The leading decision on this issue comes from the Supreme Court of Canada[1]. In this case, the Court determined that a suspension without pay would in most cases be a breach of the employment relationship unless such conduct was based on either an express or an implied term of the contract.

Recent Law

The Ontario Court of Appeal[2] considered this principle recently in an important decision as it clarified the trial judgment[3] on this issue.

The Facts

The plaintiff had been employed as a security shift supervisor at Casino Niagara. In this position he was required to hold a gaming licence issued by the Alcohol and Gaming Commission. The employer had maintained a manual which stated that am investigative suspension may be used to review alleged misconduct and that if a decision was made to suspend the employee, the employee may not be reimbursed for such time spent off work during the investigation. This right to refuse pay during the investigative process was discretionary to the employer.

Due to allegations of theft made by the Ontario Provincial Police, the employee was suspended without pay in December of 2007. The following January, he was charged with theft over $5,000. His gaming licence was also suspended pending a hearing. The criminal charges were eventually withdrawn. The licence was voluntarily surrendered by the employee and this issue did not proceed to hearing. The employer then terminated due the fact that the employee was unlicensed. This event came 17 months after the initial suspension.

The Trial Decision

At trial, the plaintiff was successful. He had argued that the suspension was a breach of the employment agreement and he was hence entitled to compensation from this date forward. The judge at trial awarded 17 months compensation plus an award of punitive damages of $100,000.

Court of Appeal Speaks to Right of Suspension

The issue presented to the Court of Appeal was hence whether the employer maintained the right of suspension, and more acutely, the right of suspension without pay.

The Court concluded that although the employer had the discretionary right to suspend without pay, but because it had such a decision to make, it also was charged with the onus of justifying an unpaid suspension as reasonable. It saw that the employer indeed had the right of suspension, but not necessarily an unpaid suspension.

The Court determined that at the initial time of the suspension, the employer had failed to meet this test of an unpaid suspension as reasonable. This conduct was hence seen as a constructive termination.

The Court did however reduce the severance award to 7 months noting the relevant factors as the length of service at 8 years and 8 months, 50 years of age, earning $50,000 a year. Coincidentally the plaintiff had been unemployed for 7 months. The punitive award was also set aside as the trial judge had not addressed the issue as to why compensatory damages were not sufficient to be a deterrence. It did not order a new trial on this issue as it could have.

Employers Take Heed

The significant aspect of this case was that it revolved around the wording of the policy document which allowed for an unpaid suspension as one of discretion. There are two possible means of correcting this. One is to ensure that such a decision is based on investigative results in good faith, not simply the commencement of criminal charges or other similar allegations. The second is to amend the policy to allow for such action in certain clearly defined circumstances.

Cautionary Note to Employees

The wording of an employment agreement or policy document will be important to determine the employer’s right of suspension, unpaid or otherwise. Although not referenced in this case, the employer’s visible well-known overt practice may also lead to the same argument. The facts of this case are somewhat unusual, involving a professional gambling business. In more common examples, when the employer is investigating allegations of wrongdoing such as sexual harassment or other serious assertions of wrongdoing, the same issues and principles will apply.

Legal Advice is Critical

Whether you be employer or employee, legal advice on this issue is clearly important. The employer maintains the advantage of creating the foundation for its position by an effective contract or policy document. The employee bears the position of vulnerability in most cases. Both views must be guided by proper and advice. For advice on this issue from either side, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.

[1] Potter v New Brunswick

[2] Filice v Complex Services OCA

[3] Filice v Complex Services, 2012 ONSC 6058 (not available on CanLII) The trial award was reduced but the liability decision was maintained.