Federally regulated employers can dismiss an employee without cause but employees can still claim unjust dismissal
The Federal Court of Canada has confirmed that federally regulated employers subject to the Canada Labour Code may dismiss non-union employees without just cause, despite the unjust dismissal provisions contained in the code. This decision was made in the context of a judicial review of a labour adjudicator’s decision in which the arbitrator concluded that federally regulated employers are only permitted to terminate employees for just cause.
The employee in this case, Joseph Wilson, had worked for Atomic Energy of Canada Ltd. (AECL) for four-and-a-half years when his employment was terminated on a without-cause basis. Wilson was provided with a severance package — in excess of his code severance entitlements — equal to six months’ pay. Unsatisfied with this payment, Wilson filed a complaint under the code claiming unjust dismissal. The adjudicator appointed to hear the case found that Wilson’s employment was an unjust dismissal under the code solely because it was not a termination for cause. AECL applied to the court for judicial review of the arbitrator’s decision, arguing that it was unreasonable and an improper interpretation of the code.
Federal Court of Canada decision
After reviewing the decisions relied upon by the adjudicator, Justice O’Reilly of the Federal Court rejected the adjudicator’s conclusion that the code only permits terminations for just cause and overturned the decision. Justice O’Reilly found the adjudicator did not properly interpret the decisions upon which he relied and noted the code provides for notice and severance pay for employees who are dismissed without cause, which is a clear indication that the intent of the code is to allow termination without cause.
Justice O’Reilly went on to clarify that a federally regulated employer may dismiss an employee without cause, provided that it gives notice or severance pay in accordance with the code. It is, however, open to the employee to make an unjust dismissal complaint and request further relief, except in cases where the dismissal was a result of a layoff for lack of work, a discontinuance of the employee’s position or where the employee has a right to another statutory remedy. If the adjudicator determines that, based on the circumstances, the dismissal was unjust, the fact the employer paid the employee severance pay does not preclude the adjudicator from granting further relief, such as additional compensation, reinstatement or another suitable remedy.
This decision alters the previously held view that employees working for federally regulated employers could not be dismissed on a without cause basis. While favourable to employers that are subject to the code, this decision also makes it clear an employee is not precluded from bringing a complaint against his former employer for unjust dismissal if the employee believes the reason for or the terms of the dismissal were unjust, even where the employee is provided with a severance package in excess of his code entitlements.
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Kelly O'Ferrall is an associate practising in the Employment, Labour and Pension Group in the Toronto office of Stikeman Elliott. She can be reached at (416) 869-6842 or [email protected]. Khalfan Khalfan is an articling student with Stikeman Elliott in Toronto. He can be reached at [email protected].
