Employers are increasingly suspending employees when allegations of misconduct are made against an employee. This includes allegations of sexual or workplace harassment and allegations of financial improprieties. If such a suspension constitutes a wrongful dismissal then these suspensions can expose employers to significant legal liability.

General Rule

According to Ontario’s Court of Appeal, an unpaid administrative suspension generally triggers a constructive dismissal “unless it (is) an express or implied term of the contract that the employer (can) suspend an employee without pay.”

A Case Study

A recent court case considered the suspension of a security supervisor at a casino. The employee needed to maintain a valid gaming registration from a government agency as a condition of employment. The casino’s Security Department was responsible for managing the casino’s lost and found processes, which include the collection of property and money from the casino’s facilities. The government agency that issues the required gaming registrations told the security supervisor that he was under investigation for theft in relation to the lost and found department but noted that no criminal charges had been laid.

One of the policies in the casino’s handbook stated:

Investigative Suspension may be used as part of the coaching and counselling process to verify allegations of misconduct.  During an investigation, the Associate may be prohibited from working. If a decision is made to separate the Associate’s employment, he or she may not be reimbursed for time spent on Investigative Suspension.

The casino immediately suspended the employee without pay.

The employee was subsequently charged criminally and the casino suspended its investigation into the allegations against the employee until the criminal charges were concluded. About 15 months later, the employee surrendered his gaming registration. Shortly thereafter, the casino wrote the employee and told him that in light of the requirement that he maintain a valid gaming registration, “his employment was at an end since he had surrendered his gaming registration.”

Is an Unpaid Suspension Legally Permitted? The Legal Test

The trial judge concluded that the employee’s suspension was clearly justified in the circumstances. The issue to decide was whether the casino could justify an unpaid suspension.

When considering this issue, the court applied the following test:

… absent express language in the employment contract stipulating that any suspension would be without pay, the burden rests on the appellant to establish that a suspension without pay was justified.  If the appellant cannot justify a suspension without pay, then taking that step amounts to a unilateral change in the employment relationship that constitutes a breach of the contract of employment.

Can a Paid Suspension be Converted into an Unpaid Suspension?

The court also discussed at what point a paid suspension can morph into an unpaid suspension.

While there might have been a point later in time when the suspension of the respondent without pay could have been justified, depending how matters unfolded, there was an insufficient foundation for a suspension without pay on December 19, when the respondent was told he was suspended and escorted out of the premises.  In my view, when the appellant suspended the respondent without pay on December 19, it made a unilateral change to the employment relationship and breached the implied term of the employment contract that the power to suspend without pay would not be exercised unreasonably.

The trial judge and the appeal court concluded the unpaid suspension constituted a constructive dismissal in this case and awarded the employee damages in lieu of reasonable notice of termination.

Lessons to Be Learned:

1. An employer does not generally have an implied right to suspend an employee without pay during an investigation.
2. An employer should therefore include a term in its employment contract giving it the right to suspend an employee with or without pay during an investigation.
3. An employer should not impose an unpaid suspension unless there is evidence of employee misconduct. Accordingly, absent extraordinary circumstances, an employer should generally investigate the misconduct allegations that trigger the employee suspension promptly. If evidence of misconduct is found to exist, an employer may be able to quickly convert a short paid suspension into an unpaid suspension.

For over 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416-317-9894 or at [email protected]