Canada: Supreme Court Restores Norm: No Termination Without Cause Under Canada Labour Code

On July 14, 2016, the Supreme Court of Canada rendered its decision in Wilson v. Atomic Energy of Canada Limited, where the 6-3 majority concluded that federally regulated employers subject to the Canada Labour Code (the Code) cannot dismiss their employees on a without cause basis. The Supreme Court restored the initial decision by the adjudicator assigned to the complaint, overturning the decision by the Federal Court of Appeal on judicial review.

Background

As you may recall from our previous post on the Federal Court decision in this case, Joseph Wilson had been an employee of Atomic Energy of Canada Ltd. (AECL) for four and a half years when he was terminated without cause and provided with a severance package of six months' pay. Mr. Wilson made an unjust dismissal complaint under the Code.

The labour adjudicator who heard Mr. Wilson's complaint at first instance concluded that the Code does not permit the termination of an employee's employment without just cause; therefore, AECL could not resort to severance payments, however generous, to avoid a determination under the Code about whether the dismissal was unjust. The complaint was therefore allowed. On judicial review at the Federal Court, Justice O'Reilly overturned the adjudicator's decision on the basis that the Code had been improperly interpreted. Justice O'Reilly held that nothing in Part III of the Code precluded federally regulated employers from dismissing non-unionized employees on a without cause basis, and that employment can be terminated without cause so long as minimum notice or compensation is given. The Federal Court agreed, but reviewed the issue on a standard of correctness.

Supreme Court of Canada Decision

Mr. Wilson appealed the Federal Court decision to the Supreme Court, and the adjudicator's decision was restored. Applying the reasonable standard (as agreed by the parties themselves), the Supreme Court held that the adjudicator's decision was reasonable given the common interpretation of the unjust dismissal provisions of the Code. Justice Abella, writing for the majority, stated that "[t]he text, the context, the statements of the Minister when the legislation was introduced, and the views of the overwhelming majority of arbitrators and labour law scholars" confirmed that the purpose of Part III of the Code was to entitle non-unionized employees in the federal sector to protection from being dismissed without cause. Justice Abella concluded that to allow federally regulated employers to provide severance pay rather than abide by the unjust dismissal provisions of the Code would undermine the intention of Parliament to protect employees' rights against arbitrary dismissal.

In her decision, Justice Abella highlighted the fact that, of the 1,740+ adjudications and decisions since the unjust dismissal scheme in the Code was enacted, only 28 (10 having been rendered post the Federal Court decision) have gone against the principle that employers subject to the Code cannot dismiss their employees without cause. Accordingly, this decision arguably restores the status quo on this issue. However, we note that three of the Justices who dissented from the outcome agreed with the Federal Court's finding that the adjudicator had misinterpreted the Code, and that the context of this case justified a correctness standard of review of the adjudicator's decision.

Our Comments

Note that this legislative scheme applies to non-unionized employees employed by a federally regulated employer who have completed twelve consecutive months of continuous employment, and to any termination without cause, unless it is the result of lack of work or the discontinuance of a function. The range of remedies under the Code are broad and include reinstatement to employment and making the employee "whole" for the losses arising as a result of the dismissal.  The provisions of the Code do not, however, limit an employee's right to bring a civil claim for wrongful dismissal against their employer.

Moving forward, employers should turn their minds to the documentation of progressive discipline and enhancing their performance management programs, given the Court's emphasis on these measures. Additionally, employers will want to assess new employees within the first year of their employment to ensure they are suitable for employment with the company, as employees must have completed twelve months' service in order to make a complaint under the Code.

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