DATE: 19991018
DOCKET: C30013
COURT OF APPEAL FOR ONTARIO
DOHERTY, AUSTIN and GOUDGE JJ.A.
BETWEEN: )
) Robert J. Upsdell
DAWN HALDANE ) for the appellant
)
Plaintiff/ )
Appellant )
) David A. Broad and
- and - ) Stephanie Ross
) for the respondent
SHELBAR ENTERPRISES LIMITED, )
Carrying on business under the name )
and Style of TOOL & CUTTER SUPPLY CO )
)
Defendant/ )
Respondent )
) Heard: May 12, 1999
)
On appeal from the order of the Divisional Court (Smith
A.C.J.O.C., O’Leary and Southey JJ.) dated January 6, 1998.
DOHERTY J.A.:
I
[1] This relatively straightforward case has developed a rather
unusual judicial wrinkle. It comes to this court with leave from
the Divisional Court. That court allowed the appeal and set
aside the judgment of the trial judge in favour of the appellant,
Dawn Haldane.
[2] Ms. Haldane, a hardworking valued employee of the
respondent, engaged in inappropriate and insubordinate conduct in
the workplace. At a subsequent meeting, the president of the
defendant advised Ms. Haldane that she would be required to
provide a written apology to each member of the staff and that
she would be suspended for three days without pay. Ms. Haldane
said that she had apologized to most of the staff and went on to
tell her employer that she could not afford to lose three days’
pay. She suggested that it would be fair to deduct three days’
pay from her vacation pay. The respondent rejected this counter
proposal and Ms. Haldane’s employment came to an end.
[3] It was the respondent’s position that the suspension of Ms.
Haldane without pay for three days was a reasonable response to
her conduct and did not constitute a termination of her
employment. The respondent contended that Ms. Haldane’s refusal
to accept the reasonable discipline gave the respondent just
cause to fire her or, alternatively, that Ms. Haldane was not
fired, but instead chose to quit rather than accept reasonable
discipline.
[4] It was Ms. Haldane’s position that the respondent never
intended to discipline her but rather used the pretext of
discipline to fire her by proposing unreasonable terms of
discipline which the respondent knew Ms. Haldane would refuse.
Alternatively, she contended that even if the respondent had not
intended to fire her all along, the suspension without pay for
three days was an unreasonable response to her conduct and she
was entitled to refuse to accept it. In either case, Ms. Haldane
argued that she was dismissed without cause.
[5] The trial judge found in favour of the plaintiff saying:
In my view, while the plaintiff had been a loyal and
excellent employee working beyond the required hours, clearly
there was a conflict in the style of management between Franks
and his predecessor which appeared to have been more relaxed.
The plaintiff had developed a position within the company which
was not acceptable to Franks and as a result he over-reacted when
the plaintiff swore at him. The dismissal interview was set up
for the plaintiff to fail. While saying that he wished the
plaintiff to continue, he did not take the route available to him
– that is a deduction from her vacation pay. In my view, the
appropriate level of discipline was an apology and being required
to take the afternoon off with a memo to her file noting the
discipline. The defendant did not have a disciplinary policy
which is unfortunate in the circumstances.
In reviewing the cases it is clear that
insolence may be a ground for dismissal;
however, in the circumstances of this case I
do not find that this threshold has been
reached. The defendant gave the plaintiff an
opportunity to accept the proposed
discipline. However, having found that it
was excessive in all of the circumstances and
that the plaintiff’s counter-proposal is
reasonable, I find that she was
constructively dismissed. [Emphasis added.]
[6] The defendant appealed to the Divisional Court. Immediately
after argument, the court delivered oral reasons. O’Leary J.,
for himself and Smith A.C.J.O.C., allowed the appeal. O’Leary J.
accepted, as the parties and trial judge had, that the defendant
had a right to take reasonable disciplinary measures as long as
those measures did not amount to a repudiation of the employment
contract. O’Leary J. said:
In my view, the discipline that Franks [the employer]
proposed did not amount to a basic refusal to continue the terms
of the contract. The employee was, in my view, wrong in refusing
this discipline and she cannot now claim that she was
constructively dismissed.
[7] Southey J., in dissent, would have dismissed the appeal on
the basis that the trial judge’s findings of fact justified his
conclusion and his reasons revealed no overriding error. In so
holding, Southey J. relied in part on the trial judge’s
conclusion that “the dismissal interview was set up for the
plaintiff to fail.”
II
[8] It is at this point that the aforementioned judicial wrinkle
occurred. Some two weeks after delivering his oral reasons, and
apparently unaware that an order allowing the appeal had been
taken out on the basis of those reasons, O’Leary J., again with
Smith A.C.J.O.C. concurring, issued further reasons. In those
reasons he indicated that upon further consideration, he had
decided that the appeal should be dismissed. O’Leary J. wrote:
Since delivering the oral reasons set out above I have
reviewed at some length the common law right of an employer to
suspend an employee without pay as a means of disciplining the
employee for misconduct, say as in this case for insubordination.
I have concluded that in the absence of an express or implied
term in the contract of employment permitting such method of
discipline, such method of discipline is not open to an employer.
The law in regard to suspension without
pay remains today as it was stated to be by
Lush J. in Hanley v. Pease and Partners Ltd.
[1915] 1 K.B. 698 (Div. Ct.) at p.705:
Assuming that there has been a
breach on the part of the servant entitling
the master to dismiss him, he may if he
pleases terminate the contract, but he is not
bound to do it, and if he chooses not to
exercise that right but to treat the contract
as a continuing contract notwithstanding the
misconduct or breach of duty of the servant,
then the contract is for all purposes a
continuing contract subject to the master’s
right in that case to claim damages against
the servant for his breach of contract. But
in the present case after declining to
dismiss the workman – after electing to treat
the contract as a continuing one – the
employers took upon themselves to suspend him
for one day; in other words to deprive the
workman of his wages for one day, thereby
assessing their own damages for the servant’s
misconduct at the sum which would be
represented by one day’s wages. They have no
possible right to do that.
…
That the common law does not permit an
employer to discipline an employee by
suspending him or her from work without
pay seems to have played no part in the
reasoning of the trial judge. That
matter was however raised on appeal. In
reviewing the matter I am now of the
view that Franks by attempting to impose
a form of discipline, that the law does
not permit namely, requiring Haldane to
take 3 days off without pay, did in fact
constructively dismiss her. He
improperly and illegally refused to
allow her to fulfill her contract of
employment. Nor can the claim for
constructive dismissal be defended on
the basis that the insubordination
warranted termination. The employer
treated the insubordination as
warranting suspension only and he
elected to keep the employment contract
alive. It was the employee’s refusal to
accept the suspension, not the
insubordination, that brought the
contract to an end.
In the result I would now dismiss the
appeal with costs. [Emphasis added.]
[9] The revised reasons of O’Leary J. injected two complications
into this case. First, the order of the Divisional Court
allowing the appeal no longer reflected the reasons of any
members of the panel as all three members were now in favour of
dismissing the appeal. Second, the reasons introduced for the
first time into the case, the question of the respondent’s right
to discipline Ms. Haldane by suspending her without pay.
III
[10] As O’Leary J. observed, the employer’s right to suspend
without pay, as an exercise of reasonable discipline may flow
from an implied term of the employment contract Terms may be
implied into a contract based on custom and usage or based upon
the presumed intention of the parties: M.J.B. Enterprises Limited
v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 at pp.
634-36; Machtinger v. H.O.J. Industries Ltd., [1992] 1 S.C.R.
986, per McLachlin J., at 1008. Whether by way of custom and
usage, or the presumed intention of the parties, the
determination of whether a term should be implied into a contract
will depend on the evidence led and the trial judge’s findings of
fact. We have neither, as the respondent’s right to discipline
Ms. Haldane by way of suspension without pay was not challenged
at trial. Ms. Haldane took issue with the bona fides and the
reasonableness of that discipline.
[11] I think it would be inappropriate to decide this case on the
basis that the respondent had no right to discipline Ms. Haldane
when that issue was not pleaded or argued at trial. The
respondent had no opportunity to present evidence which may have
supported a claim that the right to impose reasonable discipline
was an implied term of the employment contract. To the extent
that the evidence touches on these issues, Ms. Haldane’s
expressed willingness to accept what she regarded as reasonable
discipline (a loss of vacation pay), suggests that some form of
implied term permitting reasonable discipline based on the
presumed intention of the parties may have existed.
[12] As pleaded and argued, this was a factual case. The trial
judge found that the respondent intended to fire the plaintiff
and used the discipline process as a means of achieving that end.
He also found, by way of alternative finding, that the discipline
proposed by the respondent was unreasonable and Ms. Haldane was
entitled to reject it. Like Southey J., I find no basis upon
which to interfere with either finding. On the facts as found by
the trial judge, neither Ms. Haldane’s conduct nor her refusal to
accept the three-day suspension without pay constituted cause for
dismissal. I would allow the appeal and restore the trial
judgment.
IV
[13] The revised reasons of O’Leary J. warrant one further
observation. When O’Leary J. refers to the possibility of
implying a term into the employment contract permitting
reasonable discipline, including suspension without pay, he does
not elaborate on how that implication might be made. I have
referred to the possibility of implying terms either to accord
with the presumed intention of the parties, or to accord with
existing custom and usage. As indicated above, implying terms
through either of those means requires evidence of either the
intention of the parties or the applicable custom and usage.
[14] In addition to implying terms into a contract through custom
and usage, or to accord with the presumed intention of the
parties, a term may be implied into a contract as a matter of
law. This kind of implication does not depend on evidence but is
seen as a legal incident of a particular kind of contract. Terms
are implied into a contract by law where they are "necessary in a
practical sense to the fair functioning of the agreement”:
Machtinger v. H.O.J. Industries Ltd., supra, per McLachlin J., in
dissent, at p. 1010.
[15] In recent years, considerable jurisprudence has developed
over the extent to which terms should be implied as a matter of
law into employment contracts: eg. see Machtinger v. H.O.J.
Industries Ltd., supra; Wallace v. United Grain Growers Ltd.,
[1997] 3 S.C.R. 701; Malik v. BCCISA, [1997] 3 All E.R. 1
(H.L.); S.K. O’Byrne, “Bad Faith – Contexts of Employment –
Wallace v. United Grain Growers Ltd.” (1998), 77 Can. Bar. Rev.
492. The special relationship created by employment contracts
and the power imbalance between the parties renders these
contracts particularly susceptible to the implication of terms as
a matter of law.
[16] Having regard to the inclusion of progressive discipline
powers in virtually all collective agreements, the flexibility
which such an implied term would add to the employer-employee
relationship and the incorporation into employment contracts as a
matter of law of a provision requiring reasonable notice absent
just cause for termination, a case could be made for implying a
term providing for reasonable discipline into employment
contracts. Such a step would, however, raise complex questions
concerning both the procedural and substantive scope of that
implied term. In any event, the issue should await a case where
it is fully argued and its resolution is necessary for the
decision.
V
[17] I would allow the appeal, set aside the order of the
Divisional Court and in its place substitute an order dismissing
the appeal from the trial judgment. Ms. Haldane is entitled to
her costs throughout.
Released: October 18, 1999
“Doherty J.A.”
“I agree Austin J.A.”
“I agree S. Goudge J.A.” |