At common law, a non-unionized employee can be dismissed without
reasons if he or she is given reasonable notice or pay in lieu. On
July 14, a majority of the Supreme Court of Canada ruled that this
common law rule does not apply to federally regulated employers.
The court ruled that federally regulated employers must always
provide reasons for the termination of their employees.
Furthermore, if the reasons for dismissal do not meet the standard
for "just cause" as that term is understood in the
collective bargaining context, the employee may complain under
section 240 of the Canada Labour Code (Code), and may be
reinstated, with or without back pay and damages, or compensated
with pay in lieu of reinstatement plus damages.
Generous severance equals a just dismissal?
The case involved an administrator (W) with Atomic Energy of
Canada Limited (AECL) who had worked for this employer for
four-and-a-half years until his dismissal in November 2009. He
filed an "unjust dismissal" complaint, claiming that his
dismissal was in reprisal for having filed a complaint of improper
procurement practices on the part of his employer.
In response to a request from an inspector for the reasons for
W's dismissal, the employer said he was "terminated on a
non‑cause basis and was provided a generous dismissal
package." A labour adjudicator was appointed to hear the
complaint. The employer sought a preliminary ruling on whether a
dismissal without cause together with a sizeable severance package
meant that the dismissal was a just one. The adjudicator concluded
that an employer could not resort to severance payments, however
generous, to avoid a determination under the Code about whether the
dismissal was unjust. Because the employer did not rely on any
cause to fire him, W's complaint was allowed.
AECL applied for judicial review of the decision. The Federal Court
found the labour adjudicator's decision to be unreasonable
because, in its view, nothing in Part III of the Code precluded
employers from dismissing non‑unionized employees without
cause. The Federal Court of Appeal agreed, but reviewed the issue
on a standard of correctness.
A majority of the Supreme Court of Canada quashed the Federal Court
of Appeal's decision. On the issue of the appropriate standard
of review, Justice Abella proposed the debate on the standard be
reopened. In the spirit of that debate, she proposed a single
standard – that of reasonableness – be applied in all
cases, and correctness be dropped as the alternate standard of
review. Abella J.'s suggestion to drop the correctness standard
of review was rejected by the majority, although there would appear
to be some opening left for future discussion of this
proposal.
Aligning unionized and non-unionized employee protections
On the issue of whether federally regulated employers may
dismiss without cause, the majority stated that a proper
construction of Part III of the Code did not permit such an
interpretation. Abella J., writing for the majority, stated that
when Parliament amended Part III of the Code in 1978 to include
section 240, it intended "to conceptually align the
protections from unjust dismissals for non-unionized federal
employees with those available to unionized employees."
Generally speaking, this means employers must follow a course of
progressive discipline prior to dismissing an employee unless there
has been an egregious violation of the employment contract such
that immediate termination without prior warning is warranted. The
onus on employers to justify terminations with cause is extremely
heavy, with the result that discharge complaints/grievances are
notoriously difficult to defend.
In a strongly worded dissent, Justices Moldaver, Côté
and Brown held that the common law rule regarding without-cause
dismissal was not ousted by the introduction of section 240 of the
Code. In the dissenting judges' opinion, there is nothing in
section 240 or the surrounding sections of the Code that guarantees
lifelong job tenure to employees of federally regulated businesses,
provided such employees do not give their employers just cause for
dismissal.
The majority decision in this case makes it impossible for
federally regulated employers to dismiss non-unionized employees
without cause. The significance of this ruling cannot be
overstated. It is abundantly clear now that all federally regulated
employers must engage in well-documented progressive discipline of
employees whose employment they may wish eventually to terminate;
rarely, if ever, will federally regulated employers be permitted to
terminate employment for a single act of misconduct, or for
misconduct that has gone unpunished.
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