Disciplinary Suspensions

When an employee commits an act that requires discipline, can an employer institute progressive discipline such as an unpaid suspension without it being considered a constructive dismissal?

Firstly, progressive discipline is widely understood to mean the process by which an employer evaluates, measures performance and addresses any deficiencies in performance with the employee. The objective of sincere progressive discipline programs, is to raise the employee's level of competence or correct disruptive behavior, for example. It is also to ward off any allegations of condonation should the employee reject the discipline, resign and claim damages for constructive discipline.

Despite what seems like a practical solution to an employee problem, the employer who engages in progressive discipline often finds themselves being sued for constructive dismissal. The typical argument by an employee who is suspended without pay as an example, is that an unpaid suspension was never an express term of the employment contract.

In the recent Ontario Court of Appeal decision of Haldane v. Shelbar Enterprises Ltd., however, there appears to be an evolution in this area of law. In the Haldane case, the employee was suspended for three days for being "obscenely insolent" with her employer. Haldane suggested that the employer deduct three days pay from her vacation instead or suspending her. When the employer refused that proposal and ordered Haldane to commence her suspension, she resigned and claimed constructive dismissal.

The trial judge found that Haldane had been constructively dismissed. Of note is the fact that at trial, Haldane did not argue that her employment contract did not permit suspensions. The Ontario Court of Appeal agreed with the trial judge but commented that a term permitting reasonably imposed unpaid suspensions could be implied into an employment under three circumstances: 1. through custom and usage; 2. in accordance with the presumed intention of the parties; and 3. as a matter of law by the courts. The Court however, left the decision on whether and when such a term should be implied to a later case when the issue could be fully argued. Thus, it appears that the Court has opened the door to an employer to argue that an unpaid suspension could be viewed as an implied term of the employment contract by way of custom and usage, by presumed intention of the parties or as a matter of law by the courts.

In an opt-quoted case McKinley v. BC Tel, the Supreme Court of Canada ("SCC") made comments similar to the Ontario Court of Appeal in Haldane. The SCC stated that there may be situations where a lesser form of discipline other than termination, may be appropriate for an offending employee. The SCC's comments were obiter (they were made as an aside) however and were not made in directly addressing the pre-existing common law that asserts that unpaid suspensions are a form of constructive dismissal.

The case law on this issue is mixed and evolving. Accordingly, if you are an employer considering using this form of discipline, you are well advised to consult a lawyer before employing progressive discipline and unpaid suspensions.