Once a decision is made to conduct an investigation, employers must determine whether it is necessary to take any interim steps to ensure no further activity takes place during the  course of the investigation which might lead to additional allegations.  Employers have a residual and limited power to suspend for administrative reasons because of acts of which an employee has been accused. The Supreme Court of Canada’s (SCC) recent decision in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 involving an administrative suspension serves as a reminder to employers looking to suspend employees pending the outcome of an investigation to ensure procedural fairness when exercising this power, including providing reasons for the suspension and acting in good faith.

David Potter was appointed as the Executive Director of the New Brunswick Legal Aid Services Commission (the “Commission”) for a seven-year term.   After almost four years, the relationship between Mr. Potter and the Commission deteriorated, and they began negotiating a buyout of Mr. Potter’s employment contract. During buyout negotiations, Mr. Potter went on sick leave for three months. Just prior to his return to work, and unbeknownst to him, the Commission wrote a letter to the Minister of Justice recommending that Mr. Potter’s employment be terminated for cause.   On the same day, the Commission advised Mr. Potter that he was not to return to work  until further direction.   Mr. Potter was suspended indefinitely, with full pay and benefits, and the Commission designated a replacement. The Commission gave Mr. Potter no reasons for the suspension, and provided no additional information when Mr. Potter sought clarification. Eight weeks after being suspended, Mr. Potter resigned and commenced an action for constructive dismissal.

The SCC overturned the lower courts and found that Mr. Potter was constructively dismissed.   The SCC provided a two-step test to determine whether a constructive dismissal had occurred with respect to a single unilateral  act:

  1. does the unilateral change constitute a breach of the employment contract, and if it does, does the change substantially alter an essential term of the contract (if an express or implied term gives the employer the authority to make the change, or the employee condones or consents to the change, the change will not be unilateral);  and
  2. if a breach of the employment contract has occurred, is the breach sufficiently important that a reasonable person in the shoes of the employee would have felt that the essential terms of the contract were  substantially  changed?

If the answer to both steps above is yes, the employee has been constructively  dismissed.

Step 1

The SCC held there is an implied term in every contract that an  employer will not withhold work from the employee “in bad faith or without justification”.   Even where the employer is not under a general obligation to provide work, the employer may not withhold work in bad faith or without justification.   As a result, an administrative suspension will constitute a breach of the employment contract unless the employer is able to demonstrate the suspension was reasonable and justified.

The SCC determined that the Commission had breached Mr. Potter’s employment contract in the manner in which it suspended him; specifically, 1) the indefinite duration of the suspension, 2) the fact that the Commission failed to act in good faith insofar as it withheld reasons for the suspension from him, and 3) the Commission’s concealed intention to have him terminated.   In most circumstances, an administrative suspension cannot be found to be justified in the absence of a basic level of communication with the employee.

Nor did the Commission have the authority, whether express or implied, to suspend Mr. Potter indefinitely with pay.   The express terms of the employment contract did not contain any reference to suspension for administrative reasons.   Even if Mr. Potter was interested in a buyout, that interest could not be taken as consent to his suspension. However, even if there was an implied authority to suspend Mr. Potter, the suspension was not reasonable or justified in the circumstances.

Step 2

The SCC found that the second step of the test was also met, as it was reasonable to view that the essential terms of the contract were substantially changed.   As far as Mr. Potter knew, he was being indefinitely  suspended  without  reason.

Evidentiary Burden

In cases of constructive dismissal, the primary burden will be on the employee to establish constructive dismissal.   However, where an administrative suspension is at issue, the burden is on the employer to show that the suspension is justified. The burden will then shift to the employee to demonstrate that the second step has been met. The SCC stated that meeting the second step is “inevitable” in cases where an administrative suspension is not reasonable or justified; any exception  to this rule would likely arise only if the unauthorized suspension was of a particularly short duration.

Lessons for Employers

The SCC stated that the following factors will always be relevant when determining whether a suspension is reasonable and justified: the duration of the suspension; whether the suspension is with pay; and good faith on the employer’s part, including the demonstration of legitimate  business  reasons.

Employers should consider the following when looking to place employees on administrative suspension pending the outcome of an investigation:

  1. Is the suspension necessary to protect legitimate business interests? Presumably, a suspension pending the outcome of a legitimate investigation into possible workplace misconduct would be reasonable and justifiable. Although the allegations remain unproven before the conclusion of the investigation, it is important to at least anticipate the possibility that the allegations could be true, and ensure that all employees are not put at further risk while the investigation proceeds.   Even if the employer is certain that no further activity could take place during the investigation that could increase the organization’s legal liability, expecting the workplace to continue to operate “business as usual” while the investigation is underway may be impractical. However, pay particular attention to the perception of neutrality, particularly in respect of the respondent.
  2. How can the suspension be imposed in good faith?  At minimum, acting in good faith means being honest, reasonable, candid, and forthright.   Failing to give an employee a reason for the suspension would not be forthright (paragraph 1 above outlines some possible reasons).   Information relating to the reason for the suspension that is withheld from an employee will be subject to scrutiny in subsequent constructive  dismissal  claims.
  3. Will the suspension be paid? Administrative suspensions should be granted with pay.   Given that the SCC gave no examples of circumstances which would justify an administrative suspension without pay, such suspensions will only be justified in very rare circumstances.
  4. Can the interruption of the employee’s performance of  work be imposed for a relatively short or fixed period?  Any exception to the rule that a breach of an employment contract amounts to a substantial change would likely arise only if the unauthorized suspension was of a particularly short duration.
  5. Have alternatives to suspension been considered? One of the best ways to canvass interim measures is to seek the input of the parties themselves. When speaking with the respondent and complainant about the investigation initially, consider informally discussing with them special working arrangements during the course of the investigation, or asking if they have any thoughts on interim measures.   Take care not to commit to any particular course of action during this information- gathering stage, since a decision may ultimately be made which is not consistent with a party’s wishes.   It will also provide a good “heads-up” regarding each party’s expectations for the investigation, and allow the employer to prepare in advance if a suspension will be resisted by one or both parties.
  6. Do employment contracts and/or applicable policies provide the authority to suspend employees pending the outcome of an investigation?   If not, employers may wish to consider adding a term that provides this authority to their employment contracts and/  or policies, and/or clarifying in employee contracts that the employer’s obligations do not include an obligation to supply work.   Changes to existing employment relationships should be implemented with care to avoid triggering a constructive dismissal.