SCC decision broadens constructive dismissal

In the field of labour law it is assumed that there is a contract between employee and employer, whether real or implied, and that as long as both parties abide by the terms of the agreement, they have the right to pursue their own interests. As a result, employers have always enjoyed a certain leeway in dealing with workers.

Now the Supreme Court of Canada has released a decision that may have significant repercussions for employers.

The March 6 ruling regarding David M. Potter v. New Brunswick Legal Aid Services Commission, “is a very big decision because it gives employers a warning that they’ve got to be upfront and transparent with employees,” says Pete Mockler, a lawyer representing the plaintiff. “They can’t take advantage of them. They can’t be secretive and hide when they really intend to do.”

The facts of the case are straightforward. The plaintiff, David Potter, was appointed head of the New Brunswick Legal Aid Services Commission. Partway through his term, disagreements arose and the two sides began negotiating a buyout of Potter’s contract. But before a deal was reached, Potter took sick leave. Unbeknownst to Potter, the commission sent a letter to the provincial justice minister advising that Potter’s employment should be terminated. At the same time the commission wrote to Potter telling him not to return to work until further notice. Before the end of Potter’s sick leave, the commission indefinitely suspended him with pay.

Potter took this to mean that he had been let go and filed suit against the commission, alleging constructive dismissal. The commission took the position that the law suit represented voluntary resignation; both the trial judge and the court of appeal agreed.

The key issue for the Supreme Court was the commission’s behaviour toward Mr. Potter after he went on sick leave.

In overturning decisions by the trial judge and court of appeal, the Supreme Court found that putting Potter on administrative leave was a unilateral breach of contract of sufficient seriousness to constitute constructive dismissal.

“I think this is the first time the [Supreme Court] has said that an employee is not only entitled to get paid but he is also entitled to fulfill the functions [of his job],” said Clarence Bennett, a lawyer at Saint John, New Brunswick-based Stewart McKelvey who represented the commission.

Mr. Bennett believes that the decision has major implications because it imposes on employers “an implied contractual obligation not to withhold work from employees without justification.”

“This changes the previous tradition in common law with respect to constructive dismissal [and] the court itself refers to this,” says Joshua Concessao, a lawyer at Hicks Morley in Toronto.

Essentially, the traditional position was that while employers have an obligation to retain an employee, there was no obligation to supply work. But what the court says now, argues Concessao, is that every employee derives meaning from the work they perform, so under no circumstances is an employer permitted to impose an indefinite suspension unless it can point to a legitimate business reason.

Chris Paliare, a lawyer at Paliare Roland Rosenberg Rothstein LLP, says he doesn’t think the judgement was by any stretch revolutionary. Instead, it reflects how the concept of constructive dismissal has “evolved” over the past 10 years, making it “more difficult [for lawyers] to give people advice.”