The Supreme Court of Canada ("SCC") has clearly
determined that sections 240 to 246 of the Canada Labour
Code ("Code") displaces the ability of an
employer to fire a federally regulated employee without just
cause.1 In other words, employers cannot simply provide
the employee with a severance package and dismiss the employee
without having cause to terminate the employment.2
Employers have the right to terminate employees for
cause.3 Employees who are arbitrarily dismissed without
just cause can seek out their entitlements from three sources:
reasonable notice of termination or
pay in lieu thereof at common law; and
termination provisions contained in
an enforceable employment contract.
In July, 2016, the SCC clarified the law for federally regulated
employees4 who are employed for 12 months or more and
are unjustly terminated from their employment. The SCC has decided
that the Code completely displaces the common law right of
an employer to fire a federally regulated employee without just
cause by simply providing reasonable notice or pay in lieu thereof.
The SCC stated that the purpose of the Code is to match
the rights of unionized employees who can only be fired for just
cause. Employers must give reasons showing why the dismissal is
justified. Remedies under the Code include ordering that
the employee be reinstated to his/her employment position. The
reinstatement remedy would be meaningless if an employer could
simply again terminate a reinstated employee without just cause by
providing a termination/severance package.
Federally regulated employees who are unjustly terminated from
their employment have two choices for seeking a
Canada Labour Code
Seek remedy through the civil
Compensation for reasonable notice of
the termination or pay in lieu thereof
Court will decide how many months of
notice is reasonable in the circumstances with consideration to the
following factors: age, length of employment, employment position,
prospects of finding alternate employment
Seek remedy from adjudicator under
Code adjudicators do not
apply the common law remedy of reasonable notice
Employers upon written request must
provide the reasons for the dismissal within 15 days of the
If the reasons for dismissal are not
satisfactorily justified, then the Code adjudicator may
order the employer to:
pay the employee compensation
equivalent to what the employee would have been paid if not
reinstate the employee; and
any other equitable relief to
counteract the consequence of the dismissal
In summary, employers of federally regulated
cannot fire an employee without
must provide the employee with a
reason for the dismissal;
can be fired without cause if the
laid off because of a lack of work;
there is a discontinuance of
may be subject to broad ramifications
if they unjustly dismiss an employee including having to reinstate
the employee and pay the employee for all lost wages.
2 Exception to this is where an employee is laid off
because of lack of work or because of the discontinuance of a
function (s. 242(3.1) of the Code).
3 Dismissal for cause is a high threshold. The frequently
cited test for "just cause" is that set out by
Schroeder J.A. in Regina v. Arthurs (1967), 62 D.L.R. (2d)
342 (Ont. C.A.) at para. 11:
If an employee has been guilty of serious misconduct, habitual
neglect of duty, incompetence, or conduct incompatible with his
duties, or prejudicial to the employer's business, or if he has
been guilty of wilful disobedience to the employer's orders in
a matter of substance, the law recognizes the employer's right
summarily to dismiss the delinquent employee.
4 Federally employed employees include government,
banking, telecommunications, and airlines. For an extensive list
see the Government of Canada's
5 Unjust Dismissal provisions under the Code do not apply
to managers (s. 167(3) of the Code).
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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