Supreme Court of Canada weighs in on constructive dismissal

Suspension can lead to constructive dismissal, even if it’s paid
By Ronald Minken
|Canadian Employment Law Today|Last Updated: 06/24/2015

The law surrounding constructive dismissal has changed considerably over the past few years, sometimes making it difficult for employees to successfully prove an entitlement to damages based on constructive dismissal. On March 6, 2015, the Supreme Court of Canada weighed in on the issue of constructive dismissal in Potter v. New Brunswick (Legal Aid Services Commission). In Potter, Canada’s top court determined that the employee had been constructively dismissed when his employer suspended him with pay indefinitely and awarded the employee damages representing the balance of the seven-year fixed-term contract.

The employee, David Potter, was hired for a seven-year contract and held the position of Executive Director of Legal Aid of New Brunswick. The terms of the Potter’s appointment as Executive Director were governed by s. 39 of the province’s Legal Aid Act. After completing almost four years of the seven-year contact, Potter and the employer entered into negotiations whereby Potter would buy out the balance of the contract and, in exchange for the compensation package, Potter would resign. The employer wished to expedite negotiations and, without informing Potter, decided that if an agreement was not reached by a specified date, it would request that the Lieutenant-Governor in Council revoke Potter’s appointment for cause pursuant to s. 39 of the Legal Aid Act.