Federally regulated employers take note.  The Federal Court of Appeal has recently confirmed that without cause dismissals are not automatically deemed to be “unjust” under the provisions of the Canada Labour Code (the “Code”).

For decades, adjudicators have been at odds with one another regarding the question of whether the Code permits dismissals on a without cause basis.  As a matter of background, the Code applies only to federally regulated employers such as banks, railways and telecoms.  After years of uncertainty in this area, the Federal Court of Appeal recently decided to end the discord and definitively determine the legal point.

In the case of Wilson v. Atomic Energy of Canada Limited, Mr. Wilson was employed for 4.5 years before being terminated on a without cause basis and offered a common law package equal to about 6 months of pay.  Mr. Wilson chose not to sign a release in exchange for the offer and instead filed a complaint under the Code which alleged that he had been unjustly dismissed.

After both an adjudication and a Federal Court hearing, the matter proceeded to the Federal Court of Appeal, which found that a dismissal without cause is not automatically “unjust” under the Code and that adjudicators must examine the circumstances of each particular case in order to decide whether or not a dismissal is unjust.  In its analysis, the court determined that Part III of the Code (which contains exceptional remedies such as reinstatement of employment) is merely intended to offer employees more remedies than exist under the common law, but only if the dismissal is unjust.  The extra remedies granted under Part III do not, however, mean that all without cause dismissals under the Code are automatically unjust.

As a result, federally regulated employees who are terminated without cause must prove that they have been terminated unjustly if they want that conclusion to be drawn.  In practical terms, this means that where there is no finding of unjust dismissal, a federally regulated employee can be terminated without cause and simply provided with a notice or severance package.  In order to gain the benefit of Code remedies which do not exist under the common law, such as the right to reinstatement, the employee must go the extra step and establish that the without cause termination was “unjust”.

The decision in Wilson v. Atomic Energy of Canada Limited can be found here: http://decisions.fct-cf.gc.ca/fca-caf/decisions/en/item/100689/index.do.