Jul 15, 2016

No Union? No Problem: Supreme Court of Canada Decides Canada Labour Code Bars Dismissal of Non-Unionized Employees Without Cause

Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29 (CanLII)

On July 14, 2016, the Supreme Court of Canada decided that the “Unjust Dismissal” sections of the Canada Labour Code ensure that non-unionized federal employees are protected from termination of their employment without cause – and employers can’t side-step this protection by giving the employee termination notice and/or severance pay. This decision confirms that non-unionized employees working in federally-regulated businesses enjoy the same “just cause” protection that unionized employees and their employers have almost universally agreed to include in their collective agreements. The decision means that, even though there are still some limits, federally regulated employers must meet the higher bar of just cause for dismissal before they can terminate an employee’s employment – and the stakes are arguably a lot higher if they can’t make it.

Generally, the law permits an employer to dismiss a non-unionized employee even where it doesn’t have just cause to do so immediately and without notice or pay, provided it gives the employee proper termination notice. An employee who receives that notice isn’t wrongfully dismissed and one who didn’t get enough working notice, but does get compensation in lieu of that notice, has no loss and no legal claim for compensation.

Employees of federally-regulated businesses are subject to the Canada Labour Code. Subsection 240(1) of the Code allows certain non-unionized employees to make a complaint if her employer has dismissed her and she considers the dismissal was “unjust”. There has been some lingering question, however, whether subsection 240(1) of the Code changes an employer’s general right to dismiss a non-unionized employee without cause but with notice or compensation. Over the years, adjudicators assigned to decide such complaints have interpreted the Code in different ways: most have decided that an “unjust” dismissal is the same as a dismissal “without cause”, so the employee has a “right to the job” unless she’s given the employer cause to dismiss her; others have taken the view the Code doesn’t affect an employer’s general right to dismiss a non-unionized employee without cause, as long as it provides reasonable (or contractual) notice or compensation in lieu of notice.

In Joseph Wilson v. Atomic Energy of Canada, the federally regulated employer terminated the employee’s employment after more than four years’ of service. The employer didn't claim to have cause to dismiss him; rather, it offered him a severance package of about six months’ pay in return for a signed release. The employee refused and filed a complaint under subsection 240(1) of the Canada Labour Code alleging the employer “unjustly dismissed” him by terminating his employment in reprisal for making a complaint of improper procurement practices. The employee was entitled to 18 days’ pay upon termination under sections 230 and 235 of the Code; the employer ultimately paid the employee six months’ pay but without a release.

The adjudicator appointed under the Code to hear the employee’s complaint agreed that the Code only permits dismissal of employees for cause – even if the employer gave notice and/or severance. The employer applied for the Federal Court’s review of the Adjudicator’s decision – and that Court decided the adjudicator misinterpreted the law: the Code does permit employers to dismiss employees without cause. The employee appealed that decision to the Federal Court of Appeal – but lost: it agreed with the Federal Court, concluding a dismissal without cause isn’t automatically “unjust” under the Code; an adjudicator must examine the particular circumstances of the case to make that decision. The employee appealed to the Supreme Court of Canada – and won.

In a decision that split the Supreme Court of Canada, six of the nine justices agreed with the employee and restored the adjudicator’s original decision. The majority of the Court concluded that the Code’s text and context, the Minister of Labour’s statements when the Code was introduced and the views of the overwhelming majority of arbitrators and labour law scholars confirm that the entire purpose of the Code’s “Unjust Dismissal” provisions is, ultimately, to ensure that non‑unionized federal employees are protected from being dismissed without cause – protection much like that of unionized employees; allowing severance pay in lieu completely undermines this purpose because it gives employers the option of depriving employees of the full remedial package the Code offers them.

This decision makes it clear that the Code’s concept of “unjust dismissal” gives “just cause” protection to a large number of non-unionized federally-regulated employees that employers can’t avoid by giving termination notice or compensation – even generous compensation; and, in the absence of cause, an employer is exposed to statutory remedies that are over and above those available at common law in a wrongful dismissal action.

Higher bar for employers. The bar an employer must meet to prove it had “cause” to dismiss an employee is high. To successfully establish cause, the employer requires more than mere dissatisfaction with the employee’s performance; it must demonstrate that the employee’s performance or behaviour was of such a nature and extent that, considered in the full context of the circumstances, the employment relationship was no longer tenable. This decision confirms that federally-regulated employers are expected to continue their employment relationships and manage performance and behaviour issues using methods such as coaching or progressive discipline. Dismissing an employee when these issues haven’t reached the level of “cause” presents the risk that the employee will challenge the dismissal by a civil remedy through the court process (see subsection 246(1)) or file a complaint under subsection 240(1).

And higher stakes. Many employees may very well see a complaint under the Code as more attractive than a lawsuit for wrongful dismissal. In a lawsuit, a court can only require the employer to compensate a wrongfully dismissed employee with money. However, if an adjudica3tor decides an employer “unjustly dismissed” an employee under the Code, the adjudicator has broad authority to fashion appropriate relief; this could be an order requiring the employer to pay the employee additional compensation - but under section 240(4) of the Code, adjudicators can also order the employer to reinstate the employee, something courts can’t do in a wrongful dismissal lawsuit.

But still some limits. The Code does, however, set out certain limits to this just cause protection:

  • The unjust dismissal provisions don’t apply to employees who are managers (see section 167(3)).
  • Only employees who’ve completed 12 consecutive months of continuous employment and who are not a member of a group of employees subject to a collective agreement can file an unjust dismissal complaint under the Code (see subsection 240(1)).
  • The employee must make the complaint within 90 days of the dismissal (see section 240(2)).
  • An Adjudicator can’t consider a complaint where: the employee was laid off because of lack of work or because of the discontinuance of a function; or the Code or another statute provides a procedure for redress (see section 242(3.1)).

Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Labour and Employment Team to discuss this topic or any other legal issue.


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