Update by Parmvir Padda, Lawyer and Erin Brandt, Cofounder

Constructive dismissal cases are some of the more complex cases in employment law. In Potter v New Brunswick Legal Aid Services Commission, a statutory body corporate pursuant to a special act of the Province of New Brunswick, 2015 SCC 10 (“Potter”) the Supreme Court of Canada confirmed the legal framework for constructive dismissal, and applied the framework within the context of a lengthy paid administrative suspension.

Background

Mr. Potter was appointed as the Executive Director of the New Brunswick Legal Aid Services Commission (the “Commission”) for a seven-year term. Before the end of the seven-year term, the Commission started negotiations with Mr. Potter to buy out the remainder of his contract and bring his employment to an end.

Mr. Potter went on a sick leave from work, and just prior to his return, the Commission suspended Mr. Potter with pay. Mr. Potter brought a legal action against the Commission, arguing he was constructively dismissed.

Decision

The Supreme Court of Canada confirmed that constructive dismissal can take one of two forms:

1. A single unilateral act by an employer that breaches an essential term of an employment contract; or

2. A series of acts that, when taken together, show the employer intended to no longer be bound by the employment contract.

Mr. Potter was successful in his claim for constructive dismissal under the first category as a result of the Commission’s decision to indefinitely suspend him. The Supreme Court of Canada found that it was an essential term of Mr. Potter’s employment contract that the Commission provide him with work, and in the absence of a contractual right to suspend, the Commission breached that essential term.

Key Take Away for Employers

While not every change to an employment relationship will amount to a constructive dismissal, an employer does not have an unfettered right to withhold work from an employee, particularly where there is no express contractual right to suspend, and where a suspension is neither reasonable nor justified. It is important to maintain good communication with a suspended employee, and always act in good faith.

Key Take Away for Employees

Where an employer deprives an employee of work with no right to do so, an employee may treat the employment relationship as over, claim constructive dismissal, and seek severance pay. Potter also reminds us that a constructive dismissal case must be carefully navigated right from the start. In a failed case for constructive dismissal, a court could find the employee resigned, which could leave an employee with no job and no severance.