Supreme Court of Canada to Federally Regulated Employers: No “Without Cause” Dismissals Under Canada Labour Code

In a decision which returns us to what many thought was the status quo, the Supreme Court of Canada has ruled that, (save for exempt employees), the unjust dismissal scheme in the Canada Labour Code (the “Code”) does not permit federally regulated employers to dismiss employees without cause once they have one year of service or more. This decision reverses the decisions of the Federal Court and Federal Court of Appeal, which had ruled that nothing in the Code precluded federally regulated employers from dismissing non-unionized employees on a without cause basis. As a result, for federally regulated employers, when it comes to dismissal, the right of non-union employees to protection from dismissal tracks the right of their unionized counterparts.

Facts:

In November 2009, Atomic Energy Canada Limited (“AECL”) dismissed a procurement supervisor after four and a half years of service. The employee promptly filed an “Unjust Dismissal” complaint, claiming that he had been unjustly dismissed contrary to the Code. In response, AECL argued that because it had provided the employee with a generous severance package well in excess of his minimum statutory entitlements (i.e. 6 months’ pay), the employee had not been unjustly dismissed. The Adjudicator appointed to hear the matter disagreed with AECL and ruled that an employer could not rely on severance payments, however generous, to avoid a finding that an employee had been unjustly dismissed under the Code.

In a surprise to many, the Federal Court of Canada, and then the Federal Court of Appeal, disagreed with the Adjudicator, holding that nothing in the Code prevented federally regulated employers from dismissing non-unionized employees without cause. The employee appealed to the Supreme Court of Canada.

Supreme Court of Canada:

Writing for the majority, Justice Abella stated that the purpose of the Code’s unjust dismissal scheme was to provide “…a cost-effective alternative to the civil court system for dismissed employees to obtain meaningful remedies which are far more expansive than those available at common law”. In Justice Abella’s view, the remedies contemplated by the Code for non-unionized employees were meant to reflect those generally available in the collective bargaining context. As such, in the federal sphere, the common law right of employers to dismiss “…whomever they want for whatever reason they want so long as they give reasonable notice or pay in lieu” was superseded by the Code, which did not give federally regulated employers such a right.

What this means for Federally Regulated Employers:

For better or for worse, the Supreme Court of Canada’s decision provides legal certainty for Canada’s federally regulated employers, as it ends the debate about whether the Code permits without cause dismissals. That said, the Supreme Court of Canada’s decision does not mean that an employee’s right to sue his or her former employer in court for wrongful dismissal has been extinguished. As the minority noted in this case, due to a legislative wrinkle, a federally regulated employer can dismiss an employee without cause as long as that employee chooses to challenge the lawfulness of the dismissal in the civil courts.  However, if the employee files a complaint under the Code’s unjust dismissal scheme, the notice provided to the employee will not insulate the employer from an adjudicator’s finding that the dismissal was nonetheless unjust.

Accordingly, unless and until the Code’s unjust dismissal scheme is amended to allow for without cause dismissals, federally regulated employers can only dismiss an employee with one year of service or more due to performance issues, a lack of work or the discontinuance of a function. Failure to meet this requirement could result in significant liability for the employer, including reinstatement.

Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29 (http://www.canlii.org/en/ca/scc/doc/2016/2016scc29/2016scc29.pdf)

Andy Pushalik

About Andy Pushalik

Andy is a partner and the practice group leader of the Employment and Labour group of Dentons’ Toronto office. Andy has a broad labour and employment practice serving as “go to” outside labour and employment counsel to a wide variety of companies, charities and public sector organizations. Clients frequently seek Andy’s advice on sensitive human resources matters including workplace restructurings, discrimination and harassment complaints and workplace investigations. In addition, Andy regularly represents employers in all aspects of labour and employment litigation, including wrongful dismissal matters, grievance arbitrations and restrictive covenant disputes.

Full bio