SCC clarifies federal employers' right to dismiss employees without cause

In a decision released on July 14, 2016, the Supreme Court of Canada placed significant restrictions on federally-regulated employers’ right to terminate employees on a “without cause” basis.

The employee, Wilson, filed an unjust dismissal complaint under the Canada Labour Code (“CLC”) after his employer terminated his employment and provided him with pay in lieu of reasonable notice.  The employer sought a preliminary ruling to dismiss the complaint on the basis that without cause terminations (i.e., terminations achieved by providing the employee with reasonable notice or pay in lieu) were “just” and permissible under the CLC.  The adjudicator rejected the employer’s argument and held that employers cannot resort to severance payments, however generous, to preclude a finding under the CLC that a termination was unjust.  The adjudicator’s decision was overturned by the Federal Court, and the Federal Court’s decision was upheld by the Federal Court of Appeal.

The Supreme Court of Canada overturned the Federal Court of Appeal’s decision, ruling that Parliament clearly intended the unjust dismissal provisions of the CLC to displace the common law by providing non-union federal employees with a protection against without cause dismissal analogous to that afforded to unionized employees.

While the decision is an unwelcome one which is likely to have a significant impact on federally-regulated employers, it is important to note that it did not deal with the issue of remedy. The initial decisions under the unjust dismissal provisions drew a distinction between an unjust dismissal of a non-union employee and dismissal without cause of a unionized employee on the basis of the remedies available.  For unionized employees the presumptive remedy is reinstatement.  That may not be the case under the CLC.  The Supreme Court of Canada did not address that issue and, consequently, it may well be that a severance payment is an appropriate remedy.

It is important to note that employees can still be laid off for legitimate business reasons, i.e., where a lack of work exists or where a function is eliminated.  In addition, the unjust dismissal provisions of the CLC do not apply to employees who have worked for an employer for less than 12 months.

Wilson v. Atomic Energy of Canada Ltd., 2016 SCC 29

Questions relating to the content of the article may be directed to Mark Colavecchia.