indefinite were not in the Commission’s favour, along with the fact that the clarifications requested by Mr. Potter’s lawyer were not provided. In view of the foregoing, the Court was of the opinion that the Commission has breached its obligation of good faith toward Mr. Potter.
Since the Commission failed to show that the suspension was reasonable or justified, Mr. Potter had the burden of proving the second aspect of the analysis. In view of the above-mentioned facts, Justice Wagner ruled that a reasonable person in Mr. Potter’s situation would have felt that the essential terms of the employment contract were being substantially changed.
As a result, Mr. Potter was the victim of constructive dismissal.
CONCLUSION
It is important to recall that, although every measure imposed by the employer must be analyzed in view of the specific facts surrounding it, employers must act at all times in good faith toward an employee by notifying him or her of the reasons for an administrative suspension. An administrative suspension must also be based on legitimate business reasons. Lastly, note that the duration of the suspension also affects how the suspension is characterized: an administrative suspension should be for a specific period to minimize the consequences for everyone involved.
1Farber c. Cie Trust Royal, [1997] 1 R.C.S. 846.
