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September 8, 2016

Federal Employers Take Note: Just Cause is Required Once Again

Author Todd Weisberg

Canadian jurisprudence has long held that federally regulated employees, including those working in the banking, telecommunications and interprovincial transportation industries, could only be terminated for just cause. The Federal Court of Appeal (“FCA”) decision in Wilson v. Atomic Energy of Canada Limited (“Atomic Energy”) overturned that jurisprudence holding that federally regulated employees could be terminated without cause. We previously wrote about that landmark decision back in January 2015. In July 2016, the Supreme Court of Canada (“SCC”) overturned the FCA decision, reverting the law back to its original state. Federally regulated employees can once again only be terminated for just cause.  

The Canada Labour Code (the “Code”) is the legislation which sets out minimum labour standards for federally regulated workers. The different legal outcomes in Atomic Energy were largely based on different statutory interpretations of the “unjust dismissal” provisions under Part III of the Code. These provisions include that an employer must provide a terminated employee with reasons for their dismissal if requested within a specified time frame.

Wilson requested the reasons for dismissal and was informed by Atomic Energy that he was terminated on a non-cause basis. Atomic Energy’s position was that since they had provided Wilson with a generous severance package, Wilson’s dismissal was not “unjust”.

Wilson brought his complaint before a labour adjudicator who concluded that an employer could not use severance payments to circumvent a determination under the Code that a dismissal is unjust. The Adjudicator found that since Atomic Energy did not rely on any cause for termination, Wilson’s complaint of unjust dismissal was warranted.

This decision was judicially reviewed by the Federal Court and then later appealed to the FCA.  Both courts found that the Adjudicator’s decision was unreasonable on the basis that nothing in Part III of the Code precluded an employer from dismissing a non-unionized employee on a without-cause basis.

In overturning the lower court’s decision, the SCC provided a number of explanations as to why federally regulated employees should not be terminated absent just cause.

1.         Statements made by the Minister of Labour when the “unjust dismissal” provisions were first introduced:

The SCC outlined that when the “unjust dismissal” provisions were first introduced in 1978, the Minister of Labour specifically referred to the right of employees to have fundamental protection from arbitrary dismissal. The SCC pointed out that “these statements make it difficult to draw any inference other than that Parliament intended to expand the dismissal rights of non-unionized federal employees in a way that, if not identically, at least analogously matched those held by unionized employees.”

2.         Collective bargaining jurisprudence on the definition of “unjust dismissal”:

The SCC pointed out that the most significant arbitral tutor for the new provisions under the Code came from the way the jurisprudence in the collective bargaining context defined “unjust dismissal”. In the collective bargaining context, “unjust dismissal” has a specific and well defined meaning: that employees covered by collective agreements are protected from unjust dismissals and can only be dismissed for just cause.

3.         Adjudicators interpretation under the Code:

The SCC reviewed the case law dealing with “unjust dismissal” under the Code. The case law showed that out of 1700 decisions, Adjudicators only  followed the FCA’s line of reasoning in 18 decisions. The SCC pointed out that “what we have here is a drop in the bucket which is being elevated to a jurisprudential parting of waters”.

4.         Foundational premise of the common law scheme replaced under the Code:

At common law, there is a right to dismiss an employee on reasonable notice without cause or reasons. The SCC found that this foundational premise of the common law system has been replaced under the Code by a regime which specifically requires reasons for dismissal.

5.         Remedies available under the Code:

The SCC referenced a number of discretionary remedies, including reinstatement and equitable relief, which are available under the Code. The SCC found that the plurality of remedies under the “unjust dismissal” scheme of the Code are inconsistent with the right to terminate absent just cause.

State of the Law

The SCC has conclusively determined that federally regulated employers must have just cause to terminate employees who are non-managerial and non-unionized. The only exceptions to this rule are employees who have been employed for a period of less than twelve months or employees dismissed due to “layoffs” as defined under the Code.

This decision does not prevent federally regulated employers from  negotiating or coming to an agreement with employees regarding severance packages. However, it does give employees significant leverage in these situations. Accordingly, federally regulated employers should ensure that they are properly monitoring and documenting employee performance and misconduct. An employer’s proactive behaviour in these situations can make the difference in whether a dismissal for cause can be successfully defended.

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