Ipsofactoj.com: International Cases [2005] Part 5 Case 12 [SCC]


SUPREME COURT OF CANADA

Coram

Industrial Alliance Life

Insurance Co

- vs -

Cabiakman

ARBOUR J

BASTARACHE J

BINNIE J

DESCHAMPS J

FISH J

IACOBUCCI J

LEBEL J

29 JULY 2004


Judgment

LeBel J & Fish J

(delivered the reasons for the unanimous judgment of the court made on 19 March 2004; Arbour J did not participate in the reasons)

I. INTRODUCTION

  1. This appeal raises the question of the scope and nature of an employer's power to suspend an employee in a private labour law context. The issue is whether an employer has an obligation to pay an employee while the employee is under what is described as an "administrative" suspension, where the employer has imposed the suspension to protect the interests of the business and its customers while criminal charges are pending against the employee.

  2. The trial judge concluded that the suspension was justified, because the employer was acting in good faith in the circumstances. However, he held that a suspension without pay was unjustified and ordered the appellant to compensate the respondent for the salary lost during the period of the suspension. The Court of Appeal unanimously affirmed that judgment.

  3. The problem in this case arises out of the suspension of the respondent without pay for about two years at a time when he was the sales manager of one of the branch offices of the appellant, an insurance company. Shortly after he was hired, the respondent was arrested for attempted extortion. After an article about the case was published in a large circulation weekly newspaper in the Montreal area, the appellant decided to suspend the respondent without pay until the outcome of the legal proceedings brought against him by the Crown was decided. According to the appellant, it took this action, which it characterized as "administrative", to protect its reputation and to preserve the image of the service it provides to its customers.

  4. Following the trial, at which he was acquitted, the respondent was reinstated in his position at the Industrial Alliance Life Insurance Company ("Industrial"), where he has worked ever since. The issue is who must absorb the economic loss suffered by the respondent while he was suspended. The loss amounts to $200,000, as the parties have agreed on the quantum of damages.

  5. The contract between the parties is silent with respect to the employer's power to suspend. The power to suspend for disciplinary reasons is not in issue. The question here is whether, in a legal situation governed solely by the Civil Code of Québec, S.Q. 1991, c. 64, and the individual contract in issue, the employer has a residual power to suspend for administrative reasons, independent of the disciplinary suspension power, that is implicitly derived from the contract of employment and can be exercised at the employer's initiative in the business's interest. If so, the Court is asked to determine the basis of that power and to delimit its scope in order to decide, specifically, whether the power could be used to impose a suspension without pay in the circumstances of the instant case.

  6. For reasons that differ in part from the Court of Appeal's reasons, it was our opinion, at the conclusion of the hearing, that the appellant's appeal should be dismissed. This Court has therefore affirmed the relief granted, namely an order that the appellant pay the respondent the salary that was withheld from him during his suspension.

    II. ORIGIN OF THE CASE

  7. The respondent, Gilbert Cabiakman ("Cabiakman"), was a sales manager for the London Life Insurance Company from 1984 to 1995. During that period, he became friends with his immediate supervisor, André Sarrazin ("Sarrazin"). Sarrazin then left London Life to work for the appellant, Industrial.

  8. In August 1995, Sarrazin contacted Cabiakman and persuaded him to leave his job and join Industrial to work as a sales manager in its Ville Saint-Laurent branch. Cabiakman was hired because of his particular qualifications in the sale of insurance policies and related products. He also had the qualities needed to deal effectively with the target clientele in that field.

  9. The parties entered into a contract of employment that, although it was for an indeterminate term, included a two-year salary guarantee.

  10. Under that agreement, Cabiakman was responsible for hiring, training and supervising the branch's sales staff. His duties also included selling investment products such as insurance plans, retirement plans, mutual funds and pension funds to certain customers. He was also responsible for transfers of money from one institution to another for major customers. On occasion, he also advised customers about transfers of securities or cash. As a result, Cabiakman's integrity was of fundamental importance for his dealings both with his employer's customers and with the sales team he supervised.

  11. On about November 9 or 10, 1995, three months after he was hired, Cabiakman was arrested at his home for attempted extortion. At the time, he was on a week's parental leave. He was charged with conspiracy to extort money from his securities broker. The broker had allegedly caused him to lose money on the stock market. Cabiakman was held in custody until Monday, November 13. He was then released after pleading not guilty to the criminal charges against him.

  12. Two days later, he told Sarrazin about his arrest. Sarrazin told him not to worry and to keep working. The following week, Cabiakman learned that an article published in a weekly tabloid recounted the circumstances of the charges against him and stated his name. Cabiakman and Sarrazin immediately obtained a copy. Sarrazin then informed Cabiakman that he could no longer keep quiet about the matter and that he had to inform management.

  13. The vice-president for sales, Paul-Émile Burelle ("Burelle"), then submitted the case to the company's legal counsel. On their advice, Burelle decided to suspend Cabiakman's contract without pay [translation] "until the final decision of the courts in this case". Industrial conducted no investigation and did not even give Cabiakman an opportunity to explain the situation. Cabiakman was told about his suspension on December 1, 1995.

  14. Industrial decided to do this because of the connection between the nature of the charges and the duties of Cabiakman's position. It suspended Cabiakman to protect the business's image and reputation and the integrity of its relations with its customers. The other purpose of the administrative action taken was to protect its customers, if need be.

  15. On February 1, 1996, Cabiakman instituted legal proceedings against Industrial for dismissal without good and sufficient cause. He claimed that Industrial's action in suspending him for an indefinite period that lasted two years was equivalent to dismissal. In his original declaration, he sought $279,807.60 in lost income, moral damages and punitive damages.

  16. The preliminary inquiry in Cabiakman's case was held on November 21, 1996 and he was committed for trial. On October 8, 1997, he was acquitted in a judgment delivered from the bench, without even having to testify. On November 24, 1997, he was reinstated in his position as soon as Industrial was informed that he had been acquitted. He has worked there ever since.

  17. In his amended declaration dated January 26, 1998, Cabiakman added that during his suspension, from December 1, 1995, to November 23, 1997, he was unable to find another job or earn any income. In his re-amended declaration dated May 15, 1998, he claimed an additional $175,000 in damages for the inconvenience he had suffered, for a total of $454,807.60.

  18. The parties agreed that the quantum of damages was $200,000. In its judgment of April 20, 2000, the Superior Court allowed Cabiakman's claim, but only in the amount of $175,000. The Court of Appeal affirmed that judgment on December 12, 2002 but awarded the full amount fixed by the parties.

    III. JUDICIAL HISTORY

    A. Superior Court, Laramée J.

  19. In the trial judge's opinion, when the appellant suspended the respondent as it did, it stripped him of his dignity and breached its obligation to provide the work agreed to and allow the performance of that work, contrary to art. 2087 C.C.Q. The trial judge said that, as a rule, contracts do not survive deviations of this kind, which are equivalent to unilateral resiliation. However, he held that in the circumstances it mattered little whether this was a resiliation followed by renewal of the contract, or a simple suspension of the contract. The respondent had suffered substantial damage because of the appellant's failure to perform its obligation to provide the work and pay the appellant.

  20. The trial judge then considered whether, in the circumstances, the administrative action taken by the appellant was justified. He noted that the appellant had clearly made its decision based on the possible impact on the business of the charges laid against the respondent, who held a position of trust. He added, however, that the employer is not presumed to act in good faith. The appellant therefore had to prove that it was acting in good faith, since it had deliberately breached its obligations to the respondent.

  21. The judge concluded that the appellant had established a clear connection between the alleged offence and the position held by the respondent. He noted that the potential harm to the appellant was obvious. In his opinion, an employer may take actions that are necessary for the survival, and even for the proper operation, of the business. He noted that the appellant had taken action to mitigate the harm that the media attention to the charge and potential conviction of the respondent could have caused. The judge accepted the appellant's evidence that it had been unable to assign the respondent to another position during his suspension. In the judge's opinion, it was open to the appellant to act in good faith in response to the publicity given to charges laid against one of its sales managers. For those reasons, he conceded that the suspension had been imposed in good faith.

  22. Having reached that conclusion, the judge nonetheless allowed the respondent's action in damages and ordered the appellant to compensate the respondent for the salary lost during the suspension. He concluded that the appellant was able to justify its decision not to provide work but not the failure to pay the respondent, since it had not established that continuing to pay his salary could have damaged its image. The judge stated that the balance of economic convenience had to tip in favour of the respondent.

  23. The trial judge's final observation was that if the appellant had entertained the slightest doubt as to the employee's integrity, its decision to reinstate him after the acquittal would have been inconsistent with the reasons the employer itself cited for suspending him, which were based on the relationship between the position he held and the trust that had to exist for him to perform his duties. The trial judge concluded that the appellant had to share with the respondent the burden of its discretionary decision to suspend him.

  24. The judge awarded an amount of $175,000, representing two years' salary plus interest. However, he dismissed the claim for moral damages on the ground that the decision to suspend the respondent was not made in bad faith and was in fact a reasonable administrative decision in the circumstances.

    B. Court of Appeal, Rothman, Dussault and Delisle JJ.A.

  25. The Court of Appeal unanimously affirmed the trial judgment. The court first found that the suspension imposed by the appellant was justified. It then accepted the trial judge's reasoning, which had led to the conclusion that the appellant had to bear the economic loss resulting from the suspension even though the suspension was justified. The court held that it fell to the appellant to bear the consequences of the suspension because a decision of that nature was, in essence, up to it alone to make. The court also allowed the respondent's cross-appeal that the disposition in the trial judgment be varied in light of the parties' agreement regarding the quantum of damages. It therefore ordered the appellant to pay the respondent $200,000, with interest at the legal rate and the additional indemnity as of January 17, 2000.

    IV. ISSUES

  26. This appeal raises several questions, all of them relating to the performance and suspension of an individual contract of employment. Does an employer have a residual power, in addition to the power to impose a suspension as a disciplinary penalty, to unilaterally suspend the effects of an individual contract of employment? If so, what is the legal basis for that power? What conditions are applicable to the exercise of the power? Are there mechanisms for reviewing the employer's discretion, if it is found to exist? Finally, in the context of the instant case, could the employer exercise this power to suspend an employee against whom criminal charges had been laid?

    V. ANALYSIS

    A. The Nature of a Contract of Employment Governed by the Civil Code of Québec

  27. It should be noted that the situation at issue here is not governed by a collective agreement. The instant case concerns an individual contract of employment governed solely by the Civil Code of Québec. It is a synallagmatic contract (art. 1380 C.C.Q.) and a contract of successive or continuous performance (art. 1383 C.C.Q.). The Civil Code of Québec defines such a contract as one by which an employee undertakes to do work for remuneration under the direction or control of an employer (art. 2085 C.C.Q.). An agreement may be characterized as a contract of employment when the following three elements exist: performance of work by the employee, payment of wages by the employer and a relationship of subordination between the parties. These three elements also define the basic content of the contract of employment.

  28. The legal subordination of the employee to the employer is the most important characteristic of an agreement where an attempt is made to characterize the agreement as a contract of employment and to distinguish it from other onerous contracts. The creation of the relationship of subordination also implies acceptance by the employee of the employer's power of direction and control.

  29. A contract of employment imposes reciprocal obligations on the parties. The employer agrees to allow the employee to perform the work agreed upon, to pay the employee remuneration and to take any necessary measures to protect the employee's health, safety and dignity (art. 2087 C.C.Q.). The employee is bound to carry out his or her work with prudence and diligence and to act faithfully and honestly toward the employer (art. 2088 C.C.Q.). In light of the mutual obligations of the parties, we shall now examine the central issues in this case.

    B. The Problem of the Suspension by the Employer of Performance of the Contract of Employment

    (1) The Theoretical Problem

  30. In this appeal, we are asked to determine whether an employer has the implicit power to suspend temporarily the effects of a contract of employment or certain of its obligations thereunder. The question involves significant problems in terms of legal theory. There are no provisions in any legislation, be it the Civil Code or a special Act, that expressly set out the basis for the employer's power to suspend a contract of employment, be it for disciplinary reasons or for what are called administrative reasons.

  31. The very concept of a power to unilaterally suspend the performance of the synallagmatic obligations under a contract is in fact difficult to reconcile with the classical theory of obligations. It is hard to imagine how one party could unilaterally, as and when it liked, suspend the effects of a contract that had been validly entered into in the absence of an agreement between the contracting parties to recognize the existence of such a power.

  32. As there was no such agreement in the case at bar, we must now consider whether, in Quebec civil law, an employer has a unilateral power to temporarily suspend the effects of an individual contract of employment or certain of the obligations under the contract. It may then be necessary to determine the nature and legal basis of that power and delimit its scope and the conditions on which it may be exercised.

  33. Some clarifications must be made at the outset of this analysis. This appeal does not involve an administrative layoff imposed for economic reasons in the sense in which that expression is normally understood. This is not a situation in which the employer has suspended the performance of work by the employee, and the employer's correlative obligation to pay the employee, because of extrinsic factors, such as financial difficulties, a shortage of work, technological change or reorganization of the business. In this case, the decision to suspend the employee was, to a certain extent, a result of the acts of which the employee was accused. In order to be perfectly clear, we would therefore reiterate that the only question raised by this appeal relates to the unilateral power to suspend an employee against whom criminal charges have been laid, for purely administrative reasons connected with the interests of the business.

    (2) The Unique Nature of the Contract of Employment

  34. Commentators have offered a variety of explanations for the existence of the employer's power to suspend performance of the contract of employment. Some have suggested that this unilateral power to suspend the successive obligations under a contract of employment can be justified in light of the unique nature of that type of contract. Under this approach, it is argued that a contract of employment produces different effects because of its unique nature. (See F. Morin and J.-Y. Brière, Le droit de l'emploi au Québec (2nd ed. 2003), at paras. II-115 and II-160.)

  35. Morin and Brière considered the question of a layoff for economic, technical, administrative or organizational reasons and stated that [translation] "[t]he legal rationalization for the operation requires that we examine the unique, distinctive and sui generis nature of the contract of employment (at para. II-160).

  36. From this perspective, the unique nature of a contract of employment derives largely from the fact that the employee is legally subordinate to the employer's power of direction and control, and from the intuitu personae nature of the contract. Although the importance of this last characteristic should be tempered in light of the nature of a large company in the contemporary context, it is nonetheless useful in relation to penalties for failure to perform contractual obligations, particularly in the case of management personnel.

    (3) Labour Relations Practices and Suspension of the Performance of Work

  37. The unique nature of the contract of employment can be seen in practices relating to collective labour relations or individual employment relationships, which tend to confirm that some interruptions in the performance of the obligations inherent in an employment relationship do not necessarily terminate the relationship. Certain common practices in the labour market, such as layoffs for economic reasons and absences owing to sickness or accidents or, in a collective labour relations context, strikes or lockouts, are forms of suspension of performance of the contract of employment that have long been recognized and accepted.

  38. These practices have been entrenched, at least partially, by the legislature in, inter alia, the Act respecting labour standards, R.S.Q., c. N-1.1 ("A.L.S."). That Act applies to employees, with the exception of senior management personnel, although certain provisions do apply to the latter (ss. 2 and 3(6) A.L.S.). The Act respecting labour standards does not define the legal basis for those interruptions, but it does specify the procedures and legal requirements that apply to the various situations in which a contract of employment may be suspended.

  39. In this context, a layoff is not as a rule regarded as a breach of the contract of employment. Rather, a layoff for economic reasons is treated as a unilateral, temporary suspension of the work and of the employer's performance of its obligations. Employees are laid off to meet the needs of the business. In Air-Care Ltd. v United Steel Workers of America, [1976] 1 S.C.R. 2, this Court recognized the existence of the employer's power to lay employees off in the context of the application of a collective agreement, although it did not state the basis for that power.

  40. The Act respecting labour standards sets out the conditions on which the employer's power to lay an employee off may be exercised. Before laying an employee off for six months or more, the employer must give written notice if the employee has at least three months of uninterrupted service (ss. 82 and 82.1 A.L.S.). An employer who does not give notice must pay the employee a compensatory indemnity in lieu of notice (s. 83 A.L.S.). The notice, which varies with the employee's length of service (s. 82, para. 2 A.L.S.), is a minimum standard and does not prevent the employee from claiming a larger indemnity in lieu of notice under the rules of the civil law set out in arts. 2091 and 2092 C.C.Q. (s. 82, para. 4 A.L.S.).

  41. Finally, it is recognized in labour law, in the collective labour relations context, that strikes and lockouts also operate to suspend the performance of the correlative obligations of the parties to the agreement without terminating the employment relationship. For example, ss. 109.1 et seq. of the Labour Code, R.S.Q. c. C-27 ("L.C."), prohibit the hiring of substitute workers to replace striking or locked out employees. Section 110 L.C. expressly provides that the employment relationship continues during the strike or lockout. It reads as follows: "No person shall cease to be an employee for the sole reason that he has ceased to work in consequence of a strike or lock-out. Nothing in this code shall prevent an interruption of work that is not a strike or a lock-out."

  42. Failure by the employee to perform his or her work where the employee is absent by reason of sickness or accident also temporarily suspends the performance of the contract of employment but does not terminate it. On this point, the first paragraph of s. 79.4 A.L.S. provides that "[a]t the end of the absence owing to sickness or accident, the employer shall reinstate the employee in the employee's former position with the same benefits, including the wages to which the employee would have been entitled had the employee remained at work".

    (4) Recognition of a Basis for the Power to Suspend for Disciplinary Reasons

  43. The employer's power to impose a suspension as a disciplinary penalty is generally recognized and is not in issue in this appeal. The existence of this power has been uniformly recognized in the case law, both by specialized labour relations tribunals and by the superior courts in the exercise of their power of judicial review or of their direct jurisdiction over disputes arising out of contracts of employment.

  44. As well, some statutes tacitly recognize the power to suspend for disciplinary reasons, given that they provide for how that power may be exercised. For example, the legislature prohibits a series of practices in ss. 12-14 L.C. and then provides in the second paragraph of s. 14 L.C. that "[t]his section shall not have the effect of preventing an employer from suspending .... an employee for a good and sufficient reason, proof whereof shall devolve upon the said employer." (See also ss. 15-19 L.C., and the second paragraph of s. 79.4 and ss. 122-123.5 A.L.S.)

  45. In a context of individual relations, the power to suspend an employee for disciplinary reasons has been recognized by the commentators, although they have attributed it to various sources. Some of them say that it is implied by the employer's power of direction or describe it as a necessary corollary to the power of control and direction over the employee's work. The basis for the power therefore lies in the very nature of the contract of employment and can thus be inferred from art. 2085 C.C.Q., or it simply derives from custom and is sanctioned by art. 1434 C.C.Q. The suggestion has also been made that it can be explained on the basis of art. 1604 C.C.Q. by likening it to a reduction of the employer's obligations for a period proportional to the seriousness of the employee's non-performance. (See M.-F. Bich, "Le pouvoir disciplinaire de l'employeur - fondements civils" (1988), 22 R.J.T. 85; M.-F. Bich, "Contracts of Employment", in Reform of the Civil Code: Obligations, vol. 2-B (1993), 1, at pp. 11-12; C. D'Aoust, L. Leclerc and G. Trudeau, Les mesures disciplinaires: étude jurisprudentielle et doctrinale, monograph No. 13 (1982), at pp. 56-57; Morin and Brière, supra, at paras. II-113 to II-118; M. Athanassiadis, "Sources of Disciplinary Power: an Analysis of the Employment Contract" (1998), 5 R.E.J. 267; R. P. Gagnon, Le droit du travail du Québec:pratiques et théories (5th ed. 2003), at p. 98).

  46. Thus, it is recognized that an employer has the power to suspend an employee as a disciplinary sanction. However, the question as to whether an employer has a unilateral power to suspend the effects of an individual contract of employment for administrative reasons remains unanswered. This question has been a matter of controversy among Quebec's commentators and judges, and the debate continues today.

    (5) The Problem of Administrative Suspension: Proposed Solutions

  47. The commentators remain deeply divided on this question. Some maintain that the basis for administrative layoffs can be found in the recognized practice in the field. (See Morin and Brière, supra, at para. II-160.) Others argue that an employer's power to suspend the performance of its correlative obligations under the contract implicitly forms part of the contract of employment. They base this conclusion on the fact that the Act respecting labour standards contains provisions that govern layoffs in non-unionized workplaces. (See R. Bonhomme, C. Gascon and L. Lesage, The Employment Contract under the Civil Code of Québec (1994), at para. 4.3.2.)

  48. On the other hand, some authors say that absent the express or implied consent of the employee, a layoff is always in the nature of a unilateral resiliation of the contract of employment. From this perspective, an employer who lays an employee off is in breach of its obligation under art. 2087 C.C.Q. to provide work and allow it to be performed. Under art. 1605 C.C.Q., the employee is justified in considering the contract of employment to have been terminated and may claim the compensation to which he or she is entitled under art. 2091 C.C.Q. (See Bich, "Contracts of Employment", supra, at pp. 8-9; see also Gagnon, supra, at pp. 96-97.)

  49. However, decisions dealing with this question by the courts of original general jurisdiction are rare in Quebec labour law. At most, there are only a few judgments that are wholly or partially on point. Unfortunately, they are not always easy to reconcile.

  50. In support of its position, the appellant cited Laurier Auto Inc. v Paquet, [1987] R.J.Q. 804, at p. 805, in which the Court of Appeal found that the employment relationship had not been terminated by the nine-month layoff of a management employee, but that the employment relationship had merely been suspended. The court noted that in that case, the layoff was [translation] "part of a plan to rescue the business".

  51. The respondent relied on Thomas v Surveyer, Nenniger & Chênevert Inc. (1989), 34 Q.A.C. 61, in which the Court of Appeal held that an employer was not entitled to temporarily suspend the effect of a contract absent either a contractual stipulation to that effect or the employee's consent. The Court of Appeal concluded that the layoff of an employee constituted a unilateral resiliation of the contract of employment, or a dismissal without notice.

  52. These contradictory decisions are relevant only in so far as they relate to cases in which the employer has suspended the performance of the correlative obligations, but had no intention of terminating the employment relationship. On the other hand, they are of little assistance to us in understanding the basis for an employer's power to suspend an employee and the manner in which that power is to be exercised in a case like the one before us. The decisions in question deal with the power to lay an employee off because of financial constraints on the employer -- that is, because of factors that are completely extrinsic to the employee's conduct. Here, the connection between the nature of the acts of which the employee was accused and the importance of his duties is the determining factor. Other judgments raised by the parties were rendered in the very different context of legal relations governed by a collective agreement.

  53. Thus, in support of its argument, the appellant cited Syndicat du personnel de soutien du Cégep François-Xavier Garneau v Cégep François-Xavier Garneau, [2003] Q.J. No. 3580 (QL), in which the Court of Appeal summarily recognized the power of an employer to suspend a unionized employee without pay for administrative reasons. The respondent relied on Centre d'adaptation jeunesse inc. v Syndicat canadien de la fonction publique (1986), 5 Q.A.C. 241, in which the employer had suspended the complainant, an educator of mentally disabled patients, on learning that he had been charged with committing an indecent act, and then reinstated him when he was acquitted. The arbitrator decided that the suspension was not justified and that after being reinstated the complainant was entitled to payment of his lost wages and benefits. The Court of Appeal refused to set aside the award. Rothman J.A. expressly acknowledged, at paras. 15 et seq. of his opinion, that the employee had retained the right to receive his salary:

    While the offense charged did not relate to any of the patients of the Centre it was alleged to have occurred in the vicinity of the Centre. The nature of the institution and its patients as well as the nature of Poulin's functions would have made it exceedingly difficult, if not impossible, for him to continue to perform his duties until the charge was disposed of. Once that was done and Poulin was acquitted, he was called back to work immediately.

    In my opinion, there was nothing arbitrary or unjustified about the suspension.

    ....

    But even if the arbitrator was wrong in his view that appellant should have investigated the charges further prior to suspending Poulin, I do not believe that error would permit the Court to intervene in his decision. It was, of course, within the arbitrator's jurisdiction to decide whether or not the suspension was unjustified and, if he erred in that decision, the error was not a jurisdictional error.

    ....

    The critical issue before the arbitrator was not whether the suspension was justified but whether Poulin was entitled to receive his salary and other benefits for the period of the suspension. Even if the suspension was justified when it was made, the arbitrator nonetheless had jurisdiction to decide whether or not Poulin was entitled to his salary during the suspension once he was acquitted.
    ....

    .... Clearly, the only reason for the suspension was the criminal charge. Once Poulin was acquitted and he was reinstated, someone had to assume the loss for the salary that had not been paid to him. Was it to be Poulin who was found not guilty of the charge or the employer who, in good faith, had suspended him? The arbitrator decided it should be the employer. In my opinion, that decision was his to make and I do not believe that the decision he made was unreasonable.

    (4) Basis for, Nature of and Limits on the Administrative Suspension Power: the Business's Interest

  54. Identifying the bases and the nature of a power to suspend an employee for administrative reasons pursuant to an individual contract of employment poses significant conceptual problems. As mentioned above, the Civil Code of Québec does not expressly provide for such a power. In our view, the solution can be found by reviewing the contract of employment, on the one hand, and the nature and purpose of the employer's intervention in the performance of the work provided for in the agreement, on the other. Thus, it is first necessary to return to an analysis of the distinctive elements that make up a contract of employment.

  55. The forms of contracts of employment and methods of performance of the obligations for which they provide have without question evolved substantially. However, the definition in the Civil Code of Québec has remained faithful to a classical conception of this type of contract. This conception is based on the acceptance of a relationship of subordination in which the employee accepts the employer's direction and control in performing the duties provided for in the contract. The existence and acceptance of this relationship mean that the employee recognizes that he or she is an integral part of a whole, namely the business run by the employer, and that the employee accepts the employer's power of decision and the need for his or her work to be consistent with the purpose of this whole. The acceptance of this power is an implied condition of the function of the contract of employment that therefore becomes a part of the contract's content. The creation of the relationship of subordination signifies that the employee agrees both that the employer must make necessary decisions in the business's interest and that his or her own work must be performed in a manner consistent with those decisions and with the guidance they provide, subject to any express or implied agreements between the parties.

  56. This power of direction is not equivalent to the power to resiliate or amend a contract of employment. Rather, the power of resiliation or amendment falls within the scope of the power of direction. Thus, it must be determined whether the existence of a power to suspend for administrative reasons that would authorize the employer to prevent the employee from performing his or her work can be inferred from the power of direction that flows from the relationship of subordination. Although this decision leaves the framework of the contract of employment and the other obligations resulting therefrom intact, it relates to the performance of the function of direction of the business and draws its justification from the need to protect the business's interest. If the performance of the work should in itself compromise that interest, the power of suspension would seem to be a necessary component of the power of direction the employee has accepted. It therefore enables the employer to decide not to have the work performed.

  57. In the case of a business such as Industrial, the continuing performance of sensitive duties involving relations with clients and the public justified such a measure after the criminal proceedings were brought against the respondent. This suspension remained administrative in nature, although the circumstances of this case show that the distinction between a disciplinary suspension and an administrative suspension can itself occasionally pose difficult problems. Some suspensions occur in situations that may be given different and successive legal characterizations depending on the stage they are at. However, that is not the case here, as the suspension remained administrative in nature to the very end due to the conduct and decisions of the parties.

  58. The employer must be given all the powers it needs to manage its business properly and protect the interests of the business, subject to the limits imposed by law. It is logical that this should be the situation in the case at bar. This discretion is part of the latitude the employer has in managing its business. This interpretation is not inconsistent with the Civil Code; rather, it draws certain inferences therefrom that are consistent with the nature and the fundamental structures of the institution concerned. As Professor P.-A. Côté observed in The Interpretation of Legislation in Canada (3rd ed. 2000), at p. 405:

    If a strict interpretation was to be afforded [the articles of the Civil Code], situations which are not expressly foreseen might fall into the proverbial `judicial void'.

  59. It should be noted that the employer's right to terminate a contract under art. 2094 C.C.Q. does not include the power to suspend a contract of employment. Article 2094 C.C.Q. allows an employer to resiliate a contract of employment unilaterally and without prior notice for a serious reason. It is doubtful that a desire to protect the image of the service offered to customers and the reputation of the company could, without further cause, constitute a serious reason within the meaning of art. 2094. As R. P. Gagnon, supra, observed at p. 120 [translation]:

    .... the meaning to be given to the expression `serious reason' is a serious fault committed by the employee, or a good and sufficient reason that relates to the employee's conduct or failure to perform the work.

  60. However, it would seem to be appropriate to note that, as a rule, the power to suspend for administrative reasons does not entail, as a corollary, the right to suspend the payment of salary. The employer cannot unilaterally, and without further cause, avoid the obligation to pay the employee's salary if it denies the employee an opportunity to perform the work.

  61. The employer may always waive its right to performance of the employee's work, but it cannot avoid its obligation to pay the salary if the employee is available to perform the work but is denied the opportunity to perform it. By choosing not to terminate the contract of employment, with its associated compensation, the employer will, as a rule, still be required to honour its own reciprocal obligations even if it does not require that the employee perform the work.

  62. This residual power to suspend for administrative reasons because of acts of which the employee has been accused is an integral part of any contract of employment, but it is limited and must be exercised in accordance with the following requirements:

    1. the action taken must be necessary to protect legitimate business interests;

    2. the employer must be guided by good faith and the duty to act fairly in deciding to impose an administrative suspension;

    3. the temporary interruption of the employee's performance of the work must be imposed for a relatively short period that is or can be fixed, or else it would be little different from a resiliation or dismissal pure and simple; and

    4. the suspension must, other than in exceptional circumstances that do not apply here, be with pay.

  63. What must be done here is basically to balance the various interests in play. On the one hand, the employer's right to take preventive action to protect its business must be recognized. On the other hand, it must be recognized that "[a] person's employment is an essential component of his or her sense of identity, self-worth and emotional well-being": see Reference re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313, at p. 368; see also Wallace v United Grain Growers Ltd., [1997] 3 S.C.R. 701, at para. 93.

  64. There are factors that have been developed in the decisions of labour arbitrators that can guide the courts in determining whether an employer was justified in deciding to temporarily suspend an employee against whom criminal charges had been laid. The tests essentially relate to legitimate business interests and the employer's good faith.

  65. For example, the courts may consider the following factors: whether there is a sufficient connection between the act with which the employee is charged and the kind of employment the employee holds; the actual nature of the charges; whether there are reasonable grounds for believing that maintaining the employment relationship, even temporarily, would be prejudicial to the business or to the employer's reputation; and whether there are immediate and significant adverse effects that cannot practically be counteracted by other measures (such as assigning the employee to another position). It might also be determined whether the purpose of the suspension was to protect the image of the service that the employer is responsible for managing, taking the following factors, inter alia, into account: harm to the employer's reputation, the need to protect the public, the employer's motives and conduct during the term of the suspension, whether the employer acted in good faith, and absence of intent to harass or discriminate against the employee.

  66. Although it was rendered in a collective labour relations context, the arbitration award in Sûreté du Québec et Association des policiers provinciaux du Québec, [1991] T.A. 666, at p. 670, provides a very useful summary of the rules that are applied by arbitrators in determining whether the administrative suspension of an employee charged with a criminal offence is legitimate. In that case, arbitration tribunal chairperson Frumkin quoted comments made in Fraternité des policiers de la Communauté urbaine de Montréal et Communauté urbaine de Montréal, [1984] T.A. 668, at p. 671, by an arbitrator who, citing D. J. M. Brown and D. M. Beatty, Canadian Labour Arbitration (2nd ed. 1984), had stated the following [translation]:

    .... in assessing the appropriateness of a suspension pending trial, rather than inquiring into the guilt or innocence of the accused employee, arbitrators will attempt to determine whether the effects of the alleged offence on the employment relationship are such that continuation of the employment pending the decisions of the competent authorities would create sufficient serious and immediate risk, contrary to the employer's legitimate interests, which encompass the employer's financial integrity, the safety and security of its property and of the other employees, and its reputation. In weighing these various interests, some arbitrators have concluded that it must be shown that the continuing presence of the employee at work would present a serious and immediate risk to the legitimate business of the employer, .... and that [the employer] has taken the necessary measures to determine whether the risk of continuing the employment could be reduced by enhanced supervision of the employee, or by assigning the employee to another position.

  67. The employer has the burden of showing that a decision that has a fundamental impact on the performance of the obligations set out in the contract of employment is fair and reasonable. As well, to determine whether a suspension was reasonable in a particular case, it must be considered from the perspective of the point in time when the decision was made, even if the employee was subsequently acquitted. (See C.U.M. et Fraternité des policiers de la C.U.M., D.T.E. 86T-312). Facts subsequent to the employer's decision may be admissible in evidence, however, if they are relevant and if they can be used to determine whether the employer's decision was justified at the time it was made. (See Cie minière Québec Cartier v Québec (Grievances arbitrator), [1995] 2 S.C.R. 1095.)

  68. It should be noted that preventive action taken by an employer in good faith to protect its reputation, its customers or the image of the service it manages or the product it sells does not jeopardize the presumption of innocence in favour of an employee against whom criminal charges have been laid. Nor will an employer generally have to make its own inquiries, either of the employee or of the competent public authorities, to ensure that the charges are well-founded. However, it has an obligation to allow the employee to explain the situation if the employee wishes to make representations and provide his or her version of the facts.

    C. The Problem of the Suspension Without Pay

  69. A few remarks are in order concerning the employer's obligation to pay the employee's salary during the suspension. Since we have concluded that, in the context of individual employment relationships governed by a civil contract, an administrative suspension will generally be with pay, it is of little relevance that arbitration awards made in the collective labour relations context, in interpreting collective agreements that varied widely in content, recognized the right to impose an administrative suspension without pay in a variety of circumstances. (See Association des pompiers de Sherbrooke et Sherbrooke (Ville de), [1989] T.A. 211; C.U.M. et Fraternité des policiers de la C.U.M., supra; see also Re United Automobile Workers, Local 127 and Eaton Springs Canada Ltd. (1969), 21 L.A.C. 50; Re United Steelworkers, Local 3129 & Moffats Ltd. (1956), 6 L.A.C. 327.)

  70. Moreover, in Sûreté du Québec, supra, at p. 672, arbitration tribunal chairperson Frumkin stated that the power to suspend an employee without pay is exceptional owing to the significant harm the suspension would cause the employee. As well, again in a collective labour relations context, a number of arbitrators have ordered that employees suspended without pay who were subsequently reinstated be paid their salaries in whole or in part. (See Pharand et Gatineau (Ville de), D.T.E. 2003T-943; Deux-Montagnes (Ville de) et Fraternité des policiers de Deux-Montagnes/Sainte-Marthe-sur-le-Lac, [2002] R.J.D.T. 1683; see also Re James Bay Lodge and Construction & General Workers' Union, Local 602 (1993), 33 L.A.C. (4th) 23; Re Kimberly-Clark of Canada Ltd and Canadian Paperworkers' Union, Local 307 (1981), 30 L.A.C. 316.)

  71. Thus, it is our view that in such situations there is an implied condition that the legal situation between the parties be restored after the cause of non-performance of the employee's duties has ceased to exist. If the cause of non-performance has come to an end, the prior situation must be restored. Even if an employee is suspended with pay, it may be that the suspension will ultimately be treated as a unilateral resiliation of the contract if the end result is not the reinstatement of the employee. Also, the initial suspension could turn into a constructive dismissal or be regarded as one because of its length or because of an indefinite or excessive extension. The courts would then have to review the situation, having regard to the legal principles that apply to dismissal and to the unilateral resiliation of a contract of employment.

  72. Finally, we are of the opinion that an employee on whom an administrative suspension without pay -- to which the employee has not consented -- is imposed might, as a rule, properly regard that measure as a constructive dismissal. In such a case, the employer is in breach of its obligations under art. 2087 C.C.Q. to provide work and to pay the employee. Under art. 1605 C.C.Q., the employee will then be able to bring an action for damages for breach of contract based on art. 2091 and the principles that are applicable to such cases, to claim the equivalent of the severance pay to which he or she was entitled. (See Columbia Builders Supplies Co. v Bartlett, [1967] B.R. 111, at pp. 119-20; Machtinger v HOJ Industries Ltd., [1992] 1 S.C.R. 986; Wallace, supra.)

    D. Malleability of the Contract of Employment -- Restructuring of Contracts

  73. The flexibility and malleability of an individual contract of employment as an instrument for circumscribing the employment relationship enable the parties to agree to, and provide for the manner of exercise and performance of, such additional rights and obligations as they choose, subject to public order and the mandatory provisions of the law. The employer is free to provide in the contract that it has the power to suspend, and to establish the conditions on which it may do so within the bounds of the reasonable exercise of its rights. However, that power will be interpreted strictly against the employer if, in the circumstances, the contract is a contract of adhesion. (See arts. 1379, 1432, 1435, 1436 and 1437 C.C.Q.)

  74. In some cases, the possibility of a future interruption in the contractual relationship may be implied at the time the contract is entered into, owing to the very nature of the work to be performed. In some fields of work, it is common practice to interrupt the performance of the reciprocal obligations temporarily where the work is intermittent or seasonal in nature. This practice is recognized implicitly in the third paragraph of s. 82 A.L.S. (See also Internote Canada Inc. v Commission des normes du travail, [1989] R.J.Q. 2097 (C.A.)) As both parties know in advance that the contract will be interrupted, this is an implied term of the contract of employment pursuant to art. 1434 C.C.Q.

  75. The parties may thus alter their rights and obligations during the term of the contract and make consensual changes to the content of the contract of employment. One possible scenario would be where the contract of employment is silent as to the employer's power to suspend the employee. If the employer wants to suspend an employee temporarily without pay in order to investigate acts of which the employee is accused, whether they involve criminal charges or allegations made by customers or other employees, the employee would be free to agree to the employer's initiative on the proposed terms in light of the specific circumstances. Thus, he or she may want to retain the possibility of being called back to work, and the benefits that have been accumulated. However, the employee would also be free to refuse the measure, and a refusal would not constitute a resignation. The employee may then choose to demand that the employer comply with the principles that apply to the unilateral resiliation of a contract of employment.

    E. Application of the Principles to the Case at Bar

  76. The issue here is whether the suspension of the respondent without pay for two years was justified in the circumstances. Applying the principles we have set out, it is our view that the suspension imposed by the appellant was justified, having regard to the facts of the case. On the other hand, we are of the opinion that the appellant cannot justify its failure to pay the respondent during the suspension.

  77. As we have pointed out, the decision to suspend the respondent was made to protect the business's interests. Keeping the respondent in his position could have seriously harmed the appellant's image and reputation in light of the position's importance within the business. The respondent was in direct and regular contact with the business's customers. Plainly, the respondent's personal reputation was an important component of the appellant's reputation and a factor in the quality of the service provided to customers. In light of the nature of the offence with which the respondent was charged and the high level of responsibility associated with his position, the action taken was necessary, in the circumstances, to protect the image of the service provided by the appellant and to protect the business's customers. The appellant's reputation and the integrity of its relationship with its customers were at stake. Finally, the appellant proved that it could not have assigned the respondent to another position pending the outcome of the criminal proceedings. No other temporary measure was possible in the circumstances.

  78. In general, the appellant conducted itself properly. However, while it had no obligation to investigate or to make inquiries of the Crown as to whether the charges against the respondent were well-founded, it would have been preferable for the appellant to give the respondent an opportunity to provide it with his version of the facts.

  79. This having been said, the withholding of pay poses a different problem. In the instant case, in the context of a suspension that at all times remained administrative in nature, there was no reason to refuse to pay the salary of an employee who remained available to work. It was not open to the appellant to unilaterally impose a temporary cessation of performance of the correlative obligations while requiring that the employee continue to be available. The respondent was not required to endure the suspension, imposed on him by the appellant, of the performance of his work and also be denied the consideration for that work, namely his salary. This conclusion, which, as we have seen, is entirely consistent with the majority of the decisions of specialized labour law tribunals involving the application of collective agreements, is based on the nature of the reciprocal obligations created by an individual contract of employment governed by the Civil Code.

  80. This is a situation that could have been regarded as a case of constructive dismissal, but it was treated by both parties as a suspension. The respondent could not have validly regarded his suspension as a dismissal, given that he has in fact gone back to work for the employer.

    VI. CONCLUSION

  81. For these reasons, we would dismiss the appeal with costs.

    VII. APPENDIX

    Legislative Context

    Civil Code of Québec, S.Q. 1991, c. 64

    1605.

    A contract may be resolved or resiliated without judicial proceedings where the debtor is in default by operation of law or where he has failed to perform his obligation within the time allowed in the writing putting him in default.

    2085.

    A contract of employment is a contract by which a person, the employee, undertakes for a limited period to do work for remuneration, according to the instructions and under the direction or control of another person, the employer.

    2087.

    The employer is bound not only to allow the performance of the work agreed upon and to pay the remuneration fixed, but also to take any measures consistent with the nature of the work to protect the health, safety and dignity of the employee.

    2088.

    The employee is bound not only to carry on his work with prudence and diligence, but also to act faithfully and honestly and not to use any confidential information he may obtain in carrying on or in the course of his work.

    These obligations continue for a reasonable time after cessation of the contract, and permanently where the information concerns the reputation and private life of another person.

    2091.

    Either party to a contract with an indeterminate term may terminate it by giving notice of termination to the other party.

    The notice of termination shall be given in reasonable time, taking into account, in particular, the nature of the employment, the special circumstances in which it is carried on and the duration of the period of work.

    2092.

    The employee may not renounce his right to obtain compensation for any injury he suffers where insufficient notice of termination is given or where the manner of resiliation is abusive.

    2094.

    One of the parties may, for a serious reason, unilaterally resiliate the contract of employment without prior notice.

    Act respecting labour standards, R.S.Q., c. N-1.1

    79.4.

    At the end of the absence owing to sickness or accident, the employer shall reinstate the employee in the employee's former position with the same benefits, including the wages to which the employee would have been entitled had the employee remained at work. If the position held by the employee no longer exists when the employee returns to work, the employer shall recognize all the rights and privileges to which the employee would have been entitled if the employee had been at work at the time the position ceased to exist.

    Nothing in the first paragraph shall prevent an employer from dismissing, suspending or transferring an employee if, in the circumstances, the consequences of the sickness or accident or the repetitive nature of the absences constitute good and sufficient cause.

    82.

    The employer must give written notice to an employee before terminating his contract of employment or laying him off for six months or more.

    The notice shall be of one week if the employee is credited with less than one year of uninterrupted service, two weeks if he is credited with one year to five years of uninterrupted service, four weeks if he is credited with five years to ten years of uninterrupted service and eight weeks if he is credited with ten years or more of uninterrupted service.

    A notice of termination of employment given to an employee during the period when he is laid off is absolutely null, except in the case of employment that usually lasts for not more than six months each year due to the influence of the seasons.

    This section does not deprive an employee of a right granted to him under another Act.

    83.

    An employer who does not give the notice prescribed by section 82, or who gives insufficient notice, must pay the employee a compensatory indemnity equal to his regular wage excluding overtime for a period equal to the period or remaining period of notice to which he was entitled.

    The indemnity must be paid at the time the employment is terminated or at the time the employee is laid off for a period expected to last more than six months, or at the end of a period of six months after a layoff of indeterminate length, or a layoff expected to last less than six months but which exceeds that period.
    The indemnity to be paid to an employee remunerated in whole or in part by commission is established from the average of his weekly wage, calculated from the complete periods of pay in the three months preceding the termination of his employment or his layoff.

    122.

    No employer or his agent may dismiss, suspend or transfer an employee, practise discrimination or take reprisals against him, or impose any other sanction upon him:

    (1)

    on the ground that such employee has exercised one of his rights, other than the right contemplated in section 84.1, under this Act or a regulation;

    (1.1)

    on the ground that an inquiry is being conducted by the Commission in an establishment of the employer;

    (2)

    on the ground that such employee has given information to the Commission or one of its representatives on the application of the labour standards or that he has given evidence in a proceeding related thereto;

    (3)

    on the ground that a seizure by garnishment has been or may be effected against such employee;

    (3.1)

    on the ground that such employee is a debtor of support subject to the Act to facilitate the payment of support (chapter P-2.2);

    (4)

    on the ground that such employee is pregnant;

    (5)

    for the purpose of evading the application of this Act or a regulation;

    (6)

    on the ground that the employee has refused to work beyond his regular hours of work because his presence was required to fulfil obligations relating to the care, health or education of the employee's child or the child of the employee's spouse, or because of the state of health of the employee's spouse, father, mother, brother, sister or one of the employee's grandparents, even though he had taken the reasonable steps within his power to assume those obligations otherwise.

    An employer must of his own initiative transfer a pregnant employee if her conditions of employment are physically dangerous to her or her unborn child. The employee may refuse the transfer by presenting a medical certificate attesting that her conditions of employment are not dangerous as alleged.

    123.

    An employee who believes he has been the victim of a practice prohibited by section 122 and who wishes to assert his rights must do so before the Commission des normes du travail within 45 days of the occurrence of the practice complained of.

    If the complaint is filed within that time to the Commission des relations du travail, failure to file the complaint with the Commission des normes du travail cannot be invoked against the complainant.


Cases

Laurier Auto Inc. v Paquet, [1987] R.J.Q. 804; Thomas v Surveyer, Nenniger & Chênevert Inc. (1989), 34 Q.A.C. 61; Air-Care Ltd. v United Steel Workers of America, [1976] 1 S.C.R. 2; Syndicat du personnel de soutien du Cégep François-Xavier Garneau v Cégep François-Xavier Garneau, [2003] Q.J. No. 3580 (QL); Centre d'adaptation jeunesse inc. v Syndicat canadien de la fonction publique (1986), 5 Q.A.C. 241; Reference re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313; Wallace v United Grain Growers Ltd., [1997] 3 S.C.R. 701; Sûreté du Québec et Association des policiers provinciaux du Québec, [1991] T.A. 666; Fraternité des policiers de la Communauté urbaine de Montréal v Communauté urbaine de Montréal, [1984] T.A. 668; C.U.M. et Fraternité des policiers de la C.U.M., D.T.E. 86T-312; Cie minière Québec Cartier v Quebec (Grievances arbitrator), [1995] 2 S.C.R. 1095; Association des pompiers de Sherbrooke et Ville de Sherbrooke, [1989] T.A. 211; Re United Automobile Workers, Local 127 and Eaton Springs Canada Ltd. (1969), 21 L.A.C. 50; Re United Steelworkers, Local 3129 & Moffats Ltd. (1956), 6 L.A.C. 327; Pharand et Gatineau (Ville de), D.T.E. 2003T-943; Deux-Montagnes (Ville de) et Fraternité des policiers de Deux-Montagnes/Sainte-Marthe-sur-le-lac, [2002] R.J.D.T. 1683; Re James Bay Lodge & Construction and General Workers' Union, Local 602 (1993), 33 L.A.C. (4th) 23; Re Kimberly-Clark of Canada Ltd. and Canadian Paperworkers' Union, Local 307 (1981), 30 L.A.C (2d) 316; Columbia Builders Supplies Co. v Bartlett, [1967] B.R. 111; Machtinger v HOJ Industries Ltd., [1992] 1 S.C.R. 986; Internote Canada Inc. v Commission des normes du travail, [1989] R.J.Q. 2097.

Legislations

Act respecting labour standards, R.S.Q., c. N-1.1 [am. 2002, c. 80], ss. 2, 3(6), 79.4, 82, 82.1, 83, 122-123.5.

Civil Code of Québec, S.Q. 1991, c. 64, arts. 1379, 1380, 1383, 1432, 1434, 1435, 1436, 1437, 1604, 1605, 2085, 2087, 2088, 2091, 2092, 2094.

Labour Code, R.S.Q., c. C-27, s. 12, 13, 14, 15-19, 109.1 et seq., 110.

Authors and other references

Athanassiadis, Mimikos. "Sources of Disciplinary Power: an Analysis of the Employment Contract" (1998), 5 R.E.J. 267.

Bich, Marie-France. "Contracts of Employment", in Reform of the Civil Code: Obligations, vol. 2-B. Texts written for the Barreau du Québec and the Chambre des notaires du Québec. Montreal: Barreau du Québec, 1993, 1.

Bich, Marie-France. "Le pouvoir disciplinaire de l'employeur -- fondements civils" (1988), 22 R.J.T. 85.

Bonhomme, Robert, Clément Gascon and Laurent Lesage. The Employment Contract under the Civil Code of Québec. Cowansville, Qué.:Yvon Blais, 1994.

Côté, Pierre-André. The Interpretation of Legislation in Canada, 3rd ed. Scarborough, Ont.:Carswell, 2000.

D'Aoust, Claude, Louis Leclerc et Gilles Trudeau. Les mesures disciplinaires: étude jurisprudentielle et doctrinale, monographie n 13. Montreal: Cole des relations industrielles, Université de Montréal, 1982.

Gagnon, Robert P. Le droit du travail du Québec: pratiques et théories, 5e éd. Cowansville, Qué.: Yvon Blais, 2003.

Morin, Fernand, et Jean-Yves Brière. Le droit de l'emploi au Québec, 2e éd. Montréal: Wilson & Lafleur, 2003.

Representations

Michel St-Pierre and Jacques Reeves, for the appellant (instructed by Beauvais Truchon & Associés, Québec)

Raphael Levy, for the respondent (instructed by Madar Benabou Malamud & Levy, Montréal).


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