Suspending an employee indefinitely without pay may amount to constructive dismissal

The Supreme Court of Canada released its decision today in Potter v. New Brunswick Legal Aid Services Commission overturning both the Trial Court and Court of Appeal decisions that David Potter had voluntarily resigned from his position.

The fact that two lower courts concluded that Mr. Potter had resigned while the Supreme Court of Canada disagreed and decided that he had been constructively dismissed is emblematic of how difficult it can be to anticipate whether a constructive dismissal claim will be successful.

The Supreme Court did try to provide some clarity by articulating the following two part test for constructive dismissal:

  1. The court must first identify an express or implied contract term that has been breached
  2. Then the court must determine whether that breach was sufficiently serious to constitute constructive dismissal.

The Supreme Court added however that an employer’s conduct will also constitute constructive dismissal if it more generally shows that the employer did not intend to be bound by the contract. The decision also confirms that courts ought to continue using a ‘flexible approach’ in answering that question. While this flexibility allows courts to assess each case on its facts, I anticipate that this same flexibility will mean employees and their counsel will continue to approach alleging constructive dismissal with some caution.
The decision does however highlight some factors which will weigh in favour of a finding of constructive dismissal, among the ones the Supreme Court of Canada relied on in order to conclude that Potter had been constructively dismissed include:

  1. The employee’s contract did not contain the right (express or implied) to suspend the employee;
  2. Potter was not given any reason for his suspension;
  3. Potter’s suspension was indefinite and he was replaced during the period of suspension; and
  4. Potter did not agree to the change.

To read the full decision please go here.

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