Constructive Dismissal

SCC change of Constructive Dismissal Law, 2015

10.	SCC Change of Constructive Dismissal Law, 2015A new duty may exist for employers to advise an employee when the Company places the employee on an administrative leave – even if paid.

Most constructive dismissal cases rise when there is a change of compensation or changes in an employee’s job duties.  The Supreme Court of Canada has recently considered another way in which an employee can be constructively dismissed.

The Supreme Court of Canada in a case called Potter v. New Brunswick Legal Aid Services Commission outlined the two ways an employee can be constructively dismissed:

  1. 1. Repudiation by a breach of a specific term in the Employment Contract

Most constructive dismissals involve changes in compensation or in job duties.  Where an employer changes or breaches an implicit or explicit term of a contract,  the Court will use a “reasonable person” test to see if there has been a constructive dismissal. In other words, would a “reasonable person”, in the same position as the employee,  feel that an essential term of their employment has been substantially altered?


  1. 2. Repudiation without a specific breach of the Employment Contract

The Supreme Court of Canada in Potter has also now recognized that an employee can prove Constructive Dismissal if he or she can show that the employee no longer intended to be bound by its contract.  In other words, an employee doesn’t have to show that an implicit or explicit term of the contract has actually been breached.  He may succeed on a constructive dismissal claim if he can show that by its actions, the employer did not intend to continue to be bound by the contract in the future.

In this case, Mr. Potter had signed a contract to work as an Executive Director of the government agency.  The relationship soured and the parties began negotiations to end his contract early.  Mr. Potter went on sick leave.  Before his return to employment, while on sick leave, the employer placed him on definite administrative suspension with pay.  The employer did not tell Mr. Potter why he had been placed on an administrative suspension and assigned his duties to another person.  Mr. Potter quit his employment and sued for constructive dismissal.

The Supreme Court of Canada in this case decided that the employer, under its contract, did not have a right to place Mr. Potter on a paid administrative suspension

The Court stated that an employer never has the right to keep an employee from working –  unless it can demonstrate that it is reasonably justified.

There had been no communication with Mr. Potter about the reason for his suspension, the Court therefore stated “At a minimum, acting in good faith in relation to contractual dealings, means being honest, reasonable, candid and forthright”.

The Court determined that Mr. Potter had been constructively dismissed.

It is arguable following this decision that there is an imposition that employers must provide an employee with reasons before imposing a paid administrative suspension.

Constructive dismissal cases are very technically oriented and turn on their facts.  You are well advised to obtain an experienced lawyer’s advice before you make any allegations of constructive dismissal.  If you would like a consultation to discuss your particulars please contact Currie Law at 905-847-2826.

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