News & Insights

Don’t keep us in suspense

Jackie Denham explores how to ensure a suspended employee cannot claim for breach of contract.

Where a serious allegation of misconduct has been made it may be necessary for an employer to suspend an employee pending the outcome of the investigation into the allegations.  One of the risks in suspending an employee is that if the employer does not have a contractual right to suspend, or if the decision to suspend or how the suspension is managed is not considered reasonable, such actions could result in a breach of contract claim by that employee.  In a recent case the Court of Appeal considered when a decision to suspend could amount to a breach of the implied contractual term of trust and confidence.

Ms Agoreyo was a teacher.  Early in her employment at Glenbrook Primary School allegations were made that there had been three incidents of the inappropriate use of force by Ms Agoreyo to remove two separate children from the classroom.  She had asked for additional support to help with her teaching of these children but was suspended pending investigation into the incidents.  Ms Agoreyo resigned and claimed breach of contract.

The Court of Appeal clarified that an act of suspension can constitute a breach of the implied term of mutual trust and confidence where, by itself or in combination with other acts or omissions, it amounts to conduct that destroys or seriously damages the relationship of trust and confidence and is without reasonable and proper cause.  These are issues of fact and highly context-specific.  Therefore it is possible for separate Judges to decide a matter differently when considering the evidence before them.  The Court of Appeal also confirmed that there is no requirement for the decision to suspend to be “necessary”, only that the actions of the employer are reasonable.

In this particular case it was obvious that the allegations of misconduct were serious and needed to be investigated. In addition, as the context was that the employer had an obligation to safeguard the interests of very young children, the Judge was entitled to conclude that the employer had reasonable and proper cause for the suspension and that the employer had not breached the implied term of mutual trust and confidence. However there will definitely be circumstances where suspending an employee would not be considered reasonable and could amount to a breach of contract.  For example, if suspension was a “knee-jerk” reaction, if there was no particular reason why the employee couldn’t remain actively working during an investigation, or if suspension lasted longer than absolutely necessary.

The key points to note are that an employer must:

  • have an express or implied contractual right to suspend;
  • have reasonable and proper cause for the suspension;
  • have considered whether there are appropriate alternative options to avoid the suspension (as opposed to it being a “knee-jerk” reaction);
  • keep the decision to suspend under regular review and ensure the suspension is kept as short as possible; and
  • at all times handle the suspension sensitively, particularly in terms of managing communication of the suspension to colleagues, clients and third parties (such as parents if the employee is a teacher).