Cracking the code: Federal Court of Appeal confirms employers can dismiss employees without cause under the Canada Labour Code

February 11, 2015

For a number of years, there have been differing viewpoints on whether Part III of the Canada Labour Code (the Code) permits dismissals on a without cause basis. In October 2013, we discussed the decision of Joseph Wilson v. Atomic Energy of Canada Limited, wherein the Federal Court held that federally regulated employers may dismiss its employees without cause. Recently, the Federal Court of Appeal (the FCA) confirmed such an approach. After analyzing the diverging viewpoints on the topic, the FCA made clear that employers subject to the Code may dismiss non-union employees without just cause, despite the “unjust” dismissal provisions contained therein.

Key to the FCA’s conclusion was the common law of employment. As employers are well aware, at common law, an employer can terminate non-unionized employees without cause so long as it satisfies its common law severance obligations. The FCA held that absent explicit language of “irresistible clearness” the employer’s common law right to dismiss an employee without cause cannot be removed. The FCA concluded that the Code does not contain such explicit language.

Mr. Wilson argued that the Code “bestows a right to the job” and not simply reasonable notice as under the common law. The FCA disagreed noting that nothing in the Code or in its purpose suggests that the Code grants non-unionized employees a “right to the job” or suggests that non-unionized employees be in the same place as unionized employees i.e. protection from without cause dismissal. In fact, the FCA pointed to sections 230 and 235 of the Code and found that these sections “expressly allow an employer to terminate an employment relationship even without cause” so long as proper notice and/or compensation is given.

Additionally, the FCA noted that the remedies available to adjudicators under section 242 of the Code to reinstate employees and to require an employer to “counteract any consequence of the dismissal.” are new statutory remedies, which are over and above remedies available under the common law. The FCA held that these statutory remedies do not support the proposition that federally regulated employers are precluded from dismissing employees without cause.

Lastly, at the Federal Court level, Justice O’Reilly made clear that while federally regulated employers are not precluded from dismissing employees without cause, it is still open to the employee to make an “unjust” dismissal complaint and request further relief. Justice Stratas of the FCA avoided making a determination on the definition of “unjust” in this context, but did note that “just dismissal” entails “dismissal based on an objective, real and substantial cause…entailing action taken exclusively to ensure the effective operation of the business.” In other words, an employer’s decision to terminate should relate to the proper functioning of its business and not based on “caprice, convenience or purely personal disputes.” In the end, the FCA left it to Parliament and adjudicators to further develop the meaning of an “unjust dismissal”.

Our Thoughts

This decision confirms employees working for federally regulated employers can be dismissed without cause. However, a dismissed employee is not precluded from bringing a complaint against his or her former employer for “unjust” dismissal if the employee believes the reason for the terms of the dismissal were unjust, even where the employee is provided with a severance package greater than his or her entitlements under the Code. While this decision is welcomed news for employers, the extent to which an employee may nevertheless advance a claim of “unjust dismissal” remains to be further developed.

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