In its decision in Wilson v. Atomic Energy of Canada
Ltd., the Supreme Court of Canada (SCC) has ruled that
federally-regulated employers subject to the Canada Labour
Code (Code) are not permitted to dismiss employees on
a without cause basis, with a few exceptions provided for under the
Code (discussed below). In doing so, the Court has
settled the long-standing debate as to the proper interpretation to
be given to the "unjust dismissal" provisions in Part III
of the Code.
Following his dismissal from employment by Atomic Energy of
Canada Limited (AECL), without cause and without reasons, Mr.
Wilson filed a complaint under s. 240(1) of the Code
alleging that he had been unjustly dismissed contrary to the
Code. The adjudicator appointed to hear his
complaint held that the Code did not allow for dismissals
on a without cause basis, even where the employer offered a
severance package in excess of the minimums required under the
Code. That decision was overturned by the Federal
Court on judicial review and the Federal Court of
Appeal agreed on appeal. Unhappy with the result in
the Federal Court of Appeal, Mr. Wilson appealed to the Supreme
Court of Canada.
In a 6-3 decision, a majority of the Supreme Court of Canada
(per Abella J.) held that the only reasonable
interpretation of the unjust dismissal provisions in Part III of
the Code is that they only permit
employers to dismiss employees on a "for cause" basis.
The only exceptions would be those specifically spelled out
in the Code – i.e., employees who are managers (s.
167(3)); employees who have been laid off because of a lack of work
or the discontinuance of a function (s. 242(3.1)); employees for
whom redress is specifically provided under the Code or
some other piece of legislation (s. 242(3.1); and employees who
have been employed by the employer for less than twelve consecutive
months (s. 240(1)). For those employees to whom the unjust
dismissal provisions of the Code apply, the Court held
that Parliament's intention was to afford non-union employees
with the same protections against termination without cause as is
enjoyed by unionized employees under collective agreements.
In other words, employers subject to the Code are required
to show "just cause" for termination, similar to what is
required in a unionized environment.
The upshot of this decision is that federally-regulated
employers who are subject to the Canada Labour Code will
no longer be able to terminate employees on a without cause basis
by providing them with compensation in lieu of notice, even if
their employment contracts would allow it. Following this
decision, such termination provisions would be unenforceable as
they are inconsistent with the Code. In order to be in a
position to establish just cause for termination for
performance-related issues, federally-regulated employers will be
required to performance manage employees and to institute
progressive discipline prior to proceeding to termination.
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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