Cabiakman v. Industrial Alliance Life Insurance Co.

Cabiakman v. Industrial Alliance Life Insurance Co.
Collection
Supreme Court Judgments
Date
2004-07-29
Neutral citation
2004 SCC 55
Report
[2004] 3 SCR 195
Case number
29584
Judges
Iacobucci, Frank; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis; Deschamps, Marie; Fish, Morris J.
On appeal from
Quebec
Subjects
Labour law
Notes
SCC Case Information: 29584
Decision Content
Cabiakman v. Industrial Alliance Life Insurance Co., [2004] 3 S.C.R. 195, 2004 SCC 55
Industrial Alliance Life Insurance Company Appellant
v.
Gilbert Cabiakman Respondent
Indexed as: Cabiakman v. Industrial Alliance Life Insurance Co.
Neutral citation: 2004 SCC 55.
File No.: 29584.
Hearing and judgment: March 19, 2004.
Reasons delivered: July 29, 2004.
Present: Iacobucci, Bastarache, Binnie, Arbour,* LeBel, Deschamps and Fish JJ.
on appeal from the court of appeal for quebec
Employer and employee — Individual contract of employment — Employee charged with attempted extortion unrelated to his work — Suspension without pay imposed by employer until final decision of courts to protect interest of business — Contract of employment between parties silent as to employer’s power to suspend — Whether employer may suspend without pay for administrative reasons employee against whom criminal charges pending.
The respondent joined the appellant insurance company in August 1995 as a sales manager. The parties entered into a contract of employment for an indeterminate term that included a two‑year salary guarantee. Under that agreement, the respondent was responsible for hiring, training and supervising the branch’s sales staff. He also sold investment products and advised customers about transfers of securities or cash. Three months after he was hired, the respondent was arrested at his home for an attempt to extort money from his securities broker. He was held in custody for a few days and was then released after pleading not guilty to the criminal charges against him. After consulting its legal counsel, the appellant suspended the respondent’s contract without pay until the final decision of the courts because of the connection between the nature of the charges and the duties of his position. The appellant did this to protect the business’s image and to protect its customers, if need be. The respondent then commenced an action against the appellant for dismissal without good and sufficient cause in which he sought damages for lost income together with moral and punitive damages. At his criminal trial, the respondent was acquitted in a judgment delivered from the bench and the appellant reinstated him in his position shortly thereafter, some two years after he had been suspended. At the civil trial, the Superior Court concluded that the suspension imposed by the appellant was justified but held that the failure to pay the respondent was unjustified. It therefore allowed the respondent’s claim and ordered the appellant to compensate the respondent for the salary lost during the period of the suspension. The Court of Appeal affirmed that judgment but varied its disposition to award the respondent the quantum of damages fixed by the parties.
Held: The appeal should be dismissed.
According to the Civil Code of Québec, a contract of employment imposes reciprocal obligations on the parties. The employer must allow the employee to perform the work agreed upon, pay the employee remuneration and take any necessary measures to protect the employee’s health, safety and dignity. The employee is bound to carry out his or her work with prudence and diligence and to act faithfully and honestly toward the employer. The flexibility and malleability of an individual contract of employment enable the parties to provide in the contract that the employer has the power to suspend, and to establish the conditions on which it may do so. Absent such an agreement, an employer has, in Quebec civil law, a unilateral power to temporarily suspend the effects of an individual contract of employment or certain of the obligations under the contract. The power to impose a disciplinary suspension is generally recognized. As for the power to suspend for administrative reasons, it is a necessary component of the power of direction the employee has accepted if the performance of his or her work should compromise the business’s interest. This residual power to suspend for administrative reasons because of acts of which the employee has been accused is thus an integral part of any contract of employment, but it must be exercised in accordance with certain requirements. First, the action taken must be necessary to protect legitimate business interests. In this regard, the employer has the burden of showing that its decision is fair and reasonable. To determine whether a suspension was reasonable, it must be considered from the perspective of the point in time when the decision was made. 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. Second, the employer must be guided by good faith and the duty to act fairly in deciding to impose an administrative suspension. Although an employer does not have to make its own inquiries, either of the employee or of the competent public authorities, to ensure that the charges are well founded, it does have an obligation to allow the employee to explain the situation if the employee wishes to provide his or her version of the facts. Third, 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. Finally, the suspension must, other than in exceptional circumstances, be with pay. The employer cannot unilaterally avoid its obligation to pay the employee’s salary if it denies the employee an opportunity to perform the work. Thus, an employee on whom an administrative suspension without pay is imposed might, as a rule, properly regard that measure as a constructive dismissal. Also, 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.
In the case at bar, the suspension of the respondent was justified, as it was made to protect the business’s interests. 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 to protect the image of the service provided by the appellant and to protect its customers. Also, the appellant proved that it could not have assigned the respondent to another position pending the outcome of the criminal proceedings. In general, the appellant conducted itself properly, although it would have been preferable for the appellant to give the respondent an opportunity to provide it with his version of the facts. However, the appellant cannot justify its failure to pay the respondent during the suspension. 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.
Cases Cited
Distinguished: Laurier Auto Inc. v. Paquet, [1987] R.J.Q. 804; Thomas v. Surveyer, Nenniger & Chênevert Inc. (1989), 34 Q.A.C. 61; referred to: 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 et 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.
Statutes and Regulations Cited
Act respecting labour standards, R.S.Q., c. N‑1.1 [am. 2002, c. 80], ss. 2, 3, para. 1(6), 79.4, 82, 82.1, 83, 122 to 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, ss. 12 to 19, 109.1 et seq., 110.
Authors Cited
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, vol. 2-B, Obligations. Texts written for the Barreau du Québec and the Chambre des notaires du Québec. Montréal: 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. Montréal: École de relations industrielles, Université de Montréal, 1982.
Gagnon, Robert P. Le droit du travail du Québec, 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.
APPEAL from a judgment of the Quebec Court of Appeal, [2002] Q.J. No. 8521 (QL), affirming a judgment of the Superior Court, [2000] R.J.Q. 1508, [2000] R.J.D.T. 504, [2000] Q.J. No. 1407 (QL). Appeal dismissed.
Michel St-Pierre and Jacques Reeves, for the appellant.
Raphaël Levy, for the respondent.
English version of the judgment of the Court delivered by
LeBel and Fish JJ. —
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 Montréal 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 (“C.C.Q.”), 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, 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 reamended 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: [2000] R.J.Q. 1508. The Court of Appeal affirmed that judgment on December 12, 2002 but awarded the full amount fixed by the parties: [2002] Q.J. No. 8521 (QL).
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” (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, para. 1(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 to 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 to 19 L.C., and the second paragraph of s. 79.4 and ss. 122 to 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, vol. 2-B, Obligations (1993), 1, at pp. 11‑12; C. D’Aoust, L. Leclerc and G. Trudeau, Les mesures disciplinaires: étude jurisprudentielle et doctrinale (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 (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 perso