A landmark decision delivered by Stratas J.A. of the Federal Court of Appeal may have brought an end to decades of conflicting decisions concerning the proper interpretation of Part III of the Canada Labour Code, RSC, 1985, c L-2 (the “Code”). In Wilson v Atomic Energy of Canada Ltd, 2015 FCA 17 (“Wilson”), the appellant, Wilson, was dismissed from his employment with Atomic Energy of Canada without cause. He was offered a severance package equal to six months’ pay in exchange for a full and final release. Wilson did not sign the release. He argued that Part III of the Code prohibited an employer from dismissing an employee unless there was just cause for the dismissal. The adjudicator before whom the decision was first heard agreed with Wilson. On judicial review, however, the Federal Court found that the adjudicator’s decision on that point was unreasonable. Wilson appealed the Federal Court’s decision.
Standard of Review
Notably, the Federal Court of Appeal held that the applicable standard of review for the adjudicator’s decision concerning the interpretation of the Code was that of correctness. The Court recognized that labour adjudicators’ interpretations of provisions in labour statutes are typically subject to a standard of reasonableness upon review, but that the case before the Court was unusual because, for a long time, adjudicators acting under the Code had disagreed on whether Part III of the Code permits dismissals on a without cause basis. The Court reasoned that the question was of central importance to the legal system, and that in accordance with the rule of law, the meaning of a law should not differ according to the identity of the decision-maker.
The main statutory provision at issue was section 240(1) of Part III of the Code which states that any person:
- who has completed twelve consecutive months of continuous employment by an employer, and
- who is not a member of a group of employees subject to a collective agreement,
may make a complaint in writing to an inspector if the employee has been dismissed and considers the dismissal to be unjust.
The Code does not define the term “unjust”. Under subsections 242(4)(b) and 242(4)(c) of the Code, where an adjudicator decides that an employee has been “unjustly” dismissed, he or she may reinstate the dismissed employee and/or require the employer “to do any other like thing that it is equitable to require the employer to do in order to remedy or counteract any consequence of the dismissal”.
The Federal Court of Appeal began its analysis by recognizing that its interpretation of Part III of the Code was dependent on the relationship between the statute and the common law of employment. The Court stated that at common law, a non-unionized employee who is dismissed without cause but given reasonable notice is not wrongfully dismissed. The Court considered whether Part III of the Code ousted this aspect of the common law of employment, or whether the Code accepts this aspect of the common law of employment and builds on it. Ultimately, the Court concluded that the Code was “enacted against the backdrop of the common law” and that, had Parliament intended to oust the common law, it would have done so with explicit language. Contrary to the view taken by a majority of section 240 adjudicators and labour law academics, the Court held that there was nothing in the Code’s purpose that suggested that Parliament was granting non-unionized employees a “right to the job” or protection from being dismissed without cause.
The appellant pointed to the remedial powers of adjudicators under section 242(4), including the power to reinstate, in support of his position that the Code’s purpose was to provide non-unionized employees with protection against unjust dismissal. The Court disagreed, finding that the language of section 242(4) could “live together with the common law”. In reviewing what had been the minority view of the proper interpretation of Part III of the Code, the Court found that these remedial powers “enhance the remedies that may be available in appropriate cases of dismissal”.
In light of the Court’s decision that a dismissal without cause is not automatically “unjust” under the Code, the Court considered the proper interpretation of “unjust” in section 240. The Court stated that the term “gathers much, if not all, of its meaning from well-established common law and arbitral cases concerning dismissal”. The Court cited with approval an earlier decision of the Federal Court, Appeal Division, Canadian Imperial Bank of Commerce v Boisvert,  2 FC 431. That decision 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”. The Federal Court of Appeal in Wilson clarified this statement by noting that the cause did not have to relate to the affected employee but rather that “the cause had to entail ‘action taken exclusively to ensure the effective operation of the business’ and had to be something other than ‘caprice, convenience or purely personal disputes’”.
The Court concluded that it will always be the responsibility of an adjudicator to assess the circumstances and determine whether a dismissal, whether or not for cause, was unjust. The Court stated that “it is for Parliament’s chosen decision-makers in this specialized field - the adjudicators - to develop the jurisprudence concerning the meaning of ‘unjust’ on an acceptable and defensive basis, not ‘any basis’”. An adjudicator under the Code does not have “free rein” to find a dismissal “unjust”.
The Federal Court of Appeal’s decision in Wilson seeks to put an end to the conflicting lines of jurisprudence arising out of the interpretation of the unjust dismissal provisions of Part III of the Code. The case suggests that federally regulated employers may now dismiss employees with appropriate notice and severance pay without having to build a “just cause” case. Employees may, however, still challenge their dismissal as being “unjust”. It remains to be seen how adjudicators will interpret the term “unjust” and on what basis adjudicators will exercise their powers to reinstate.
It should be noted that an application for leave to appeal to the Supreme Court of Canada was recently submitted in this case (Wilson v Atomic Energy of Canada Ltd.,  SCCA No. 114 (QL)). Updates with respect to this application will be posted as they become available