Originally posted August 13, 2008
I teach a graduate course on labour law to human resource professionals. When I mention to them that a suspension without pay in a non-union workplace is likely to amount to a constructive dismissal (unless the contract expressly gives the employer the right to do that), the students are often quite surprised. My point when I raise this is to contrast the non-union setting with the union setting in which suspensions without pay are not only common, but often expected by arbitrators as part of a program of progressive discipline.
The surprise of my students caused me to go back and look at this issue again. There’s a recent Ontario case decided by Justice Echlin, who by chance happens to be the author of a leading textbook on employment law (For Better or For Worse, with Christine Thomlinson). He ought to know the law. The case is Carscallen v. FRI Corp The employee was suspended without pay indefinitely for a variety of alleged reasons, primarily due to a failure to ensure that certain materials made it to a trade conference in time. His decision was upheld by the Ontario Court of Appeal.
Echlin J. begins his analysis with the following observation:
Historically, the common law has tended towards the view that in the absence of an express or implied term in the contract of employment, it is generally not open to an employer to suspend without pay as a means of disciplining an employee for misconduct. (para. 30)
Thus, assuming there is no expressed or implied term allowing for suspensions, the question is whether the historical approach has changed. Echlin noted that in two recent decisions–the Supreme Court case, McKinley v. B.C. Tel.(esp. at paras. 52, 53)and the Ontario Court of Appeal decision in Haldane v. Shelbar Enterprises Ltd (esp. at para. 16)–appellant courts had hinted at the possibility that a right to suspend without pay might make some sense. But neither of these decisions changed the law.
So, a non-union employer does not have a right to suspend without pay absent an expressed or implied term permitting this. Absent that term, the suspension can be treated as a fundamental breach of the contract by the employee, amounting to a constructive dismissal and therefore a right to reasonable notice damages. This is what happens in Carscallen. Echlin found that the suspension amounted to a constructive dismissal and ordered 9 month’s notice.
On the question of whether a right to suspend without pay should be implied, Echlin noted correctly that this should only be done by courts in clear and exceptional cases. An implied right to suspend without pay is not necessary to give business efficacy to the employment contract, so that the term can only be implied if it is clear and obvious that the parties intended this result. Rarely will this be the case.
Lastly, the Court acknowledged that, if the ER had cause to summarily dismiss the employee without notice, but instead opts a lesser penalty of suspension, the court would not allow a constructive dismissal complaint. That makes sense, since in that case, the ER is cutting the EE a break, and giving him/her a second chance. In Carscallen, the Court found that the employer did not have cause to dismiss the employee without reasonable notice.
Of course, all an employer needs to do is include the right to suspend without pay in the employment contract. Courts would presumably enforce this right, although they might review whether the employer’s exercise of that right was proper.
Issue for Discussion
In unionized environments, employers almost always bargain a right to suspend as a form of discipline, but nonunion employers rarely include such a right in their individual employment contracts with employees. Why do you think that is?
Do you think the courts should recognize an implied right to suspend employees without pay as a form of discipline? What arguments can you make to justify the implication of such a term?