Disappointing Decision for Federally Regulated Employees

The relatively commonly held belief that the unjust dismissal provisions of the Canada Labour Code (“the Code”) were intended to provide quasi union like protections for non-unionized employees has been turned on its head by the Federal Court, to the pleasure of employers and to the chagrin of employees.

The unfortunate recipient of this news was an employee of Atomic Energy of Canada Limited (AECL), Mr. Joseph Wilson. Mr. Wilson worked at AECL for four and half years. He was terminated on a “without cause” basis, and provided a severance package that would be viewed as fair and reasonable under common law standards. 

He filed an unjust dismissal complaint regardless of the package that was offered, no doubt operating on the understanding that, absent discontinuance of a job function or layoff, a federally regulated employer cannot simply dismiss without cause but could only terminate for just cause. Absent just cause, an adjudicator could order his reinstatement. This is an additional statutory protection not available under the common law.

The adjudicator allowed Mr. Wilson’s complaint against AECL on the basis that it could not avoid an unjust dismissal complaint by providing a sizable severance package. The adjudicator further held that AECL was not lawfully permitted to terminate Mr. Wilson’s employment on a without cause basis.

The employer took the case up to the next level through judicial review. On July 2, 2013, in Atomic Energy of Canada Limited v. Wilson, 2013 FC 733, the Honourable Mr. Justice O’Reilly overturned the adjudicator’s decision, finding it unreasonable.

The adjudicator had decided that employers cannot escape the unjust dismissal provisions (sections 240 to 245) of the Code by resorting to the termination and severance payment provisions (sections 230 and 235) of the Code, or by providing a generous severance package.

Justice O’Reilly determined that the Code permits employers to terminate employees without cause as long as notice and severance pay under sections 230 and 235 is provided as required. However, the employee may still complain that his dismissal was unjust or that the reasons given by the employer were unjustified. According to the Court, the fact that an employer has provided severance pay does not preclude an adjudicator from granting further relief if the dismissal was unjust. However, this does not mean that the Code only permits dismissals for cause.

In Justice O’Reilly’s view, a different conclusion would not properly account for the statutory provisions of Sections 230 and 235 of the Code that cover individuals dismissed without cause.

Employers will treat this as a positive development and will, no doubt, rely on this decision to resist attempts by employees who, to date, have used the threat of reinstatement not available at common law, to seek enhanced severance packages. The bargaining strength of employees in post dismissal negotiations has just been weakened by this decision.

The complainant, Mr. Wilson, has until the end of September to file an appeal.