Suspension Without Pay Equals Wrongful Dismissal

Carscallen v FRI Corp, [2005] OJ No. 2400

Carscallen was 43 years old and had been employed with FRI Corporation for a period of 14 years when she was indefinitely suspended from her position as Vice President. At that time Carscallen earned approximately $80 000.00 annually and worked closely with FRI's president and CEO, Gaudio.

On May 7, 2003 Carscallen was suspended without pay for an undisclosed period of time.

Despite her long term employment with FRI and her position, Carscallen had experienced some problems in her position prior to the one that instigated this action. She had missed project deadlines and she required flex hours that allowed her to arrive to work later than others. In addition, Carscallen had never attained any of her bonus targets, which was found to indicate that a number of her projects had not been completed on time.

FRI Corp developed and supplied software and data information for the securities industry. In the spring of 2003, FRI was to participate in a trade show in Spain. Cascallen was responsible for getting the company booth and materials from Toronto to Spain by May 7, 2004. On May 1, 2003 the booth and materials were shipped via Federal Express and Carscallen was told that it would take two business days for the materials to arrive.

The booth and materials did not arrive in Spain as they were supposed to. Gaudio, who was in Spain to run the booth at the trade show, tried to phone Carscallen on May 5, 2003 to find out why the booth was not there yet. Carscallen maintains that she received no messages that day; however, on May 6, 2003 Carscallen did receive an angry message on her voicemail from Gaudio. He was unhappy because the booth and materials would not arrive in Spain in time for the show. On May 7, 2003, a number of emails were exchanged between Carscallen and Gaudio regarding the problem. Gaudio wanted a written explanation of the events leading up to this incident and why it had not been resolved prior to the start of the trade show. Carscallen criticized the expenditure of the Spain show and admitted that the tone of her e-mails that day might have offended Gaudio.

After the exchange of emails on May 7, 2003 Carscallen was given a letter explaining that she was suspended until further notice as a result of her recent discussions and exchange of correspondence with Mr. Gaudio.

Carscallen was asked to return to FRI on May 14, 2003 for a meeting. There, she was told that she would be demoted from her position, lose her office and no longer have flex hours allowing her to arrive later than the usual start time. She was also told that if she did not return to work by May 22, 2003 her employment would be treated as having been abandoned or she will be treated as having been dismissed for just cause and neglect of duty.

FRI had no policy on suspending their employees. Their discipline policy stated that they follow "fair and constructive disciplinary guidelines, which will allow for rehabilitation in the workplace". In order for Carscallen's suspension to be valid, either an implied term permitting suspensions must be read into Carscallen's employment contract or FRI must be able to establish just cause to dismiss Carscallen.

Generally courts will not read an implied term into a contract unless: 1) it is reasonable and equitable; 2) it is necessary to give business efficacy to the contract; 3) it is so obvious that 'it goes without saying'; 4) it is capable of clear expression; 5) it must not contradict an express term of the contract (BP Refinery Pty. Ltd v Shire of Hastings (1997), 16 A.L.R. 363 (P.C.). An implied term, which would permit FRI to suspend its employees, could not be read into Carscallen's contract in this case because such a term would expressly violate FRI's policy on discipline. In addition, a suspension policy would not pass the above test because it would not give business efficacy to the contract and it is not so obviously needed that 'it goes without saying'.

Just cause has been defined as "an employee who is guilty of serious misconduct, habitual neglect of duty, incompetence of conduct incompatible with his duties, or prejudicial to the employer's business, or if he has been guilty or wilful disobedience to the employer's orders in a matter of substance". It has been found in other decisions that if an employer has just cause to outright dismiss an employee without notice, then the employer may impose a lesser punishment, such as suspension without pay.

Only the most severe misconduct may justify a just cause dismissal. Clearly, there was discontent in the way Carscallen performed her duties in getting the booth to the trade show in Spain. The steps taken by Carscallen diverged from the way that her employer wished her to take. In hindsight, other actions should have been taken. However, such a misjudgment should not result in the finding of just cause when things go wrong.

The punishment that Gaudio implemented was intended to humiliate and hurt Carscallen. Had Gaurdio wanted Carscallen to leave the company he could have done so on a without cause notice basis. Instead, he chose to suspend her, make her move into a lesser office and accept a lesser title. By conducting itself this way, FRI was not showing a bona fide intent to have Carscallen return, thereby effectively breaching its contract with Carscallin. Since Echlin J. determined that there was no just cause for dismissal, the suspension was not valid and Carcallen cannot be seen as abandoning her employment and FRI can be seen as ending their relationship with Carscallen.

Echlin J.fixed the period required for notice at 9 months, but added an extra 3 months for Wallace damages because FRI's conduct was unduly insensitive and likely designed in hope that it would make Carscallen leave the company. FRI was also ordered to pay outstanding bonuses owed to Carscallen and costs.

Carscallen v FRI Corp., [2005] OJ No. 2400
Ontario Superior Court of Justice
Echlin J.