The Supreme Court of Canada has made it clear that employees of federally regulated entities who are governed by the Canada Labour Code (the “Code”) cannot be terminated without just cause. The Court’s reasoning in Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29 settled a long-standing debate between two schools of thought regarding the appropriate remedy for unjust dismissal complaints under section 242 of the Code.
Prior to this decision, the Federal Court of Appeal, as well as a number of Adjudicators, had concluded that with a sufficient amount of termination and severance pay, any employee may be terminated without cause. This is the case for the vast majority of employers who are provincially regulated, and are able to terminate non-union employees at any time, subject to a few exceptions, including a duty not to discriminate as set out in the Human Rights Code.
The majority of the Supreme Court of Canada took the opposite position, concluding that in the absence of just cause for an employee’s dismissal, it should be considered unjust. The majority found that “unjust dismissal” was intended to mean that the employment relationship should not have been severed in the first place. In finding a way to restore the employee to a position they would be in but for the unjust dismissal, the appropriate remedy is to make it as though the dismissal did not happen. In other words, unjustly dismissed employees are entitled to be reinstated to their original position, with back pay to the date of termination.
Despite the compelling arguments of the Federal Court of Appeal and the dissent of the Supreme Court, the legal effect of the decision in Wilson is to give employees of federally regulated entities the same protection from unjust dismissals as unionized employees under a collective agreement. The majority of the Supreme Court found that looking at the purpose behind adding the unjust dismissal provisions in 1978, the federal Parliament intended to give employees the same protection from termination as their unionized counterparts.
From a practical standpoint, the major legal implications for federally regulated employers are:
1. Reinstatement is the “presumptive” remedy where there is a finding of unjust dismissal. An employee may not be terminated without just cause because Adjudicators have the authority under the Code to reinstate the employee with back pay to the date of termination.
2. Select groups of employees are not protected by the unjust dismissal provisions of the Code. These employees include those who have been employed for less than 12 months, managers, and individuals who are laid off due to lack of work, or are terminated because of the elimination of their job.
3. An assessment of whether an employer has “just cause” to terminate an employee is a fact-based exercise, and is a relatively high threshold. In the absence of extremely serious misconduct, employers are generally expected to exhaust the progressive discipline process before a decision to terminate will be upheld.
4. Prior to the Wilson decision, federal employers would be able to spare employees the distress of being terminated for just cause by simply paying an appropriate period of notice to sever the relationship. This also avoided the need to implement performance improvement plans and progressive discipline. However, these options are now off the table, and proof of just cause is required to terminate an employee.
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