Major Clarification in Law around Dismissal of Non-Union, Federally Regulated Employees: Wilson v. Atomic Energy of Canada Limited, 2015 FCA 17

Previously printed in the CCH’s Focus on Canadian Employment and Equality Rights (CEER) Newsletter.

The Federal Court of Appeal recently clarified that without cause dismissals of employees covered by the Canada Labour Code (the “Canada Code”), such as those working in banking, broadcasting, telecommunications and the railways, are not automatically “unjust” simply by virtue of the fact that no cause is asserted.

Atomic Energy of Canada Limited (AECL) dismissed Mr. Wilson from his employment of 4.5 years without cause and paid him six months’ severance pay. He complained under Section 240 of the Canada Code that he had been “unjustly dismissed” simply because he had been let go without cause. The adjudicator appointed under the Canada Code agreed with him but reserved judgment regarding remedy when AECL sought judicial review of the decision before the Federal Court. The Federal Court concluded that the adjudicator’s decision was unreasonable, quashed it and remitted the matter to the adjudicator for decision. Mr. Wilson brought an appeal to the Federal Court of Appeal.

The fundamental legal issue before the Federal Court was whether Part III of the Canada Labour Code permits the dismissal of an employee without cause. Put another way, does every termination under the Canada Code have to be for cause to avoid being held to be “unjust”? The Federal Court of Appeal acknowledged that for a very long time there had been two divergent and conflicting lines of case law regarding the question of whether Part III of the Canada Code permits terminations of employment without cause. The Federal Court of Appeal concluded that a without cause dismissal is permitted and is not automatically “unjust” for that reason alone. Rather, it falls to an adjudicator to examine the circumstances of the particular case to see whether the dismissal is “unjust”. While not ruling out the possibility that a without cause termination can still be “unjust” in certain circumstances, the Federal Court of Appeal made clear that simply because a dismissal occurs on a without cause basis does not make it “unjust” under Section 240 of the Canada Code. This conclusion effectively nullifies the line of case law that suggested employees covered by the Canada Code, similar to unionized employees, could only be dismissed if the employer established just cause for doing so. The Court made the following statement which clarifies this point:

But there is nothing in the Code or in its purpose that suggests that Parliament was granting non-unionized employees a “right to the job” or was trying to place unionized and non-unionized employees in the same position: protected from being dismissed without cause. To the contrary, subsections 230(1) and 235(1) expressly allow an employer to terminate an employment relationship even without cause and require that notice or compensation be given.

The Federal Court of Appeal contrasted the provisions of the Canada Code with those in Section 4 of the Nova Scotia Labour Standards Act, which plainly states that an “employer shall not discharge … [an] employee without just cause”. In the absence of such clear language in the Canada Code, the Federal Court of Appeal concluded that “Part III of the Code offer[s] employees more remedies than exist at common law” but does not establish the same rights as unionized employees in the event of dismissal.

Even though the Federal Court of Appeal concluded that a without cause termination of employment is not automatically “unjust”, the Court left no doubt that not every such dismissal is just. The Court expressly stated that “[i]t will always be for the adjudicator to assess the circumstances and determine whether the dismissal, whether or not for cause, was unjust”. The Federal Court of Appeal declined to elaborate on when a dismissal without cause will be considered “unjust”, leaving this to be determined by adjudicators on a case-by-case basis. Historically, in making such assessments, adjudicators have considered common law principles relating to the dismissal, e.g. whether the employment contract with termination provisions was entered into under duress or was the product of free will and whether the severance compensation the employer offered was “requisite [and] … enhanced to facilitate a quick resolution”. In Wilson’s case, the Federal Court of Appeal acknowledged that if AECL had simply paid him severance according to the Canada Code, he would have only received 18 days instead of the six months he was paid by his employer. The Court found this to be acceptable.

Practically speaking, this means that employers which intend to dismiss a non-union, federally regulated employee:

• may do so on a without cause basis. It is not necessary to show that there is just cause in order to effect a just termination of employment under the Canada Code.
• should ensure that any notice or severance pay required by the Canada Code is given and the departing employee is also provided with a severance option which is consistent with any contractual obligations or the common law (where the employment contract does not address termination of employment or provides less than the Canada Code minimum requirements).

Employers, however, should be aware that payment of severance does not prevent an employee from making a complaint under the Canada Code. Employees may still do so and will typically allege that the severance payment is not consistent with common law principles or the employer’s contractual obligations or that cause has been alleged which is disputed.