Essentials: Unjust Dismissal

Update by Angie Sung, Lawyer and Paula Krawus, Cofounder

Federally regulated employees who meet the criteria to make an unjust dismissal complaint under the Canada Labour Code (the “Code”) cannot be dismissed without cause. The Code is the federal statute that provides for minimum employment standards and occupational health and safety rules, amongst others, for federally regulated workplaces.

In the seminal case Wilson v Atomic Energy, 2016 SCC 29 (“Wilson”),  the Supreme Court of Canada (the “SCC”) decided that non-unionized, federally regulated employees are statutorily protected from being dismissed without cause. Where a federally regulated employer does dismiss an employee without cause, the dismissal is called “unjust”. The SCC confirmed that a reasonable notice period or pay-in-lieu of notice does not justify an otherwise unjust dismissal.  

The Code provides some exceptions to this rule, including that an employer may dismiss an employee without cause for just economic reasons (e.g. lack of work or discontinuation of services), or if the employer is a manager.

Background

Atomic Energy Canada Limited (“Atomic Energy”) dismissed Mr. Wilson after four-and-a-half years of employment. He was dismissed on a “without cause” basis with a six-month severance package. Afterward, Mr. Wilson filed a “unjust dismissal” complaint pursuant to section 240(1) of the Code.

Mr. Wilson asserted that his employer dismissed him in reprisal after he filed a complaint for improper procurement practices by Atomic Energy. Atomic Energy responded by saying that it let Mr. Wilson go on a “non-cause basis” and gave him a generous severance package exceeding his statutory entitlements under the Code.

The Adjudicator decided in favour of Mr. Wilson and concluded that the Code only permits dismissals “with just cause”. The Adjudicator clarified that a generous severance package did not make the dismissal justified.

Atomic Energy then asked the Federal Court to review the Adjudicator’s decision (i.e. a judicial review). The Federal Court quashed the Adjudicator’s decision. But the case went to the Federal Court of Appeal. In their decision, the Federal Court of Appeal concluded that the Code did not express a rebuttal of the common law principle that employees may be dismissed without cause by providing reasonable notice or pay-in-lieu of notice. The case then went to the SCC.

Decision

The SCC sided with the original decision made by the Adjudicator.

The SCC stated that the Code replaced the common law principle that a without cause dismissal could be justified with a reasonable notice or pay-in-lieu of notice. The Court found that if unjust dismissal complaints were not permitted, it would frustrate other parts of the Code. Specifically, reinstatement as a remedy for an unjust dismissal.

To arrive at that decision, the SCC considered the purpose of the termination pay provisions (s. 230(1) and s. 235(1)) in the Code and the legislative intent of enacting unjust dismissal provisions (s. 240-246).

The purpose of the termination pay provisions is to provide minimum standards to termination pay, and to provide alternative recourse for dismissed employees outside of the court system.

The purpose and intent of the unjust dismissal provisions are to:

“Provide employees not represented by a union, including managers and professional, with the right to appeal against arbitrary dismissal – protection the government believes to be a fundamental right of workers and already a part of all collective agreements.”

In essence, the unjust dismissal provisions under the Code provide that no one should be dismissed without just cause.

During a just cause dismissal, where the employee is dismissed without notice or pay-in-lieu of notice, the onus is on the employer to prove that the dismissal was justified by proving on a balance of probabilities that the employee breached the employment contract in a fundamental way or committed misconduct that has irreparably damaged the employment relationship.

Key Take Away for Employees

A federally regulated employee who meets the criteria for an unjust dismissal complaint may do so under the Code. The employee could simultaneously pursue a civil claim in court for common law reasonable notice (or pay in lieu). However, there are rules against double recovery.

Key Take Away for Employers

A federally regulated employer takes on considerable risk when dismissing an employee without just cause or where the just cause allegations are tenuous. An employee who meets the criteria can file an unjust dismissal complaint under the Code. The onus is on the employer to justify the dismissal, and the threshold is a heavy one. There are particular rules with tight deadlines an employer must follow under the Code when they are faced with a complaint or asked by an employee to provide written reasons for the dismissal. Employers need to tread cautiously when dismissing an employee and should always get legal advice.