Canada: Unjust Dismissal Clarified: Without Cause Terminations Not Prohibited By The Canada Labour Code

Last Updated: February 5 2015
Article by Laura Cassiani and Hugh R. Dyer

The unjust dismissal sections of the Canada Labour Code ("Code") were, at one time, thought to have provided enhanced job security for non-unionized individuals employed in the federal sector by significantly narrowing the circumstances in which an employer could discharge an employee. The Code applies to federally regulated employers, primarily those in the banking, broadcasting, telecommunication, inter-provincial transportation and aeronautics sectors. Although there were some contrary authorities, the prevailing view was that a non-union, non-managerial employee with more than 12 months of service could only be dismissed because of lack of work or the discontinuance of a function unless the employer could establish "cause". Cause was a relatively high standard; comparable to the concept of "just cause" applicable to most unionized employees.

The Federal Court of Appeal's recent decision in Wilson v. Atomic Energy of Canada rejects the previous prevailing interpretation. Mr. Wilson was dismissed without cause and, upon termination, was provided with six (6) months' pay. He filed an unjust dismissal complaint pursuant to the Code. His complaint was referred to an adjudicator who concluded that the Code did not permit dismissals without cause. The employer applied to the Federal Court, Trial Division for judicial review. The Trial Division found that there was no basis for concluding that the Code only permits dismissals for cause. The court went on to note that the Code sets out the following regime for dismissals:

[35] An employer can dismiss an employee without cause so long as it gives notice or severance pay (ss 230, 235). If an employee believes that the terms of his or her dismissal were unjust, he or she can complain (s 240). The only exceptions to the general right to make a complaint are where the dismissal resulted from a lay-off for lack of work or a discontinuance of the employee's position, or the employee has some other statutory remedy (s 242(3.1)).

[36] In addition, an employee can complain if he or she believes that the reason given by the employer for the dismissal was unjustified or if the dismissal is otherwise unjust (eg, based on discrimination or reprisal) (s 240(1)). If the adjudicator appointed to entertain the complaint concludes on any basis that the dismissal was unjust, he or she has broad remedial powers to compensate the employee, reinstate the employee, or grant any other suitable remedy (s 242(4)).

[37] The fact that an employer has paid an employee severance pay does not preclude an adjudicator from granting further relief where the adjudicator concludes that the dismissal was unjust. Similarly, there is no basis for concluding that the CLC only permits dismissals for cause. That conclusion would fail to take account of the clear remedies provided in ss 230 and 235 (ie, notice and severance) for persons dismissed without cause.

Mr. Wilson appealed from the Trial Division judgment to the Federal Court of Appeal. The Court of Appeal dismissed his appeal in a judgment released on January 22, 2015. The Court of Appeal stated:

Like the Federal Court..., I conclude that a dismissal without cause is not automatically "unjust" under Part III of the Code. An adjudicator must examine the circumstances of the particular case to see whether the dismissal is "unjust".

The Court identified a distinction between a "just" and an "unjust" dismissal based on one of its earlier judgments:

In Boisvert, the majority of this Court went about understanding the meaning of "unjust dismissal" by considering common law cases (see, e.g., at pages 458-459). In concurring reasons, Marceau J.A. attempted to define "unjust dismissal" by considering its opposite, just dismissal. He defined a just dismissal as a "dismissal based on an objective, real and substantial cause...entailing action taken exclusively to ensure the effective operation of the business." Viewed in its proper context, this Court was not saying that the "real and substantial cause" had to relate to the affected employee. Rather the cause had to entail "action taken exclusively to ensure the effective operation of the business" and had to be something other than "caprice, convenience or purely personal disputes."

While the Court of Appeal confirmed that not every termination must be for cause, it also concluded that an employee who did not fall into one of the exclusions (e.g. managerial, less than 12 months of service) could file an unjust dismissal complaint. Unless the claim is settled, an adjudicator will then "assess the circumstances and determine whether the dismissal, whether or not for cause, was unjust".

The Trial Division decision in Wilson was recently considered and followed by Adjudicator Rose in Sigloy v. DHL Express (Canada). In Sigloy, the complainant entered into an employment contract with this employer, DHL Express, which provided that he could be dismissed without cause upon receiving the greater of two (2) weeks' notice in writing or the minimum notice and severance required by the Code. Mr. Sigloy was dismissed without cause and on termination received his statutory entitlements to termination and severance pay. The complainant did not advance any basis to support his claim that his dismissal was "unjust".

The issue before Adjudicator Rose was whether he had jurisdiction to hear Mr. Sigloy's complaint as his employment was terminated without cause and in compliance with a "valid and enforceable contract of employment and the Code". Relying on Wilson, Adjudicator Rose concluded that there had been no unjust dismissal.

Practical Implications

From a risk management perspective, and in light of the recent clarification in the law, federally regulated employers should consider including "termination without cause" provisions in all offers of employment and employment contracts.

The fact that an employee has been given notice and paid severance in accordance with a valid and enforceable employment contract does not necessarily preclude a claim of unjust dismissal under the Code. The unjust dismissal protections in the Code will continue to be available to employees who allege dismissals were unjust because they were motivated by improper considerations (reprisal, discrimination, arbitrariness, etc.). If a complaint is filed, the employer will, according to the Court of Appeal in Wilson, need to establish that its decision was made to "ensure the effective operation of the business".

The Labour and Employment Group will continue to monitor these developments and provide updates as they become available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Laura Cassiani
Hugh R. Dyer
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