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When is a Suspension Not a Suspension? When it's a Constructive Dismissal | The HR Space

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Labour, Employment and Human Rights Bulletin

When is a suspension not a suspension? Sounds like the start of a bad joke. However, in a recent decision, the Supreme Court of Canada explained that in certain circumstances a suspension will be deemed to be a termination.

On March 6, 2015, the Supreme Court of Canada released its decision in Potter v. New Brunswick Legal Aid Services Commission (PDF). At issue was whether and in what circumstances a suspension with pay of a non-union employee constitutes a constructive dismissal.

The Plaintiff, D.P., was employed as Executive Director of Legal Aid in New Brunswick with a 7-year term appointment.  Approximately halfway through his appointment, D.P. began negotiating a buyout of his contract.  Before those negotiations were completed, D.P. took a medical leave that was extended several times.

While D.P. was on medical leave, the employer recommended to the Minister of Justice that D.P.'s appointment be revoked for cause. At the same time, the employer sent D.P. a letter advising him that he "ought not to return to the work place" until further direction, but would continue to be paid.  D.P.'s duties were delegated to someone else. D.P.'s lawyer sought clarification, including asking whether D.P. had been suspended and why.  The employer provided a response that included "I am surprised that you and your client are confused.  He is not to return to work until further notice." No reasons were provided.

At the end of his leave, D.P. did not return to work as directed.  D.P. subsequently commenced an action for constructive dismissal.  In response, the employer stopped his salary and benefits and advised D.P.'s lawyer that as D.P. had commenced an action for constructive dismissal, D.P. had effectively resigned his position.

The New Brunswick Court of Queen's Bench found that D.P.'s administrative suspension did not constitute constructive dismissal and that by commencing an action for constructive dismissal, D.P. had "destroyed any chance of a productive working relationship"; essentially that D.P. had effectively quit.

The New Brunswick Court of Appeal upheld the lower court's decision and dismissed the appeal.

The Supreme Court Decision

The Supreme Court of Canada (the "SCC") overturned the lower courts' decisions and found that D.P. had been constructively dismissed.

A majority of the SCC reviewed the law of constructive dismissal, explaining that where an employer's conduct shows that it no longer intends to be bound by the employment contract, the employee has the choice of either accepting the conduct/change to the contract, or suing for constructive dismissal.

The majority explained that there are two types of constructive dismissal: a single, unilateral act that breaches an essential term of the contract, or a series of acts that, taken together, show that the employer no longer intends to be bound by the contract.  Each case must be considered on its own facts and the key question is whether or not the employer's conduct shows that it intended not to be bound by the contract.

The Court set out a two-branch test for constructive dismissal. The Court must consider:

  1. Whether the employer breached an implied or express term of the contract and whether the breach substantially altered an essential term of the contract; and
  2. 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.

In relation to an employer's ability to implement an administrative suspension and deny an employee the opportunity to work, the majority explained that no employer is at liberty to withhold work from an employee either in bad faith or without justification. The question is whether the administrative suspension of the employee with pay is reasonable and justified.

In D.P.'s case, the administrative suspension was neither reasonable nor justified. In this case, the administrative suspension was for an indefinite duration and no reason was given.  In addition, the employer concealed its intention to have D.P. terminated.

In this case, the Court determined that the suspension was a breach of contract that constituted a substantial change to the essential terms of the contract and D.P had been constructively dismissed.

Implications for Employers

This case reinforces the importance of dealing with employees honestly and in good faith.  It also illustrates that paying an employee during a suspension does not insulate an employer from a constructive dismissal claim.  Lastly, in the appropriate case, employers may wish to consider adding a clause providing for suspensions in employment contracts.

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