Canada: Canada Labour Code Clarified: Supreme Court Rules That Non-Unionized Employees Can Only Be Dismissed With Cause

Co-author: Coleman Brinker

At common law, a non-unionized employee may be dismissed without cause or reasons if he or she is given reasonable notice of termination or pay in lieu. However, for non-unionized federal employees, the Supreme Court of Canada has recently clarified that the common law was replaced under the Canada Labour Code (Code) by a regime requiring just cause for dismissal.

As previously reported in Workwise, in 2015, the Federal Court of Appeal (FCA) issued what appeared to be a game-changing decision¹ by ruling that non-unionized employees could be dismissed without cause under Part III of the Code. An appeal brought the matter before the Supreme Court of Canada (SCC). In the decision of Wilson v. Atomic Energy of Canada Ltd, 2016 SCC 29 (Wilson), the SCC held that the Code provides non-unionized federal employees with significant protection from dismissals without cause, even where adequate severance pay is provided.² Specifically, the Code stands in the way of an employer's common law right to provide reasonable notice (or payment in lieu) to dismiss a non-unionized employee without cause.

Mr. Joseph Wilson was employed as a non-unionized worker by Atomic Energy Canada Limited (AECL) for four and a half years until he was dismissed on a without-cause basis in November 2009. AECL is a federally-regulated employer, and as such, is governed by the Code. Mr. Wilson filed a complaint in December 2009, claiming that he had been unjustly dismissed contrary to s. 240(1) of the Code. AECL maintained that the dismissal was a just one, given that they had provided a generous severance package that exceeded statutory requirements.

A labour adjudicator was appointed to hear Mr. Wilson's complaint. The adjudicator concluded that an employer could not resort to severance payments, however generous, to avoid the finding that the dismissal was unjust under the Code.³ Because AECL did not rely on any cause for their dismissal of Mr. Wilson, the dismissal was found to be an unjust one under the Code.

AECL appealed to the Federal Court, where the Application Judge reversed the adjudicator's decision, relying on the common law approach. The Federal Court found that nothing in Part III of the Code precluded employers from dismissing non-unionized employees on a without cause basis. The ruling made by the Federal Court was upheld on appeal to the FCA.  The matter then made its way to the SCC.

In deciding Wilson, the SCC interpreted the right of employees based on Parliament's intention in enacting Part III of the Code. The SCC found that the intention was to entitle non-unionized federally-regulated employees to protection from being dismissed without cause. The Code is meant to encourage employers to dismiss an employee in a manner that demonstrates that they made the employee aware of performance problems, worked with the employee to correct the issue and resorted to dismissal only as the final alternative.

The result is that the law governing the unjust dismissal of non-unionized employees under the Code has largely converged with the equivalent law governing unionized employees. Justice Abella went so far as to note that with Part III of the Code, Parliament intended to expand the dismissal rights of non-unionized federal employees to make them, if not identical, at least analogous to those of unionized employees.

Effectively, the SCC has shown that the common law right of employers to dismiss without cause, where reasonable notice has been provided, has been replaced under the Code to require federally-regulated employers to meet a just cause standard.

Field Law can assist federally regulated employers with any questions about their obligations pursuant to the Canada Labour Code.