In what will no doubt be one of the most impactful employment law cases of the year, the Supreme Court of Canada in Wilson v. Atomic Energy of Canada, 2016 SCC 29 has found that federally regulated employers cannot, absent economic reasons, terminate a non-unionized employee without just cause. The decision appears to have settled a debate that has been ongoing for nearly 40 years as to whether the “unjust dismissal” provisions of the Canada Labour Code preclude an employer from terminating an employee, even if common law severance is provided.
Background
At the outset, it is important to recognize that this decision applies only to companies (and their employees) under federal jurisdiction. This includes banks (not credit unions), companies in telecommunications (such as broadcasting), companies in inter-provincial transportation (planes, trains, shipping and trucking), employees of First Nation bands, the Federal government and federal crown corporations.
Joseph Wilson was hired by Atomic Energy Canada Limited (AECL) in 2005. He worked for 4.5 years before being terminated in 2009. He had a clean disciplinary record. In December 2009, Mr. Wilson filed an “Unjust Dismissal” complaint with Federal Labour Standards.
For those unfamiliar with unjust dismissals, relevant portions of the Code state as follows:
240(1) Subject to subsections (2) and 242(3.1), any person
a) who has completed twelve consecutive months of continuous employment by an employer, and
b) who is not a member of a group of employees subject to a collective agreement,
may make a complaint in writing to an inspector if the employee has been dismissed and considers the dismissal to be unjust.
[…]
242(4) Where an adjudicator decides pursuant to subsection (3) that a person has been unjustly dismissed, the adjudicator may, by order, require the employer who dismissed the person to
a) pay the person compensation not exceeding the amount of money that is equivalent to the remuneration that would, but for the dismissal, have been paid by the employer to the person;
b) reinstate the person in his employ; and
c) do any other like thing that it is equitable to require the employer to do in order to remedy or counteract any consequence of the dismissal.
When prompted for reasons for the termination, AECL stated that Mr. Wilson was “terminated on a non-cause basis and was provided a generous dismissal package that well exceeded the statutory requirements.” A labour adjudicator was appointed, and ultimately found that “an employer could not resort to severance payments, however generous, to avoid a determination under the Code about whether the dismissal was unjust.” Because AECL did not rely on any cause for the termination, the complaint was allowed.
The Federal Court and the Federal Court of Appeal disagreed, finding that a dismissal without cause is not necessarily an unjust dismissal, and noting that nothing in the Code precluded employers from dismissing non-unionized employees without cause. The case ultimately found its way to the Supreme Court of Canada.
The Supreme Court Decision
In a split decision, the Supreme Court issued a decisive judgement in favour of workers. Key to this decision was the historical context behind Parliament’s decision to include ‘unjust dismissal’ provisions in the Code. In fact, on multiple occasions the Court recognized that Parliament intended to create a statutory framework protecting federally regulated employees from arbitrary dismissal, much in the way that unionized employees are protected under collective agreements:
And this, in fact, is how the new provisions have been interpreted by labour law scholars and almost all the adjudicators appointed to apply then, namely, that the purpose [of unjust dismissal provisions] was to offer a statutory alternative to the common law of dismissals and to conceptually align the protections from unjust dismissals for non-unionized federal employees with those available to unionized employees.
Under the common law, an employer may terminate for any reason, provided that reasonable notice of the termination has been provided and that the reasons underlying the termination respect human rights legislation. In fact, explanations such as “this just isn’t working out” or “you are not a right fit for the job” are commonly used when letting an employee go.
This ‘right to dismiss’ creates a major distinction between non-unionized and unionized workplaces, as collective agreements have largely done away with an employer’s unfettered ability to terminate employment for reasons unrelated to performance. Without a strong case for a “just cause” termination or economic layoffs, employers in unionized workplaces have limited room to terminate.
In the Atomic Energy case, the Supreme Court found that federal unorganized workers have comparable protections against arbitrary terminations as those that are enjoyed by unionized workers under collective agreements. To that end, the Court stated that in order for a termination to be ‘just’, the employer must seeks to justify the dismissal by showing that the employee was aware of performance problems, that the employer worked to rectify them, and imposed a “gradual repertoire of sanctions before resorting to the ultimate sanction of dismissal”.
Takeaways
The implications of this decision may be significant. At its simplest, federally regulated employers will have less flexibility in managing their workplace, no matter what is given by way of severance. Terminating employees will be more difficult and more expensive.
Damages for unjust dismissals may also be significant. Filing complaints through the Federal Labour Standards program is often quicker, easier and cheaper than a wrongful dismissal action. Damages also have the potential to be larger, as an adjudicator has the authority to award reinstatement of employment and compensation for lost wages, in much the same way that a labour arbitrator would.
One important final note – the limitation period for unjust dismissal is very short, as an employee will generally only have 3 months following termination to file a complaint.