Dismissal Without Cause Is Not Always an Unjust Dismissal

Last month, the Federal Court of Appeal released a decision of importance to all federally regulated employers. In Atomic Energy of Canada Ltd. v. Wilson, 2015 FCA 17, the Federal Court of Appeal explained that a dismissal without cause is not necessarily an “unjust dismissal” pursuant to s. 240 of the Canada Labour Code.

Facts

The employee worked for Atomic Energy of Canada Ltd. (“AECL”) for four and a half years in a non-management position. He was dismissed without cause and provided with six months’ severance. The severance provided to the employee far exceeded the minimum statutory notice and severance the employee was entitled to, which was a mere 18 days’ pay. The employee filed a complaint pursuant to s. 240 of the Canada Labour Code alleging that he had been “unjustly dismissed”.
The matter was heard before an adjudicator, who held that AECL could not terminate the employee without cause, pay him severance, and characterize the dismissal as just. The decision was judicially reviewed by the Federal Court. The Federal Court concluded that the adjudicator’s decision was unreasonable. The matter proceeded to the Federal Court of Appeal.

Decision

The Federal Court of Appeal explained that the Canada Labour Code sets out a complaints mechanism and remedies for “unjust” dismissals. It does not, however, define the term “unjust”. The common law provides that an employee dismissed without cause is entitled to reasonable notice, or pay in lieu thereof. The Canada Labour Code was enacted against the backdrop of the common law. It does not, either explicitly or by necessary implication, oust the common law.
The Federal Court of Appeal concluded that a dismissal without cause is not automatically an “unjust dismissal” under the Canada Labour Code. When an employee who has been dismissed without cause files a complaint of “unjust dismissal”, an adjudicator must examine the individual circumstances to determine whether the dismissal is “unjust”. There may be some circumstances where a dismissal without cause will be found to be “unjust” but the mere fact that it was a dismissal without cause is not, in and of itself, a sufficient basis to establish the dismissal was “unjust”.

Implications

This decision of the Federal Court of Appeal has resulted in a change of the status quo. Previously, adjudicators commonly held that an employee who was dismissed without cause was “unjustly dismissed” and entitled to a remedy. One of the remedies available, and frequently awarded, was reinstatement of the dismissed employee. This left many employers feeling they had little choice but to retain employees whom they no longer needed or wanted, until they were able to establish cause for dismissal.
Now, federally regulated employers may be able to avoid liability under the “unjust dismissal” provisions of the Canada Labour Code by dismissing an employee without cause so long as they provide the employee with reasonable compensation. This course of action will not preclude an employee from filing an “unjust dismissal” complaint and having an adjudicator examine the surrounding circumstances to determine if the dismissal was “unjust”.  However, a dismissal without cause will no longer result in a prima facie finding that the dismissal was “unjust”.
Although the decision is good news for federal employers, it does leave some matters unresolved in that the Court declined to provide any direction as to the meaning of “unjust”. In this regard, the Court stated as follows at para. 100:
I shall not comment further on the meaning of “unjust.” It is for Parliament’s chosen decision-makers in this specialized field — the adjudicators — to develop the jurisprudence concerning the meaning of “unjust” on an acceptable and defensible basis, not “any basis.” It is for us to review the adjudicators’ interpretations for acceptability and defensibility when they are brought before us.

It therefore remains to be determined what circumstances will result in in a finding of “unjust dismissal” where an employee was terminated without cause.