The Supreme Court of Canada (SCC) has finally settled the highly contested question of whether federally regulated non-unionized employees can be dismissed without cause. In Wilson v. Atomic Energy of Canada Ltd. (Wilson), the SCC ruled that the Canada Labour Code (CLC) prohibits employers covered by the CLC from dismissing employees without cause, even where reasonable notice or payment in lieu of notice is provided.

The decision also highlights an interesting debate within the SCC about the circumstances in which a reviewing court should defer to the reasons of administrative decision-makers (such as a labour arbitrator, as in Wilson) as opposed to considering such decisions on a correctness standard.

BACKGROUND

In November 2009, Atomic Energy of Canada Limited (AECL) terminated the employment of Joseph Wilson without cause. Mr. Wilson had four years of service and was given a severance package based on six months’ wages. Subsequently, Mr. Wilson filed a complaint claiming that he was unjustly dismissed contrary to CLC section 240(1).

The matter proceeded to arbitration, where the labour adjudicator allowed Mr. Wilson’s complaint. The primary question concerned the interpretation of “unjust dismissal” in the CLC and whether dismissals without cause were automatically unjust. The adjudicator held that they were, and that an employer could not resort to severance payments, however generous, to avoid a determination under the CLC about whether a dismissal was unjust. The AECL sought judicial review before the Federal Court, which overturned the adjudicator’s decision and remitted the matter back to the adjudicator for decision. The Federal Court of Appeal upheld the Federal Court’s decision.

WITHOUT CAUSE DISMISSALS PROHIBITED UNDER THE CLC

By a 6-3 majority decision, the SCC reinstated the holding of the adjudicator. The majority held that the purpose of the unjust dismissal provisions of the CLC is to offer a statutory alternative to the common law of dismissals and to conceptually align the protections for unionized and non-unionized federal employees. The SCC held that these provisions prevent federally regulated employees from terminating employees without cause, regardless of whether they have paid adequate severance pay.

Justice Abella reasoned that if an employer could continue to dismiss without cause under the CLC by simply providing adequate severance pay, there would be no role for the many remedies available to an adjudicator under CLC sections 240 to 245 (which include, for example, reinstatement). Dismissed employees in the position of Mr. Wilson will continue to have the option to either pursue such remedies before an adjudicator under the CLC or pursue a remedy for wrongful dismissal at common law in the courts.

The dissenting judges in the case disagreed with the analysis of the majority on this issue, and would have held that federally regulated employers can dismiss non-unionized employees without cause.

IMPLICATIONS FOR FEDERALLY REGULATED EMPLOYERS

The decision may make it more challenging for federally regulated employers to deal with the business realities of managing their workforces. While section 240(1) does not apply to the dismissal of managers, the SCC’s pronouncement establishes a legal standard that is very different from the law established on terminating other non-unionized employees in most provinces under the common law (the civil law in Quebec) and provincial employment standards statutes.

Federally regulated employers should also keep in mind that, although they cannot rely on reasonable notice of dismissal or pay in lieu thereof to indicate that a termination was not unjust, employees may still pursue the common law remedy of reasonable notice or pay in lieu thereof in the civil courts instead of availing themselves of the dismissal provisions found in the CLC. Further, regardless of any notice or severance paid, the range of remedies, including reinstatement and other equitable relief, will be available to those who bring an unjust dismissal application.

ADMINISTRATIVE LAW IMPLICATIONS – REASONABLENESS STANDARD AFFIRMED

Apart from the significant implications for federally regulated employers outlined above, the Wilson decision also highlights an ongoing debate amongst legal scholars and judges alike about the role of the courts in reviewing administrative decisions.

Leading up to the Wilson case, there was some disagreement amongst labour adjudicators on whether the CLC permitted or prohibited employers from dismissing employees without cause. Simply, whether an employer standing in the shoes of AECL would win or lose could depend on which adjudicator heard the case. This circumstance was canvassed by the SCC at some length in Wilson.

In the result, the majority confirmed that the “reasonableness” standard of review is presumptively appropriate when specialized adjudicators interpret their governing statutes. Therefore, even where different adjudicators have reached divergent interpretations over time, the courts will not step in to identify which interpretation is “correct.” The majority reiterated that the “correctness” standard of review only applies to a limited sphere of decisions made by administrative adjudicators. One judge, Justice Abella, suggested that perhaps the court should develop a single standard of review to avoid the confusion arising from the two existing standards of reasonableness and correctness.

In a dissenting opinion, three judges held that the decision of the labour adjudicator should not have been reviewed by the courts on a “reasonableness” standard but on the higher standard of correctness. To the minority, the fact that employers and employees may face different outcomes on similar facts based solely on the adjudicator deciding the matters undermines the rule of law.

The majority decision in Wilson underscores the courts’ ongoing preference to defer to specialized administrative decision-makers on matters within the latter’s sphere of expertise.