Sunday, 24 July 2016

No Cause? Then No Dismissal for Non-Unionized Federal Employees – The Supreme Court of Canada Shakes Up Canadian Employment Law

At the end of 2015, I proclaimed the Supreme Court of Canada’s decision to grant leave to appeal from a decision of the Federal Court of Appeal the most important decision to Canadian employment law of that year. (See Top Five Cases of Importance to Ontario Employment Law - 2015.) My reason for doing so was simple:

The Federal Court of Appeal’s decision in Wilson v. Atomic Energy of Canada Limited, 2015 FCA 17 was unanimous: A federally regulated employer can dismiss an employee without cause. While that statement may sound obvious, given the provisions of section 240 of the Canada Labour Code the same was far from a given. Indeed, given the Supreme Court’s decision to hear the appeal I would suggest that it still is not.

It is the fact that the Supremes are willing to hear the appeal, which was unanimous, and which upheld a previous decision of the Federal Court suggests to me that the Supreme Court of Canada is not entirely certain that the Federal Court got it right.

Although I somewhat reserved my prediction on matters, it would turn out I was right: The Supremes did grant leave because they doubted the correctness of the Federal Court of Appeal's decision.

On July 14, 2016, the Supreme Court of Canada (“SCC”) laid down its decision in the case of Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29.

In doing so, the Supreme Court has finally settled years of debate among Canada’s employment lawyers as to whether non-unionized federally regulated employees can be let go without cause, with a resounding “No!”.


The case arose out a dismissal of Mr. Joseph Wilson, an administrator for his employer, Atomic Energy of Canada Limited, for four and a half years, who had no record of any disciplinary issues. He was dismissed in November 2009, and promptly filed an unjust dismissal complaint, claiming his dismissal was a reprisal for having complained about his employer’s improper procurement practices. His employer said he was “terminated on a non cause basis and was provided a generous dismissal package”. At common law, a non unionized employee can be legally dismissed without reason or cause if he or she is given reasonable notice or pay in lieu. In 1978, the “Unjust Dismissal” provisions added by Parliament to Part III of the Canada Labour Code (“the Code”) created expansive protections for non-unionized federal workers, similar to those available to employees covered by a collective agreement. A dismissed employee can ask the employer for a written statement setting out the reasons for the dismissal and the employer must then provide the statement within 15 days. If an adjudicator determines that the dismissal was unjust, he or she has broad authority to grant an appropriate remedy, including requiring the employer to pay the person compensation and/or reinstate the person. No complaint can be considered where the employee was laid off because of lack of work or the discontinuance of a function.

Decisions Below

At adjudication, the employer sought a preliminary ruling on whether a dismissal without cause together with a sizeable severance package could ever mean that the dismissal was “unjust”. The Adjudicator held that an employer could not resort to severance payments, however generous, to avoid a determination under the Code about whether the dismissal was unjust.

On application to the Federal Court for judicial review of the Adjudicator’s decision, the Federal Court judge found that decision to be unreasonable because nothing in the Code precluded employers from dismissing non unionized employees on a without cause basis. The Federal Court of Appeal (FCA) agreed, but reviewed the issue on a standard of correctness. The FCA noted that even if the standard was reasonableness, only a very narrow margin of deference would have applied because the statutory interpretation at issue involved “relatively little specialized labour insight”.

For a summary of the decision of the Federal Court see: Federal Court says Terminations Without Cause are Not Intrinsically "Unjust".

For a summary of the decision of the Federal Court of Appeal see: Terminations without Cause are not Automatically Unjust: Federal Court of Appeal .

Decision of the Supreme Court of Canada

For the SCC, the issue was whether Parliament intended to provide an alternative statutory scheme, consisting of expansive protections, much like those available to employees covered by a collective agreement, when it passed the 1978 amendments to the Canada Labour Code.

Writing for the majority of the Court, the Honourable Justice Rosalie Abella, found that the Adjudicator’s decision was both reasonable and consistent with the approach applied by most decision-makers and scholars. She made it clear that decisions of labour adjudicators, who are interpreting statutes within their expertise, attract a reasonableness standard, despite the fact that a handful of adjudicators had taken a different approach to the interpretation of the Code. She also noted the FCA was wrong to calibrate reasonableness by applying a potentially indeterminate number of varying degrees of deference. That view would unnecessarily complicate the standard of review, an area of law she felt requires greater simplicity.

The real issue was whether the Adjudicator’s interpretation of the Code was reasonable. She explained the purpose of Part III of the Code was to ensure that non unionized federal employees would be entitled to protections from being dismissed without cause. Severance pay in lieu of those protections would fall outside the range of reasonable outcomes as it would completely undermine the provisions’ purpose. She noted that when the provisions were introduced, the Minister actually referred to employees “rights to fundamental protections from arbitrary dismissal [– similar to] the protection already a part of all collective agreements”. From those statements, the SCC felt it was clear that Parliament intended to expand the dismissal rights of non unionized federal employees in a way that, if not identically, at least closely matched those held by unionized employees. Further, Madame Justice Abella explained that the common law right to dismiss on reasonable notice without cause or reasons was completely replaced under the Unjust Dismissal provisions of the Code, which does require reasons for dismissal to be provided. The large breadth of discretionary remedies for unjustly dismissed federal employees, including reinstatement would also be inconsistent with a right to dismiss without cause. There would virtually be no role for the plurality of remedies available to the adjudicator.

The bottom line was that the argument that employment can be terminated without cause so long as minimum notice or compensation is given, would essentially render many of the Unjust Dismissal remedies meaningless or redundant. If dismissal without cause were permitted, employers would have the discretion to deprive employees of the full remedial package that Parliament created specifically for them. As such, the scheme must be interpreted as a displacement of the employer’s ability at common law to terminate an employee without reason by merely ensuring reasonable notice is given. Justice Abella explained that this interpretation is consistent with the vast majority of decision-makers and legal scholars. As such, based on parliamentary intention, statutory language, arbitral jurisprudence, and labour relations practice, the Adjudicator’s decision was reasonable and had to be restored.

From there, the Supreme Court of Canada went on to consider the issue of standard of review. For those who are fortunate enough not to practice in the area of administrative law, you can likely skip the Court’s consideration of a review of such a topic. On the issue of standard of review, Justice Abella acknowledged that collapsing the three standards of review into two has not proven to be the “runway to simplicity” the SCC hoped it would be in Dunsmuir. While the goal is to build on the theories developed in Dunsmuir and apply them in a way that eliminates the need to sort cases into artificial categories, she found most of the confusion in the jurisprudence has been over what to call the category of review in a particular case: reasonableness or correctness. She wanted to find a way to move forward that would both respect the underlying principles of judicial review in Dunsmuir, while redesigning implementation to make them easier to apply.

Justice Abella suggested the most obvious reform would be to move to a single reviewing standard of reasonableness. She explained there is nothing in its elaboration of rule of law principles that precludes the adoption of a single standard of review, so long as it accommodates the ability to continue to protect both deference and the possibility of a single answer where the rule of law demands it. In her view, approaching legal analysis by asking whether the outcome falls within a range of defensible outcomes would have the advantage of allowing courts to have a wider range for issues traditionally given a measure of deference, and a more narrow range, even perhaps only one option, for those which formerly attracted a correctness review. Alternatively, if the standards of review framework did not move to this one standard, she suggested it would still be beneficial if the template developed in Dunsmuir were adhered to, namely by applying a “correctness” standard only in the four circumstances Dunsmuir articulated.

Chief Justice McLachlin, together with Justices Karakatsanis, Wagner and Gascon agreed that the standard of review in this case was reasonableness and that the Adjudicator’s decision was reasonable. They also agreed with Justice Abella’s analysis of conflicting interpretations of the Unjust Dismissal provisions, but they found it unnecessary to endorse any particular proposal to redraw the current standard of review framework.

Mr. Justice Cromwell also agreed the standard was reasonableness and that the Adjudicator’s decisions should be restored. He affirmed that reasonableness is a single standard and must be assessed in the context of the particular type of decision making involved and all relevant factors. He also viewed the FCA’s attempt to develop new and apparently unlimited numbers of gradations of reasonableness as inappropriate. However, he disagreed with Justice Abella’s comments on the standard of review, and further explained that he did not think the standard of review jurisprudence required another overhaul.

In dissent were Justices Moldaver, Côté and Brown. They felt that this case exposed a serious concern for the rule of law. In their opinion, presumptively deferential reviews of a decision maker’s interpretation of its home statute was inappropriate. Rather, they felt a correctness review was justified to avoid indiscriminate deference to the administrative state. They explained that the fact that there are lingering conflicting interpretations of the unjust dismissal provisions undermines the very basis for deference. As the legislature could only have intended the statute to bear one meaning, only a correctness standard of review could be considered appropriate.

In explaining their position, they noted that sections 240 to 245 of the Code create a mechanism for employees to challenge the lawfulness of their dismissal. They explained that this procedure is more efficient than a civil action, since it involves less stringent evidentiary rules, an expert adjudicator who is well versed in the factual nuances of employment relationships, and a stricter timeline than a court action. It is both a time and cost effective means of resolving employment disputes. Further, while the additional remedies available to employees who choose to use the unjust dismissal provisions actually demonstrate an increased level of access to justice for federal employees, this fact cannot fundamentally alter the legal basis of the federally regulated employment relationship. An employee is always entitled to challenge the lawfulness of a dismissal in the civil courts, irrespective of whether the employee first chooses to resort to the unjust dismissal procedure in the Code, meaning those same provisions are simply meant to be a procedural option for federal employees.

As such, they argued the common law defines the federal employment relationship and federally regulated employers are thus entitled to dismiss employees without cause, so long as there is payment of the appropriate notice and severance pay as prescribed by ss. 230 and 235 of the Code, the contract of employment, or the common law (whichever is greater). They were careful to note that due to the concurrent jurisdiction of the adjudicator and the courts, the mere provision of a notice and a severance payment does not allow an employer to escape the scrutiny of an adjudicator any more than it would allow the employer to escape the scrutiny of a court. However, as dismissal without cause is not per se unjust, so long as adequate notice is provided, it can stand. Thus, the Adjudicator’s interpretation of ss. 240 to 246 of the Code ought to be set aside and the appeal dismissed.


Before considering the implications of this decision, it is important to remember that the Canada Labour Code governs but a small subset of workers in Canada.

In providing commentary on the decision there are really two approaches one can take to any legal decision: (1) Is the decision what the law demands; (2) Is the decision the one that society still wants?

I note that I was critical of both the decisions of the Federal Court and that of the Federal Court of Appeal. My criticism, however, was focused more on what the courts did not say than it was on what they did. I found myself confused by those decisions and the contortions that they were forced to employ to arrive at the decisions that they so obviously wanted.

In that respect I find myself of the opinion that the Supreme Court’s decision, i.e. employers in federally regulated industries can only terminate an employee’s employment for cause, to be legally sound. The same is clearly what the government of the day intended and it is not now for the court to change that. (Thereby making it somewhat ironic that Justice Brown, criticized by some as an ‘originalist’ when he was appointed to the Court, was in the dissent in this decision.)

As of today there is no ambiguity in the law: A federally regulated employer cannot simply ‘package out’ an employee that it no longer wishes, for whatever reason, to employ. The employer must either have just cause for the termination or be closing up shop, otherwise the employer is stuck with the worker.

Notwithstanding the passage of nearly four decades it is probable, given that workers will almost always outnumber owners, that the simple majority of Canadians would still wish for such protections.

What is less obvious and more susceptible to debate is whether such protections are still economically advisable.

Although the position may sound attractive to some workers, the same often does not withstanding closer scrutiny. There is a lot of undesirable behaviour, which falls short of “just cause.” Key among that group are the lazy, but not so lazy that they can be said to have given their employers just cause for dismissal. Next are those that simply do not ‘fit’ within an organization. “Lack of fit” is typically not “just cause” for dismissal. (However, on this point see the 1994 decision of the Ontario Supreme Court in Mison v. Bank of Nova Scotia, 1994 CanLII 7383 (ON SC), in which Justice Epstein commented at paragraph 43 of her reasons for decision that “I agree that an employer can only dismiss a probationary employee for just cause. However, during probation, “just cause” can be based on a decision that the employee is unsuitable for the job.”) Employers typically do not wish to employ such employees, and most employees do not wish to work alongside such coworkers either. Absent the protections afforded by the Canada Labour Code the problem could be addressed; no more.

So, is the decision correct? Yes. Is it the approach to employment that Canadians want? Given the state of the statutory law outside the federally regulated workplace the answer would appear to be “no.” (For example, Ontario’s Employment Standards Act, 2000, does not provide any sort of protection similar to that of Part III of the Canada Labour Code.) Will this topic come up for debate in any legislature? Unlikely.

Takeaways for Employees with Labour Pains

As mentioned before, this decision will actually affect very few workers in Canada. Very few people actually work in a non-unionized federally regulated place of business. For those who do, however, the decision is a positive. In those rare cases, an employer cannot terminate your employment without just cause. What does “just cause” mean? That’s a complex legal question on which you will need a legal opinion.

Takeaways for Employers with Labour Pains

Before getting upset or becoming worried about this decision, employers need to first consider whether they are even impacted by it. For those who are federally regulated, the decision will be a blow. Getting rid of problem employees just got much, much more complicated.

To subscribe to Labour Pains enter your email address:

Delivered by FeedBurner


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.

No comments:

Post a Comment