Mastering the Art and Science of Employee Discipline

October 11, 2000 By Allan C. Wells Organizations often leave employee discipline up to managers' discretion. But a recent Ontario case shows how important it is to have an effective discipline policy in place. The ramifications of improperly disciplining employees are illustrated by a recent court decision that awarded seven months' pay to an employee with less than five years' service after she refused to accept a three-day unpaid suspension. In Haldane v. Shelbar Enterprises Ltd., Ms Haldane worked as the controller in a small company. She was suspended after she swore at her boss in front of other employees. Ms Haldane thought the discipline was excessive and suggested instead that she lose three days' vacation pay. The employer rejected her suggestion, and ended Ms Haldane's employment because she would not accept the suspension. Ms Haldane claimed constructive dismissal. The trial judge found that while insolence may be a ground for dismissal, in the circumstances of this case, the threshold had not been reached, and that even a three-day suspension without pay was excessive. According to the judge, the appropriate disciplinary response was to require Ms Haldane to apologize and take the afternoon off with a memo added to her file noting the discipline. By imposing unreasonable discipline, the employer had constructively dismissed Ms Haldane. On appeal, a majority of the Divisional Court panel initially disagreed with the trial judge on the grounds that the employer had a right to take reasonable disciplinary measures, providing they did not amount to a repudiation of the employment contract. However, the majority of the panel members subsequently changed their minds, and found instead that an employer did not have the right to suspend an employee without pay as a means of discipline unless such discipline was an express or implied term of the employment contract. The Court of Appeal agreed that an employer could not suspend an employee unless it had a right to do so under the terms of employment, although the Court did not base its decision on that finding. Instead, the Court of Appeal, like the trial judge, found that a three-day suspension was unreasonable in the circumstances and, therefore, that Ms Haldane had been constructively dismissed. Two key principles emerge from these decisions: 1. Employee discipline must be reasonable; 2. An employee discipline policy is important. "Reasonable discipline" factors Because acts of employee misconduct in the workplace often arouse emotional responses from employees, including the person who will make the decision about discipline, it may be difficult to respond objectively. The Haldane case shows employers should consider the following factors before reaching a decision: The circumstances of the misconduct: For example, the trial judge noted that the incident between Ms Haldane and her employer occurred with a new boss, who had a less "relaxed" management style than his predecessor. Moreover, the new boss, without discussing the matter with Ms Haldane, announced a change in the scheduled non-smoking day for employees Ms Haldane supervised, effectively repudiating Ms Haldane?s authority. The employee's past record: An isolated incident of misconduct by an otherwise good employee should not merit the same disciplinary response that would be imposed on an employee with a poor record. The trial judge in Haldane noted Ms Haldane's excellent work record and her willingness to work beyond required hours as relevant factors in assessing whether the employer's disciplinary response was reasonable. Alternative discipline: The employer should always consider whether there are other options, which might achieve the disciplinary objectives just as well. The employer in Haldane apparently could offer no satisfactory explanation why Ms Haldane's suggestion of losing three vacation days was not acceptable. Cite penalties in policy Even if a particular disciplinary response is reasonable in the circumstances, it could still lead to a constructive dismissal claim if the terms of employment neither imply nor expressly permit that response to be imposed. The court in Haldane said a term can be implied in a contract based on "custom and usage or based upon the presumed intentions of the parties." This means an employer with an established and well-known practice of imposing particular forms of discipline will be better able to show that such discipline was an implied term of employment. However, for those employers without an established disciplinary practice, or for those who wish to avoid the practical difficulties associated with proving a past practice, a written disciplinary policy could constitute express terms of employment. The trial judge in Haldane noted: "The defendant did not have a disciplinary policy which is unfortunate in the circumstances." As with any employment policy, to be effective, a disciplinary policy must be reasonable and effectively communicated to all employees. Besides identifying specific disciplinary offences, and procedures for investigating and responding to those offences, the policy should define a range of specific penalties. (Otherwise, these penalties could constitute a fundamental breach of the employment contract.) Specific penalties may include:

Written or verbal warnings: These should include a warning of further discipline up to and including termination of employment in the event of future misconduct. Temporary suspension without pay: Suspensions are typically issued to employees who, given the nature of their work, are temporarily replaceable without disrupting the employer's operations. A suspension with pay is usually imposed pending the results of an investigation into allegations of serious wrongdoing. Loss or reduction in bonus: This form of discipline is generally more appropriate for higher-income employees for whom a suspension without pay would be inappropriate. If the employer wishes to retain the option of using bonus payments as a disciplinary response, it must ensure that its bonus policy clearly states that bonus payments are at the employer's discretion and are based on employee performance as well as financial targets. Loss of overtime work: This is an option for hourly employees who rely upon evening or weekend overtime work at premium wage rates to supplement their income. A demand for an apology: The court in Haldane recognized that in some circumstances it is reasonable to ask an employee to apologize for inappropriate conduct. Where the employee refuses to apologize in response to a reasonable request from the employer, the employer may have cause to dismiss the employee for refusing to accept reasonable discipline, or possibly even for insubordination. Denial of annual wage increase: Denying a discretionary wage increase can be an effective disciplinary response in some circumstances. However, for employees who are entitled to scheduled wage increases based solely on service, denying an incremental increase could prompt a constructive dismissal claim. Temporary demotion: This may be an appropriate response to employees disciplined for committing mistakes or accidents while performing their duties. For example, a delivery driver involved in a series of accidents may be assigned a "desk job" for three months. However, an unreasonable demotion, or a demotion for an unreasonable duration, could constitute constructive dismissal. Remember also that a reasonable disciplinary policy should incorporate the principle of "progressive" discipline, to ensure that employees have a reasonable opportunity to demonstrate they've taken corrective action.