Introduction

On 10 July 2018 the Ontario Court of Appeal released its decision in Filice v Complex Services Inc. The decision is a reminder of the principles governing suspension without pay during an investigation into employee misconduct. Both the trial judge and the court of appeal concluded that Mr Filice's suspension without pay was a constructive dismissal. However, the court of appeal reversed the trial judge's award on the question of damages and examined whether the employer had been obliged to offer alternate employment.

Facts

The employer, Complex Services Inc, operates a casino which maintains a security department responsible for, among other things, managing the lost and found processes, including a collection of property and money from its facilities. Filice was employed as a security shift supervisor.

On 17 December 2007 Complex was informed that the Alcohol and Gaming Commission of Ontario (AGCO) had performed a routine audit of the casino's lost and found logs and identified several discrepancies. Those discrepancies corresponded with entries made by Filice. Two days later, Filice was escorted to a meeting conducted by police officers of the AGCO enforcement unit. On conclusion of the meeting, Filice was again escorted by police officers – this time, to his supervisor's office. The supervisor was advised that Filice was under investigation for theft in the workplace; no charges had yet been laid and the investigation was ongoing.

The same day, the supervisor informed Filice that he was being placed on an investigative suspension pursuant to casino policies, without pay. He was escorted from the premises and prohibited from returning.

On 21 January 2008 Filice was charged with four counts of theft under C$5,000 and one count of breach of trust. Three of the charges were later withdrawn and the remaining two were dismissed after the Crown was precluded by the trial judge from relying on certain business records to prove its case against Filice.

Shortly afterwards, Filice surrendered his gaming registration, the possession of which is a condition of employment for all employees in the casino's security department. On 20 May 2009 the casino informed Filice that, in light of his failure to maintain a valid gaming registration, his employment was terminated.

Filice commenced an action against Complex for constructive dismissal, among other things. The trial judge found in his favour and awarded him C$75,723.64 in damages for constructive dismissal, which represented the amount of pay that had been withheld from him during his 17-month suspension without pay.

Decision

The Ontario Court of Appeal agreed with the trial judge that the suspension should have been with pay. However, it disagreed on the issue of damages.

Suspension without pay often amounts to constructive dismissal When an employee is placed on administrative suspension pending the completion of an investigation, the employer bears the burden of proving that the suspension is justified. A suspension without pay generally constitutes a unilateral change in the employment relationship and a breach of the employment contract, unless the employer has the right (explicitly or implicitly) to suspend an employee without pay. Even in such cases, discretion must be exercised reasonably.

In Filice the employer's policies and handbook made it clear that such discretion existed and the parties had treated the policies and handbook as forming part of the employment contract. The problem lay elsewhere; the employer never considered whether Filice's suspension should be with or without pay.

The circumstances in which an employer can deny an employee both the opportunity to perform work and their salary without leading to constructive dismissal are exceptional. The power to suspend for administrative reasons does not entail the additional right to suspend salary. The court of appeal opined that there may have been a point in the future when a suspension without pay would have been justified, but that moment had not yet arrived for the employer.

Damages for constructive dismissal are the same as damages for wrongful dismissal The trial judge awarded the equivalent of 17 months' salary to Filice as compensatory damages for constructive dismissal. He treated the entire period of suspension as constituting the loss for which Filice had to be compensated – this was a mistake. Damages for constructive dismissal are the same as damages for wrongful dismissal. Filice's length of service was eight years and eight months, he was 50 years' old and earned approximately C$50,000. The appropriate notice period was seven months according to the court of appeal and Filice's damages were reduced accordingly.

No duty to offer alternative employment The court of appeal also rejected the idea that the employer had been obliged to offer Filice another job (not requiring a gaming registration) within its organisation before dismissing him. The parties where not bound by a collective bargaining agreement subject to a labour law scheme and, in that context, an obligation to offer alternate employment would run:

Contrary to the fundamental principles of individual agency, freedom of contract, and tantamount to binding the parties to a specific performance obligation for employment which has long been rejected by the common law, except perhaps in the rarest of circumstances, none of which are present here.

Comment

Employers should ensure that their policies and, where relevant, employee handbook provide them with the necessary latitude to deal with employees during investigations. Employment contracts should reference such policies and the handbook or contain a standalone provision regarding the right to suspend an employee with or without pay.

When suspending an employee, an employer should consider whether the suspension should be with or without pay. Most often, or at least initially, the suspension will be with pay.

For further information on this topic please contact Julie Robinson at Fasken by telephone (+1 613 236 3882) or email (jurobinson@fasken.com). The Fasken website can be accessed at www.fasken.com.

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