Federal Court Decision Impacts Terminations in Employment Law

In its 2013 decision, Atomic Energy of Canada Limited v. Wilson, the Federal Court of Canada confirmed employer’s right to terminate employment for economic or administrative reasons. In the event of administrative dismissal, the Court found that severance pay is the appropriate remedy.

In this case, Atomic Energy of Canada (AECL) terminated Mr. Wilson’s employment on a “without cause” basis, and offered a severance package that would be considered fair and reasonable under common law standards. Mr. Wilson challenged the dismissal believing that, with the exception of discontinuance of a function, an employer can only terminate employment for cause. The adjudicator allowed the complaint, finding that an employer may only terminate employment for cause.

AECL applied for judicial review of the decision. The Federal Court determined that the Canada Labour Code allows employers to terminate employment without cause under sections 230 and 235. While this may not prevent employees from seeking additional relief, this decision reinforces the employer’s right to manage its resources.