'Even if it says there's no guaranteed hours, the employer still needs to approach it from the angle of good faith': employment lawyer explains why unpaid suspensions are risky
In recent years, Canadian employers have seen rising challenges over constructive dismissal claims tied to suspensions and unpaid leave.
The Supreme Court of Canada’s 2015 decision in Potter v. New Brunswick Legal Aid Services Commission, and most recently, the B.C. Civil Resolution Tribunal’s April 2025 ruling in Putter v. Joey Tomato’s (Canada) Inc. highlight the fine line between lawful disciplinary measures and fundamental breaches of contract.
With punitive damages on the table in Putter, the decision makes clear that suspensions – paid or unpaid – can be treated as unilateral contract changes amounting to constructive dismissal.
“Putter and constructive dismissal overall are a little bit complicated,” says Jenson Leung, employment lawyer at KSW Lawyers in Vancouver.
“Every constructive dismissal case is assessed case-by-case by the judges, because it's extremely fact-based… if it is a unilateral change and it's significant, such as an unpaid suspension, then most of the time that would be something that's considered constructive dismissal.”
Both decisions confirm that placing an employee on suspension without clear contractual authority can trigger legal liability. Potter established the two-step test for constructive dismissal: first, did the employer breach an express or implied term? Second, was that breach a substantial change to an essential term?
In Putter, the Tribunal found a one-week unpaid suspension violated the employee’s fundamental right to work and be paid, leading to a $3,134 award including punitive damages. According to Leung, these outcomes underscore the need for precise policy drafting and procedural fairness in disciplinary practices.
In Putter, the Civil Resolution Tribunal (CRT) found that a one-week unpaid suspension was a breach of the worker’s right to work and earn wages – even though the employee’s contract was casual and did not guarantee hours.
Joey Tomato’s vague disciplinary policy did not explicitly authorize unpaid suspension, the CRT found, and the employer failed to explain why suspension was necessary over lesser measures.
As a result, the Tribunal awarded statutory notice pay, $2,000 in punitive damages, and interest.
“Without a contract or policies that explicitly allow for suspension on a temporary basis as a disciplinary measure, it's going to be pretty dicey to put someone on an unpaid suspension,” says Leung, explaining that without explicit policy language, unpaid suspensions are fraught with risk.
“That's kind of the bottom line: if a company wants to have that as an option, then they need to be taking other steps, such as having a properly drafted policy or contract that gives them that latitude to do that.”
Potter involved an indefinite administrative suspension, with pay, of the Legal Aid Commission’s executive director while secret plans for his dismissal were hatched. The Supreme Court held that even paid suspensions can constitute constructive dismissal if they lack explicit contractual authority or legitimate business purpose.
Crucially, Potter confirmed employers cannot rely on vague handbook provisions to suspend employees without breaching the duty of good faith and fair dealing.
“The key question is essentially whether whatever has happened … is something that the employer has the implied or explicit right to do, or if it's one that they've just unilaterally done,” Leung says.
Both Potter and Putter hinge on fact-specific analyses, he points out, which means the implied or explicit authority to suspend must be clear in the employment agreement or policy – otherwise, even a single unpaid suspension may be viewed as a repudiation of the contract, allowing employees to treat it as wrongful dismissal.
Judges will weigh whether the change served a legitimate business interest and whether its impact was more than minimal.
Casual or parttime roles often include “no guaranteed hours” clauses intended to give employers scheduling flexibility – however, as Leung explains, courts may imply a stable pattern of hours into the contract where practice diverges from written terms.
Putter reaffirms that removing pay entirely – even for workers without guaranteed hours – can be a fundamental change; Joey Tomato’s described the role as casual, yet the employee regularly worked predictable shifts until suspension, creating an expectation of ongoing hours.
“Even if someone has a contract that says that they're not guaranteed any hours, if, in practice, they were essentially given the same hours for an ongoing basis, then it's going to be a lot harder for the employer to suddenly cut the hours to zero and say that that's not constructive dismissal,” Leung says.
He explains that employer conduct can override contractual wording when it comes to guaranteed hours; a casual status clause will not protect against a sudden cessation of shifts if an employee has until then been working stable hours.
Constructive dismissal remains a fact-driven inquiry, but as Leung explains, clear contracts and fair processes can make the difference between a defensible disciplinary measure and a costly legal defeat. To minimize exposure to constructive dismissal claims, he recommends HR leaders:
include clear, time-limited suspension provisions in contracts/policies, with defined scope and appeal rights
ensure procedural fairness: document reasons, let employees respond, and provide review steps
audit “no guaranteed hours” roles for implied stable hours and update agreements accordingly
consult legal counsel before imposing unpaid suspensions or novel disciplinary measures
“Having a contract that's drafted a certain way can often at least help minimize the chances of it not working when you need it to,” Leung says.
“Even if it says there's no guaranteed hours, the employer still needs to approach it from the angle of good faith essentially. Just because a contract gives the employer certain freedom doesn't mean that they should exercise that freedom without a good faith basis to do that.”
