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August 2018

Casino Niagara: Rolling the Dice on Constructive Dismissal

David Elmaleh
David Elmaleh
Partner

Egi Troka
Egi Troka,
Law Student

By David Elmaleh and Egi Troka
Reprinted in the Employment Law News Section of EmploymentLawToday.com

In Filice v Complex Services Inc., the Ontario Court of Appeal overturned a trial judge's decision by significantly lowering the reasonable notice period arising from the constructive dismissal of an employee and finding that punitive damages were not appropriate in the circumstances despite the trial judge awarding $100,000 in punitive damages.

The case has several implications for employees under investigation, both administratively and criminally, and should be considered by all employers and human resource departments country-wide.

The Facts

Mr. Filice worked as a Security Shift Supervisor at Casino Niagara and Fallsview Casino – operated by Complex Services Inc. On December 19, 2007, the Alcohol and Gaming Commission of Ontario Enforcement Unit investigated his involvement in workplace theft. Mr. Filice was immediately placed on an investigative suspension without pay.

On January 21, 2008, the Ontario Provincial Police charged Mr. Filice with four counts of theft under $5,000 and one count of breach of trust. Mr. Filice's gaming registration was suspended; prohibiting him from working. By February 7, 2009, all criminal charges were withdrawn or dismissed.

However, before appealing the investigative suspension, Mr. Filice voluntarily surrendered his gaming registration on May 15, 2009. Subsequently, his employment was at an end.

On March 12, 2012, Mr. Filice's statement of claim alleged he was constructively dismissed on December 19, 2007.

The Decision

The Court of Appeal found that the trial judge erred in two fundamental respects. First, the reasonable notice period arising from the constructive dismissal should not have been seventeen months, but rather seven months. Second, punitive damages of $100,000 were not appropriate. The Court of Appeal only awarded Mr. Filice compensatory damages for seven months' lost wages.

The constructive dismissal test looks at circumstances where there has been an act by the employer that may constitute a breach of the contract of employment. First, a Court must objectively identify whether an express or implied contractual term has been breached. Second, it determines if the breach is sufficiently serious to constitute constructive dismissal, based on a modified objective standard of a reasonable employee in similar circumstances.

...the allegations were one of theft...

The Court of Appeal found that the evidence demonstrated that an administrative suspension was clearly justified in the case, as the employee was a security supervisor, his duties involved very regulated activities in the lottery and gaming industry, and the allegations were one of theft.

In a nod to employers, the Court of Appeal noted that indeed, the employer would have been irresponsible for not administratively suspending the employee. The Court noted that the content of the employer's policies and handbook, which the parties treated as forming part of the employment contract, supported the position that the employer had a contractual right to suspend the employee. However, absent express language in the employment contract stipulating that any suspension would be without pay, the burden rested on the employer to establish that a suspension without pay was justified.

The Court of Appeal found that the employer could not justify a suspension without pay, so the suspension without pay amounted to a unilateral change in the employment relationship that constituted a breach of contract – effectively, constructive dismissal.

After finding that the employee was constructively dismissed, the Court of Appeal noted the employee's length of service (8 years and 8 months) and that it took the employee 7 months to find other employment. The Court of Appeal lowered the notice period awarded by the trial judge to a more appropriate 7 months, as the trial judge had erred by simply treating the entire period that the employee was suspended as being the appropriate notice period for which he was to be compensated. Of note, the employee was 50 years old at the time of his dismissal and he was earning approximately $50,000.

As noted above, the Court of Appeal found there was no basis for an award of punitive damages.

Takeaways

  • Automatically suspending an employee without pay is a gamble. The Court of Appeal ruled that suspension without pay is only reserved for exceptional situations. Courts look at what information the employer had at the time the decision to suspend without pay was made. Evidence that could be interpreted either way, such as pending criminal charges, is not enough to justify a suspension without pay.
  • The Betting Limit was Capped: An award of $100,000 in punitive damages was set aside. Punitive damages are not common. The Court of Appeal instructed trial judges to “have regard to the punitive components of the compensation otherwise awarded to the plaintiff and penalties imposed on the defendant.” Nevertheless, the trial judge obviously found sufficient grounds for an award and not every employer has the will, desire or deep pockets to appeal certain rulings. There is always a risk that if an employee is suspended without pay (a fairly harsh decision pending an investigation), there is a risk of an award for punitive damages in certain circumstances.
  • Casino “Home Court” Advantage: There is no duty on employers to offer alternative employment to employees placed on suspension without pay: “This would be contrary to the fundamental principles of individual agency, freedom of contract, and tantamount to binding the parties to a specific performance obligation for employment which has long been rejected by the common law.”

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