The decision came up after the Scottish manager was accused of "unsporting and unethical behaviour" which contradicted with the club's laid down code of conduct.
The former Gor Mahia boss has been in the news recently for several bad reasons, with the latest being an alleged hot argument with midfielder Malik Akowuah following the club's elimination from the Ghalca G8 pre-season tournament.
According to reports, the situation led to the player's decision to hand in transfer request since the coach vowed never to use him in the upcoming season.
A three-man committee headed by former Ghana Football Association president Dr. Nyaho Nyaho-Tamakloe has been set up to look into the matter, while assistant coach Henry Wellington takes charge in the interim.
Nuttall, who joined Hearts in a three-year deal last season, could not win any trophy in his first season as the Phobians finished third in the league behind winners Aduana Stars and Wafa.