There has been an ongoing jurisprudential controversy over the issue of whether a federally regulated employer may lawfully dismiss an employee without cause under Part III of the Canada Labour Code. On July 2 2013 the Federal Court ruled that the code permits the dismissal of an employee without cause. However, the dismissal continues to be subject to scrutiny before an adjudicator under the standard of justness.

In Atomic Energy of Canada Limited v Wilson(1) Justice O'Reilly allowed a judicial review application against an adjudicator's decision in which it was decided that the code permits only dismissals for cause. In particular, the adjudicator had ruled that employers cannot escape the unjust dismissal provisions of the code (Sections 240-245) by resorting to the termination and severance payment provisions of Sections 230 and 235 of the code, or by giving a sizable severance package.

The complainant, who had worked for Atomic Energy for four-and-a-half years, was dismissed on a 'without cause' basis with a monetary severance package equalling six months' pay. He filed an unjust dismissal complaint, but the employer argued that he was terminated with a generous dismissal package that exceeded the statutory requirements.

The Federal Court found the adjudicator's conclusion to be unreasonable. The court ruled that the code permits employers to terminate employees without cause as long as notice or severance pay under Sections 230 and 235 is provided. However, the employee may still complain that the 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 permits only dismissals for cause.

Under that reasoning, a dismissal may be made without cause, provided that the dismissal is not unjust. The court specified that a different conclusion would fail to take into account the remedies provided in Sections 230 and 235 of the code for persons dismissed without cause. Also, the court indicated that this conclusion was consistent with the principle set out in its earlier judgment in Redlon Agencies Ltd v Norgren(2) that employers cannot avoid unjust dismissal remedies by simply awarding severance pay. In the court's view, Redlon does not stand for the proposition that the code permits only dismissals for cause.

This judgment is a positive development for employers, as many adjudicators previously took the position that employers were obliged first to prove that the dismissal was for just cause on the basis that they considered the unjust dismissal provisions of the code to establish a protection akin to that found in collective agreements for unionised employees. This judgment is also aligned with a recent ruling by an adjudicator in which it was found that an employer that dismissed an employee by offering the severance pay provided under the consensual employment contract fulfilled its bargain and complied with the code.(3)

A distinction between just cause and just dismissal has therefore been established by this recent judgment. The complainant has until the end of September 2013 to file an appeal.

For further information on this topic please contact Maryse Tremblay at Heenan Blaikie LLP by telephone (+1 514 846 1212), fax (+1 514 846 342) or email (mtremblay@heenan.ca).

Endnotes

(1) 2013 FC 733, available at http://canlii.ca/en/ca/fct/doc/2013/2013fc733/2013fc733.html.

(2) 2005 FC 804.

(3) Klein v Royal Canadian Mint [2012] CLAD No 358 (Peltz).

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