Federally Regulated Employers Now Require Just Cause For Dismissal: Wilson V. Atomic Energy Of Canada Ltd.

July 27, 2016

On July 14, 2016 the Supreme Court of Canada released its much-anticipated decision in Wilson v. Atomic Energy of Canada Ltd, providing a determination on the meaning of the Unjust Dismissal provisions of the Canada Labour Code (the “Code”).

In short, unlike their provincial counterparts, federally regulated employers may not dismiss (or “fire”) a non-unionized employee without just cause. The provision of reasonable notice and severance payments alone are no longer sufficient for dismissal.

This brings the protections afforded to these employees in line with those of unionized employees, and further apart from those afforded to provincial employees under the Employment Standards Act and common law.

The changes apply in the following circumstances:

  • For persons in the federal sector who have been employed for 12 consecutive months, are not a manager, and are not a member of a group of employees subject to a collective agreement; and
  • Absent circumstances of a lay off for lack of work or discontinuance of a function.

If adequate reasons are not provided for the dismissal, reinstatement becomes an option among a number of other remedies for the employee. This is a significant change and a further departure from provincial employment laws. Reinstatement is aimed at putting the employee back in the position they would have held but for the unjust dismissal and can have significant impacts on the workplace as the employment relationship often will have become damaged or tarnished as a result of the dismissal.

The Law

The Code is the governing statute for federally regulated employees regarding industrial relations, occupational health and safety, and employment standards. Sections 240-246 of the Code allows eligible employees who have been dismissed to bring a complaint in writing that their dismissal was unjust. An inspector, and ultimately an adjudicator will review the complaint and if the dismissal is deemed unjust, an appropriate remedy will be awarded.

Background

In this case, the employee had worked for the employer for four and a half years and had a clean disciplinary record. He was terminated without cause, but with a severance package. He filed an “Unjust Dismissal” complaint under s. 240 of the Canada Labour Code. The adjudicator held that the employer could not resort to notice and severance payments to avoid a determination under the Code about whether the dismissal was unjust.

The SCC Decision

In a 6-3 decision, the majority of the Supreme Court of Canada (the “Court”) held that the dismissal was unjust, restoring the decision of the adjudicator. The Court found the purpose of the Unjust Dismissal provisions of the Code was to ensure that non-unionized federal employees would be entitled to protection from being dismissed without cause, bringing their protections in line with unionized employees.

The majority of the Court found that the common law right to dismiss on reasonable notice without cause or reasons has been replaced by the statutory mechanism under the Code, with the requirement for reasons for dismissal. The remedies available under the Code, which include reinstatement, and equitable relief, were found to be inconsistent with the right to dismiss without cause.

The Court concluded that the Unjust Dismissal provisions of the Code replace the employer’s ability at common law to dismiss an employee without reasons with a requirement of reasons or just cause for dismissal.

Looking Forward: what does this decision mean for federally regulated employers?

This decision highlights the following important points for employers:

Notice and severance payments alone are insufficient:
The Court has clarified that reasonable notice and severance, no matter how generous, will not alone be sufficient to dismiss an employee. Just cause is required to terminate an employee.
The requirement to give reasons:
Upon request, the employer is required to provide a written statement giving the reasons for the dismissal, and any employer who receives such a request shall provide the reasons within fifteen days of the request being made. Employers should be cognizant that any reasons for dismissal must not be discriminatory under the Canadian Human Rights Act (the “Act”). The provision of reasons that may be construed as discriminatory may invite potential human rights complaints against the employer under the Act.
Communication and documentation of employee misconduct, incidents and disciplinary measures are essential:
As the employer must provide reasons for dismissal, an accurate and robust documentary record will be important to establish just cause.

This decision affects approximately 500,000 non-unionized employees across Canada employed by airlines, banks and other federally regulated organizations. The requirement of just cause and the availability of reinstatement as a remedy present added challenges for affected employers and may necessitate a re-work of current employee review and dismissal practices.

We at Weilers are experienced in assisting employers to ensure their practices keep pace with new legal developments and would be pleased to provide advice on how best to equip your organization to handle these changes.