What most would have thought was a pretty clear principle – that an employer whose business is covered by Part III of the Canada Labour Code had the right to dismiss employees without cause – was, for a period of time, cast into doubt by an adjudicator. Fortunately for employers, the Federal Court of Canada recently set matters right again.
Facts
Part III of the Canada Labour Code is sets out what are commonly known as employment or labour standards. It applies to employees whose operations are regulated by the federal government, such as banks, radio and television stations, inter-provincial and international transportation companies, and most federal Crown Corporations.
Atomic Energy of Canada, an employer who falls under Part III of the Code, dismissed one of its employees without cause. The employee was paid six months' severance pay: well more than the Code required to be paid.
Adjudication
The employee filed an unjust dismissal complaint under the Code. The Code allows for an employee to make an allegation of unjust dismissal. If the unjust dismissal complaint is unresolved, the exemployee may request that an adjudicator review the dismissal. The employee did just that.
It is at this point that things started to go wrong for the employer. In a surprising twist, the adjudicator determined employers covered by Part III of the Canada Labour Code did not have the right to dismiss employees without cause. He made that decision on the basis of a previous Federal Court decision where the Court found that an employer could not avoid the unjust dismissal provisions of the Code by providing severance pay to the employee at the time of dismissal. Remarkably, the adjudicator took this to mean that employees under the Code could not be dismissed without cause!
After making this decision, the adjudicator told the employer and ex-employee to try to work out a remedy.
Judicial Review of Adjudicator's Decision
The employer declined the adjudicator's offer. Instead, it applied to the Federal Court to set aside this decision.
The ex-employee argued first that the court application was premature because the adjudicator had not finished the job and not determined what the employee's remedy would be. The ex-employee also argued that the adjudicator's decision was reasonable, and therefore should not be interfered with.
The Court did not accept that the judicial review application was premature. The Court also did not accept the adjudicator's determination that employers under Part III of the Canada Labour Code could only dismiss employees for cause. The Court went to some length to show how the adjudicator's analysis in this area was flawed.
The Court did note that paying an employee severance pay will not bar an unjust dismissal complaint under the Code. In that event the adjudicator has the power to determine whether the amount of severance pay that was paid was appropriate.
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