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Non-unionized employees in federally regulated industries cannot be dismissed without cause, Supreme Court of Canada confirms

August 25, 2016

In Canada, unionized employees are typically protected by collective agreements from discharge without cause. On the other hand, subject to the terms of their employment contracts, non-unionized employees may typically be fired without cause, provided they are given reasonable notice or pay in lieu thereof. There are exceptions. Thus, section 240 of the Canada Labour Code, added in 1978, allows non-unionized employees in industries within federal jurisdiction to complain of unjust dismissal and obtain remedies that include reinstatement as well as damages. These provisions were interpreted by adjudicators as mandating that non-unionized employees who had been employed for a certain period of time could not be dismissed without just cause, regardless of notice, although a minority of adjudicators decided otherwise.

In 2013, siding with this minority, the Federal Court of Appeal held that s.240 of the Code does not preclude an employer from dismissing an employee without cause, as long as it provides the minimum notice and severance pay prescribed by s.230 of the Code, and the dismissal is not otherwise unjust. Now, however, in a landmark decision, the Supreme Court of Canada has ruled (6-3) that s.240 of the Code provides non-unionized employees with the same just cause protection afforded to those employees who are unionized.

The Facts:

At the time of his dismissal, Joseph Wilson had worked for Atomic Energy of Canada Limited (AECL), a federal Crown corporation responsible for managing Canada's nuclear program, for approximately four-and-a-half years, first as a senior buyer/order administrator and then, following several promotions, as a procurement supervisor.

On November 16, 2009, after complaining about improper procurement practices on the part of AECL, Wilson's employment was terminated by AECL on a "without cause" basis and he was provided with a severance package equaling 24 weeks' pay. In December 2009, Wilson brought a complaint under s.240(1) of Part III of the Canada Labour Code, which states, in part, that "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."

Section 242(4) of the Code sets out remedies available from an adjudicator that may include, at the adjudicator's discretion, reinstatement: "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."

Pursuant to section 230(1) of the Code, notice or pay in lieu of notice is due in the event of dismissal without just cause. "[A]n employer who terminates the employment of an employee who has completed three consecutive months of continuous employment by the employer shall, except where the termination is by way of dismissal for just cause, give the employee either (a) notice in writing, at least two weeks before a date specified in the notice, of the employer's intention to terminate his employment on that date, or (b) two weeks wages at his regular rate of wages for his regular hours of work, in lieu of the notice." Section 235(1) of the Code similarly requires an employer to provide for severance pay in prescribed amounts "except where the termination is by way of dismissal for just cause…."

Wilson's complaint was upheld by Adjudicator Stanley Schiff in 2012, but the award was quashed by the Federal Court in 2013. Wilson launched an appeal to the Supreme Court of Canada from a decision of the Federal Court of Appeal to the same effect, written on behalf of that Court in 2015 by Justice David Stratas.

The Majority Decision:

In a 6-3 split, a majority of the Supreme Court of Canada allowed the appeal, ruling that non-unionized employees in industries within federal jurisdiction cannot be dismissed without cause under the Canada Labour Code.

On the merits, Abella framed the issue as "whether Parliament's intention behind amendments to the Canada Labour Code in 1978 was to offer an alternative statutory scheme consisting of expansive protections much like those available to employees covered by a collective agreement." Opining that this "is exactly what Parliament's intention was," and that the arbitrator's decision was reasonable, she reasoned:

The text, the context, the statements of the Minister of Labour when the legislation was introduced, and the views of the overwhelming majority of arbitrators and labour law scholars, confirm that the entire purpose of the statutory scheme was to ensure that non-unionized federal employees would be entitled to protection from being dismissed without cause under Part III of the Code. The alternative approach of severance pay in lieu falls outside the range of "possible, acceptable outcomes which are defensible in respect of the facts and law" because it completely undermines this purpose by permitting employers, at their option, to deprive employees of the full remedial package Parliament created for them. The rights of employees should be based on what Parliament intended, not on the idiosyncratic view of the individual employer or adjudicator.

In regard to legislative intent, Abella pointed to a statement made by the Minister of Labour when the amendments were introduced in the House of Commons that: "It is our hope that [the amendments] will give at least to the unorganized workers some of the minimum standards which have been won by the organized workers and which are now embodied in their collective agreements." [emphasis added in Court decision] She also quoted his statement to the Standing Committee on Labour, Manpower and Immigration in March 1978 that: "The intent of this provision is to provide employees not represented by a union … 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." Finally, she referenced the Minister's statement in August 1977 that the definitions of the terms "just" and "unjust" would be guided by the "vast body of arbitral jurisprudence on dismissals in the organized sector," and that "the application of the principles of fairness and common sense have established pretty clearly what constitutes just or unjust dismissal." Based on these passages, Abella concluded:

The references … to the right of employees to "fundamental" protection from arbitrary dismissal and to the fact that such protection was "already a part of all collective agreements", make it difficult, with respect, to draw any inference other than that Parliament intended to expand the dismissal rights of non-unionized federal employees in a way that, if not identically, then certainly analogously matched those held by unionized employees.

Turning to the legislation itself, Abella held that a restrictive interpretation was also inconsistent with the scheme set out in the Code, stating:

[T]he foundational premise of the common law scheme — that there is a right to dismiss on reasonable notice without cause or reasons — has been completely replaced under the Code by a regime requiring reasons for dismissal. In addition, the galaxy of discretionary remedies, including, most notably, reinstatement, as well as the open-ended equitable relief available under s. 242(4)(c), are also utterly inconsistent with the right to dismiss without cause. If an employer can continue to dismiss without cause under the Code simply by providing adequate severance pay, there is virtually no role for the plurality of remedies available to the adjudicator under ss. 240 to 245. [emphasis in original]

Again, the fact that legislative schemes in Nova Scotia and Quebec use more explicit language requiring cause did not, according to Abella, indicate that Parliament had the opposite intent in enacting s.240. Indeed, Abella held that the schemes in Quebec and Nova Scotia supported her interpretation as they had "significant structural similarities" to the federal statute, in that they applied to employees who had completed a certain length of service and did not apply to cases of dismissal for economic reasons or layoffs. To quote Abella: "Like the federal scheme, the two provincial ones have been consistently applied as prohibiting dismissals without cause, and grant a wide range of remedies such as reinstatement and compensation."

Once again emphasizing the importance of adhering to the intention of Parliament, Abella stated:

The remedies newly available in 1978 to non-unionized employees reflect those generally available in the collective bargaining context. And this, as [the Minister of Labour] stated, is what Parliament intended. To infer instead that Parliament intended to maintain the common law under the Code regime, creates an anomalous legal environment in which the protections given to employees by statute — reasons, reinstatement, equitable relief — can be superseded by the common law right of employers to dismiss whomever they want for whatever reason they want so long as they give reasonable notice or pay in lieu. This somersaults our understanding of the relationship between the common law and statutes, especially in dealing with employment protections, by assuming the continuity of a more restrictive common law regime notwithstanding the legislative enactment of benefit-granting provisions to the contrary….

AECL's argument that employment can be terminated without cause so long as minimum notice or compensation is given, on the other hand, would have the effect of rendering many of the Unjust Dismissal remedies meaningless or redundant. The requirement to provide reasons for dismissal under s. 241(1), for example, would be redundant. And, if an employee were ordered to be reinstated under s. 242(4)(b), it could well turn out to be a meaningless remedy if the employer could simply dismiss that employee again by giving notice and severance pay. These consequences result in statutory incoherence. Only by interpreting ss. 240 to 246 as representing a displacement of the employer's ability at common law to fire an employee without reasons if reasonable notice is given, does the scheme and its remedial package make sense.

Moreover, in Abella's view, the fact that, under s.246, a dismissed employee can choose to pursue a claim of wrongful dismissal in civil courts for damages for an inadequate notice period does not detract from the significantly more expansive remedies available should an employee elect to proceed under the Code.

In the result, remarking that the adjudicator's decision was "anchored in parliamentary intention, statutory language, arbitral jurisprudence, and labour relations practice," and that "[t]o decide otherwise would fundamentally undermine Parliament's remedial purpose," Justice Abella for the majority allowed the appeal and restored the adjudicator's decision.

The Minority Dissent:

Writing a dissenting opinion on behalf of three judges, Justices Suzanne Côté and Russell Brown would have upheld the Federal Court of Appeal's ruling, declaring that "[a] dismissal without cause is not per se unjust, so long as adequate notice is provided."

Côté and Brown set out the "narrow question" before the Court as: "Is a dismissal without cause automatically an unjust dismissal that always entitles an employee to a remedy under s. 242(4)? Or, as the Federal Court and Federal Court of Appeal both found in this case, is a dismissal without cause potentially an unjust dismissal (depending on the circumstances) that could entitle an employee to a remedy under s. 242(4)?" [emphasis in original]. In this regard, they held that the scheme of the Code provisions supported the latter interpretation.

Côté and Brown identified the "fundamental flaw" in the majority's interpretation as their failure to read the provisions in their "broader context." In this regard, they noted that "[b]ecause ss. 230 and 235 of the Code do not apply to dismissals for just cause … they must necessarily apply to dismissal without cause. Otherwise they would be substantially redundant." Determining that these provisions therefore indicated that "Parliament clearly intended to permit federally-regulated employers to dismiss non-unionized employees without cause," Côté and Brown also rejected the majority view that the severance and notice provisions applied only to managers, those who were laid off due to lack of work, or employees who had worked for the employer for more than three but less than 12 months.

Côté and Brown also disagreed that the majority interpretation of ss.240 to 245 was supported by legislative history, finding instead that Parliament's decision not to use the language of "just cause" indicated that it "did not intend to use these amendments to enact a 'just cause' regime for non-unionized employees." Moreover, they considered the Minister of Labour's reference to "minimum standards" that did not "match" those of unionized employees to provide a "frail basis for" the majority's argument that Parliament intended to "expand the rights of non-unionized employees in a manner that identically matches those held by unionized employees…." Opining that the addition of ss. 240 to 245 to the Code did not create "a 'just cause' regime," the minority further noted that it was up to the Minister to decide whether to appoint an adjudicator under these provisions, and that "[i]t would, in effect, be up to the Minister to decide in any case whether the employer was entitled to dismiss an employee without cause." They also endorsed the Federal Court of Appeal's reasoning that the fact that Parliament did not use the term "just cause" as had been done in Nova Scotia supported a more restrictive interpretation.

Finally, the minority rejected the majority's view that a more restrictive interpretation would render the unjust dismissal remedies redundant. First, they held that the requirement to provide reasons was "simply an evidentiary tool for inspectors and adjudicators, not a wholesale change to the nature of the employment relationship." Second, they held that reinstatement was not inconsistent with a "without cause" regime, noting that an adjudicator might consider reinstatement where an employee was fired for discriminatory or arbitrary reasons and the employment relationship was not irreparably damaged.

Comment:

The majority's decision that federally-regulated employers are prevented from terminating non-managerial employees without cause is reliant on Parliament's legislative intent, set out in Hansard and elsewhere. In addition to the statements made by Minister of Labour Munro in Parliament, quoted by the majority above, the Minister wrote the following in August 1977 in the Labour Gazette (quoted in part by the majority):

The proposed protection against unjust dismissal will be breaking new ground in Canada. It will give the unorganized worker a procedure for appealing against a dismissal he believes to be unjust. Several other countries, including Britain, West Germany, India and Australia, have enacted such legislation. So far it has been omitted from our federal and provincial labour laws. I think the time has come to extend this elementary right to non-union workers.

It will simply give them a mechanism for appealing alleged unjust dismissal which will be the equivalent of the protection unionized workers now enjoy under their collective agreements. All agreements under Part V of the Labour Code make it mandatory for contracts to contain a means of settling grievances over dismissal. It is only fair that we demonstrate the same concern for the unorganized worker.

I realize that the terms "just" or "unjust" are sometimes difficult to define. However, we have a vast body of arbitral jurisprudence on dismissals in the organized sector. They contain precedents that will enable arbitrators to determine whether a firing is warranted or not. Each case has to be decided according to its circumstances, but the application of the principles of fairness and common sense have established pretty clearly what constitutes just or unjust dismissal.

In any event, the interpretation of s.240 of the Canada Labour Code can now be considered to have been definitively settled for employees working in industries within federal jurisdiction. Legislation in Quebec and Nova Scotia is to the same effect, i.e. that non-unionized employees, like unionized employees, cannot be fired without just cause. Whether Ontario's employment standards legislation should provide similar protections is currently under consideration by the Changing Workplaces Review, conducted by two Special Advisors appointed by the provincial government. Their final report is expected by the end of the year.