Friday, 23 June 2017

Can Employers Opt-In to the Common Law to Opt-Out of the Canada Labour Code?

(c) istock/kieferpix

Given the considerable effort that has been expended as of late in trying to have employees opt out of the common-law regime of reasonable notice, see e.g. my discussion of termination clauses in my post Will Wood Finally Answer the Question of Benefits? There’s Hope., it is almost unfathomable that employers would even consider attempting to contract in to such a regime. However, when one considers the remedies to which employees employed pursuant to the provisions of Canada Labour Code can have access, a payment in lieu of reasonable notice would be the lesser of two evils.

It now settled law that the employment of non-managerial employees, employed for more than 12 consecutive months, who are employed pursuant to the provisions of Canada Labour Code cannot be terminated absent the employer showing just cause for termination: Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29 (CanLII), about which I wrote in my post No Cause? Then No Dismissal for Non-Unionized Federal Employees – The Supreme Court of Canada Shakes Up Canadian Employment Law. Moreover, as the more recent case of Randhawa v Bank of Nova Scotia, 2017 CanLII 4774 (ON LA) demonstrates, where a complaint of unjust dismissal under the Canada Labour Code is upheld, the default remedy must be reinstatement. Reinstatement is much more intimidating than a severance payment.

And so the question is begged: Can employees contractually - and preemptively - opt out of the unjust dismissal regime established by the Canada Labour Code in favour of the common-law regime of reasonable notice and wrongful dismissal?

The answer would appear to be “no.”

In the case of National Bank of Canada v Canada (Minister of Labour), (1998) 151 FTR 302 (FCA), the Federal Court of Appeal grappled with the question of whether a non-unionized, federally regulated employee could, upon termination, sign a full and final release in exchange for a severance package. The language of the full and final release precluded the employee from exercising his right under the Canada Labour Code to bring a complaint for unjust dismissal. Despite the release between the parties, the employee filed a complaint for unjust dismissal anyway.

The appeal decision concerned an appeal of the decision of Justice Rothstein (as he then was) sitting as a motions judge who, in interpreting subsection 168(1) of the Canada Labour Code, concluded that a settlement reached between an employer and an employee upon the dismissal of the employee did not prevent the laying of a complaint for wrongful dismissal by that employee under section 240 of the Code.

Subsection 168(1) of the Canada Labour Code provides, in effect, that Division XIV of the Code, which deals with the right to lay a complaint for wrongful dismissal, applies "notwithstanding any other law or any custom, contract or arrangement". Justice Rothstein was of the view that any settlement contract between an employer and an employee is subject to the minimum statutory requirements established in favour of employees in Part III of the Code. Therefore, the employee was entitled to resort to the mechanism of complaint for unjust dismissal and the Minister, pursuant to the complaint and the unsuccessful efforts of the inspector to assist the parties in settling the complaint, had the authority under section 242 of the Code to appoint an adjudicator to hear the complaint.

In a decision released from the bench, the Federal Court of Appeal denied the employer’s appeal.

That decision leads me to the conclusion that there is no possible way that an employee could contract out of the protections of the Canada Labour Code. While subsection 168(1) preserves the right of parties to contract out of the minimum provisions of that statute, the same is only true if such contractual arrangement confers a benefit more favourable to the employee than his rights or benefits under the law. (An example of where a contract would confer a more favourable benefit than the minimum standard would be a wage greater than minimum wage or more vacation time than the minimum prescribed period.) Reasonable notice of termination, or a payment in lieu thereof, is nowhere near as good a benefit as near-absolute security of tenure.

Moreover, a reading of the Supreme Court’s decision in Wilson reinforces the opinion that the provisions of the Canada Labour Code were intended to create a regime similar to that appreciated by those employed pursuant to the terms of a collective agreement, meaning: no cause, no dismissal.


So what does this really mean in the grand scheme of things? Not a whole lot to be honest.

First of all, very few employees in Ontario are employed pursuant to the terms of the Canada Labour Code. If you are unsure whether that law applies to your employment, have a look at my page: Which Laws Apply?

Second, most of those employees who are employed in federally regulated workplaces already work in unionized environments, meaning that cause has always been required to terminate their employment in any event.

Finally, for those employees who would prefer to receive a severance package, rather than applying for their job back, section 246 of the Code expressly preserves their right to seek a civil remedy in the courts. The unjust dismissal procedure set out in sections 240 to 245 of the Code is not the exclusive mechanism available to federally regulated employees to challenge the lawfulness of a dismissal.

Takeaways for Employees with Labour Pains

If you are an individual, employed in a federally regulated workplace and your employer attempts to terminate your employment without you having done anything wrong seek legal advice before doing anything else. Even if you have signed a full and final release (which you should never do before speaking with an experienced employment lawyer), and even if your contract of employment says that your employer can terminate your employment without cause, you may still have options available to you.

If you are an individual looking for assistance with respect to the interpretation or enforceability of the terms of your employment contract, the professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP would be happy to be of service to you.

Takeaways for Employers with Labour Pains

Employers, unless you are involved in one of those few industries that are governed by federal labour regulations this post is really of no consequence to you. However, if you are a federally regulated workplace, then you need to be mindful of the rules governing termination.

If you are an employer and you need to make changes to the terms of your employee’s employment, or if you want to introduce written employment agreements with your staff, the professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization.

Contact Me

To reach the author of this blog, Sean Bawden, email or call 613.238.6321 x260.

Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

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