Employment contract bars unjust dismissal complaint

Termination clause specified Canada Labour Code minimums — which employer fulfilled — and employee had no evidence of unjust dismissal factors

Sometimes it may feel to employers that it’s very difficult to dismiss an employee, and this has some element of truth. The reality is that the bar is high if an employer alleges just cause for dismissal, but if the dismissal is without cause, it’s pretty simple as long as the employer meets its notice and severance obligatations.

Federally regulated employers are subject to a different employment standards regime than their provincially regulated counterparts, including some differences with regards to wrongful dismissal — called unjust dismissal in the Canada Labour Code. However, recent decisions have reinforced the fact that there’s nothing standing in the way of dismissal without cause, as long as legal obligations are upheld. And, as was determined in one recent case, an employment contract with a specific and legal termination provision is just as valid for a federally regulated employer as any other.

Last year, the Federal Court had the opportunity to settle an ongoing debate about whether or not terminations without cause are permitted by the Canada Labour Code. This was an important question because of the unique statutory regime governing federally regulated employers and the possible remedies — such as reinstatement — that are available to employees who have been unjustly dismissed. Put simply, if a without-cause termination is not considered to be “unjust,” then those employees terminated without cause would not be permitted to seek redress under the code.

After reviewing the code in its 2013 judgment in Atomic Energy of Canada Ltd. v. Wilson, Justice James O’Reilly concluded, “There is no basis for concluding that the CLC only permits dismissals for cause. That conclusion would fail to take account of the clear remedies provided in ss. 230 and 235 (notice and severance) for persons dismissed without cause.”

Instead, according to Justice O’Reilly, the code sets out the following regime for dismissals:

• An employer can dismiss an employee without cause so long as it gives notice or severance pay, as required (ss. 230 and 235).
• If the employee believes the terms of her dismissal were unjust, she can file an unjust dismissal complaint (s. 240).
• In addition, the employee can complain if she believes the reason given by the employer for the dismissal was unjustified or if the dismissal is otherwise unjust (such as based on discrimination or reprisal).
• If the adjudicator concludes that the dismissal was unjust, she has broad remedial powers (s. 242(4)).
• The only exceptions to the general right to make a complaint is where the dismissal resulted from a layoff for lack of work or a discontinuance of the employee’s position, or the employee has some other statutory remedy (s. 242(3.1)).

Sigloy v. DHL Express

After Wilson, there was some question about how the ruling would be applied by code adjudicators and what its repercussions would be.

This year, in Sigloy and DHL Express (Canada) Ltd., Re, the first reported decision to consider Wilson, the issue was whether an adjudicator had jurisdiction to hear a complaint of unjust dismissal where the employer did not allege just cause and the employee’s notice and severance entitlements were governed by an employment contract.

Filo Sigloy was hired by DHL Express (Canada), Ltd. on or about Sept. 20, 2010, into a bargaining unit position. On May 1, 2012, he was promoted to a non-union position for which he signed an employment contract containing the following termination clause:

“This agreement and your employment hereunder may be terminated as follows:

(a) You may terminate this agreement for any reason upon fourteen (14) days prior notice in writing to the Company.

(b) By the company at any time without notice for Cause in which case your employment shall terminate immediately upon receipt of written notice setting out the Cause of termination. “Cause” shall include, but not be limited to, a material breach of the terms of this Agreement.

(c) The Company may terminate your employment at any time giving you the greater of two (2) weeks’ notice in writing or the minimum notice and severance required by the Canada Labour Code. No other notice or severance requirement, expressed or implied, shall apply. Upon termination of your employment you will return all DHL property, materials, reports, keys, cards, etc. that you have in your possession or control to DHL (emphasis added) .”

On Oct. 9, 2012, DHL terminated Sigloy without cause and provided him with two weeks’ pay in lieu of notice and five days severance, fulfilling the minimum requirements of the code. Sigloy filed an unjust dismissal complaint under the code.

DHL raised a preliminary objection, arguing that the arbitrator was without jurisdiction to hear the complaint because Sigloy was not unjustly dismissed. According to DHL, Sigloy’s termination was not “unjust” because the code permits dismissals without cause; the dismissal occurred pursuant to a valid and enforceable employment contract; the statutory requirements for termination pay and severance pay were met; and Sigloy did not allege that the dismissal was discriminatory, the result of reprisal, or in bad faith.

Relying on the analysis in Wilson, the adjudicator agreed with DHL and dismissed the complaint.

“Summarizing, (Sigloy) entered into a valid and enforceable contract of employment, the terms of which were in compliance with the code. Further, (Sigloy’s) initial complaint does not allege the dismissal involved discrimination, reprisal or bad faith. In the circumstances, I find I am without jurisdiction and grant the employer’s preliminary objection. Accordingly, the complaint is dismissed,” said the adjudicator.

Takeaways for employers

This decision has some important takeaways for federally regulated employers, the most obvious of which is the importance of having valid and enforceable employment contracts containing termination clauses meeting the minimum requirements of the code with all employees. Additionally, this decision reinforces that employers must always act in good faith when terminating an employee because a valid contract will not bar an unjust dismissal complaint where the dismissal was motivated by discrimination, reprisal or was otherwise in bad faith.

This decision also raises strategic considerations for both employers and employees in future cases. Where an employer is debating whether it has just cause to terminate an employee and the employee has a contract with a valid termination clause, it may make financial sense to terminate the employee without cause and provide compensation in accordance with the contract to insulate the employer from the costs of an unjust dismissal complaint and a potential award under the code if the dismissal is ultimately found to be without cause.

Conversely, there will likely be a spike in employees who allege that their termination was discriminatory or in bad faith as a means of avoiding the preliminary objection raised in this case.

For more information see:

Sigloy and DHL Express (Canada) Ltd., Re, 2014 CarswellNat 815 Can. Adjud.(CLC Part III)).
Atomic Energy of Canada Ltd. v. Wilson, 2013 CarswellNat 3191 (F.C.).

Justin Tetreault is an associate with Grosman, Grosman & Gale LLP in Toronto. He represents both employers and employees in all aspects of labour, employment and human resources law with a particular focus on wrongful dismissal litigation. He can be reached at [email protected]

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