Canada: Federal Employers Can Dismiss Without Cause, Says Federal Court Of Appeal

The Federal Court of Appeal in Wilson v Atomic Energy of Canada Limited1 (Wilson v AECL) has confirmed the ability of federally regulated employers to dismiss employees without cause by providing adequate notice of termination or pay in lieu thereof. This decision will profoundly affect federally regulated employers who have operated under the prevailing view that the Canada Labour Code (the Code) does not permit dismissals without just cause.

Background

In Wilson v AECL, a federally regulated employer (AECL) terminated an employee without cause and paid him six months of severance pay. The employee filed an unjust dismissal complaint under section 240 of the Code.

The labour adjudicator appointed to hear the complaint found that the employee's termination was unjust because he had been terminated without cause. On judicial review, the Federal Court disagreed with the adjudicator, concluding that the Code permits dismissals without just cause.

The Federal Court of Appeal decision

The Federal Court of Appeal upheld the Federal Court decision, similarly finding that a dismissal without cause is not automatically "unjust" under Part III of the Code. In doing so, the court provided clear guidance on an area of law that had troubled decision-makers for some time.

The Federal Court of Appeal agreed with the line of previous cases that held "unjust dismissal" under section 240 of the Code should be interpreted consistently with common law "wrongful dismissal." Justice Stratas, who penned the decision for the Federal Court of Appeal, essentially reasoned that Parliament would have expressly provided that an employee cannot be discharged except for just cause, if this is what it had intended. In the absence of such clear language, the Code should not be interpreted to create a drastically different legal order from the common law, under which non-unionized employees can be dismissed without cause, provided reasonable notice or compensation in lieu thereof is paid. 

Justice Stratas also concluded that the notice and severance pay provisions at sections 230 and 235 of the Code – which specifically allow an employer to terminate without cause as long as notice or compensation is given – support the view that termination with notice is permitted under the Code.

Rejecting the prevailing school of thought

The Federal Court of Appeal rejected a conflicting line of case law holding that Part III of the Code disallows terminations without cause. Justice Stratas disagreed that by enacting section 240, and providing for the remedy of reinstatement, Parliament gave non-unionized employees enhanced protection against unjust dismissal or a "right to the job" analogous to that normally reserved for unionized employees. Rather, Justice Stratas concluded that section 240 established new statutory remedies that did not represent a sea change in the law of dismissal. The reinstatement remedy simply enhanced the suite of remedies available to adjudicators in appropriate cases of unjust dismissal and can co-exist with the common law.

Justice Stratas also addressed the argument that, as benefits-conferring legislation, the Code should be construed liberally in favour of employees. He concluded that this principle cannot be used to drive a more generous application of the Code than is supported by a genuine interpretation of its provisions.

Defining "unjust" under the Code

The court stopped short of providing any guidance about what would be considered unjust within the meaning of the Code. The fact that an employer has provided a severance package does not automatically remove the employee's recourse to an unjust dismissal remedy. Certainly, compliance with the minimum notice and severance requirements of sections 230 and 235 of the Code does not ensure a dismissal is "just." The particular circumstances of each case must be considered to determine if a dismissal, whether or not for cause, is unjust. The court left it up to adjudicators to develop the jurisprudence concerning the meaning of unjust.

Conclusion

Following the Federal Court of Appeal's decision in Wilson v AECL, federally regulated employers may legally terminate employees without cause as long as they provide adequate notice of termination or pay in lieu thereof. The decision leaves it open to parties and adjudicators to shape the meaning of unjust under the Code.

Footnote

1 2015 FCA 17.

Norton Rose Fulbright Canada LLP

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