A recent Federal Court of Appeal decision has provided some clarity on the meaning of an “unjust dismissal”, and in doing so offers some added piece of mind to employers in federally regulated industries who want to make adjustments to their labour force.
Employees who work in industries such as aviation, telecommunications, and international shipping, are governed by the Federal Canada Labour Code (the “Code”), as opposed to provincial employment standards legislation such as the British Columbia Employment Standards Act. One of the most significant differences between most provincial employment statutes and the Code is that, under the Code, employees who have been employed for 12 months and are not managers are entitled to challenge the termination of their employment before an appointment arbitrator, and argue that their dismissal was “unjust”. Arbitrators who agree with the employee’s position have broad remedial powers, including reinstating the employee and providing her with lost wages to the date of reinstatement.
Until recently, there had been some disagreement among different courts as to whether a “without cause” dismissal is also always an “unjust” dismissal. With the decision of Wilson v. Atomic Energy of Canada Ltd., 2015 FCA 17 the Federal Court of Appeal has now settled this conflicting line of cases, and ruled that just because a dismissal was without cause, this does not mean it was “unjust” under the Code.
Federal Court of Appeal Decision
The appellant in Wilson was initially dismissed without cause and given 6 months’ severance pay. He brought an unjust dismissal complaint against his employer, and the adjudicator accepted his submission that a without cause dismissal can, in itself, be unjust. The employer appealed to the Federal Court, which accepted its submission that the arbitrator’s interpretation of the Code was unreasonable, and remitted the case back to the arbitrator. Mr. Wilson appealed to the Federal Court of Appeal.
The appeal court observed the many conflicting arbitration decisions on this issue, and concluded that this state of discord required it to “break the tie.” The Court decided that a dismissal without cause is not automatically unjust, and the circumstances of the particular case must be examined.
Key to its conclusion was the relationship between the common law and Part III of the Code: To oust the common law, Parliament must do so with “irresistible clearness.” Since Parliament had not expressed any clear intention in Part III to limit the right of an employer to terminate an employment relationship only where just cause existed, the common law of employment still applied.
The Court also cited this ruling as consistent its earlier decision in Canadian Imperial Bank of Commerce v. Boisvert, 2 F.C. 431, 68 N.R. 355 (Fed. C.A.), wherein it defined a just dismissal as a
dismissal based on an objective, real and substantial cause…entailing action taken exclusively to ensure the effective operation of the business”, based on something other than “caprice, convenience or purely personal disputes.
The Court concluded by stating it would not comment further on the meaning of “unjust”, but would leave it for adjudicators to develop its meaning on an acceptable and defensible basis.
Implications for Employers
The Wilson decision answers one question definitively, by stating that federally regulated employers have a right to dismiss employees without cause and pay them any severance to which they are entitled.
However, it remains to be seen whether future decisions will further refine what kind of specific circumstances will be required for an employee to establish that her dismissal was unjust. Employers should insulate themselves from unjust dismissal complaints by treating employees fairly at the time of dismissal, avoiding allegations of wrongdoing that they may not be able to later substantiate, and paying employees fair separation packages upon dismissal.
A final caveat: It appears the matter is not yet settled. The Supreme Court of Canada has granted the employee in Wilson leave to appeal, with the result that Canada’s highest Court will eventually be providing a third level of review to the adjudicator’s decision. Stay tuned!
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