Significant implications for federally regulated First Nation employers: Wilson v Atomic Energy of Canada Ltd.

First Nation employers that are regulated by the Canada Labour Code are no longer able to dismiss employees on a without cause basis.

On July 14, 2016, the Supreme Court of Canada (“SCC”) released its decision for Wilson v Atomic Energy of Canada Ltd., 2016 SCC 29, [2016] S.C.J. No. 29 (“Wilson”). In this 6-3 decision, the SCC ruled that the “Unjust Dismissal” provisions (ss. 240-246) in the Canada Labour Code (“Code”) replaced the common law right of a federal employer to dismiss a non-unionized employee without cause.

The facts of this case focused around an employee who was dismissed without cause, but who was offered fair notice and severance pay. The employee, Mr. Wilson, filed an “Unjust Dismissal” application pursuant to s.240 of the Code, and the adjudicator in that case held that a federally regulated employer could not rely on severance payments to avoid a determination of unjust dismissal. This decision was judicially reviewed, with both the Federal Court and the Federal Court of Appeal determining that, in fact, a dismissal without cause should not be automatically classified as unjust. However, these decisions were overturned at the SCC and the adjudicator’s original decision was re-instated.

The main dispute at the SCC was whether the provisions in question (ss. 240-246) create a substantive labour standard, or whether they merely provide a procedural mechanism for aggrieved employees to challenge the lawfulness of their dismissal. In writing for the majority, Justice Abella argued that the purpose of the Unjust Dismissal provisions is “to offer a statutory alternative to the common law of dismissals and to conceptually align the protections from unjust dismissals for non-unionized federal employees with those available to unionized employees,” which, according to her interpretation, meant that the Unjust Dismissal provisions create a substantive right for an employee to not be dismissed without cause (para 46).

This finding centered around the interpretation of “Unjust Dismissal” under the Code. The majority interpreted protection from “Unjust Dismissal” to indicate that an employee can only be lawfully dismissed for “just cause,” thus creating a substantive right for federally regulated employees to only be dismissed with cause (para 51). While this is framed as a way to protect non-unionized Federal employees from arbitrary dismissals, this decision fails to recognize that a dismissal may in fact be fair and just while falling short of the technical definition of “just cause.” In fact, this was how the common law was applied up until this decision; the common law rule allows an employer to dismiss an employee without cause so long as appropriate notice has been provided. This rule is commonly held as existing as a fair counterpoint to an employee’s right to quit without cause, so long as they provided due notice (para 107).

In arguing that the common law should be held to apply concurrently with the provisions of the Code, the dissenting opinion in Wilson pointed to the explicit notice requirements (s.230(1)) and minimum severance provisions (s.235(1)) that are contained within the Code. The dissent held that these notice and severance provisions were designed to bolster the common-law protection for non-unionized employees. According to the dissenting opinion, these provisions allow a federally regulated employer to justly dismiss an employee without technical cause, by statutorily defining the appropriate notice and severance pay that would have to be provided to the dismissed employee (para 99). Therefore, the Unjust Dismissal provisions in ss.240 to 246 provide a residual procedural mechanism for an employee to challenge the lawfulness of a dismissal which would take into account the entire context of the dismissal, while simultaneously providing additional remedies if a dismissal was found to be truly unjust (para 103).

The majority, on the other hand, held that ss. 230(1) and 235(1) do not apply universally to all employees who fall under Part III of the Code, narrowly interpreting them to apply only to those employees who fall outside the scope of the Unjust Dismissal provisions (para 47). In other words, ss. 230(1) and 235(1) only apply to the dismissal of a manager, a dismissal due to lack of work or discontinuance of a function, or, in the case of s.230(1), to employees who have worked for less than twelve, but more than three months. This effectively narrows the application of ss. 230(1) and 235(1) to a small minority of non-unionized federal employees. Under this interpretation, instead of providing mandatory severance and notice requirements, in addition to a procedural mechanism for challenging the justness of a dismissal, the SCC has held that the main purpose of the Unjust Dismissal provisions of the Code is to define whether or not a dismissal has been just, and in so doing, the SCC has narrowed the application of the provisions of the Code which may have helped make a dismissal just in the first place.

As is noted in the dissent, the consequences of the majority’s decision go beyond creating an onus on employers to provide reasons showing why a dismissal is justified. This interpretation risks guaranteeing employees of federally regulated businesses “lifelong job tenure,” provided the employee never does something that technically qualifies as “just cause” for dismissal (para 99). Alternatively, it may result in employers pursuing dismissals for cause, with all their inherent stigma, rather than a negotiated settlement with the employee in order to avoid the risk of an unjust dismissal claim. The SCC’s majority view fails to consider the multitude of reasons that an employer could have for dismissing an employee, and instead of noting the totality of circumstances surrounding a dismissal, holds that the “justness” of a dismissal is determined solely on whether or not “just cause” was satisfied. This determination deprives the adjudicator of the power to consider whether or not a dismissal was unjust under s.242(3), and instead requires the adjudicator to automatically conclude that a dismissal without cause is unjust, regardless of the notice and severance pay provided by the employer. Further, the decision stops short of providing a meaningful guide for employers to define what constitutes “just cause”, though the majority does stress the importance of progressive discipline, suggesting that this is an appropriate route to a “just” dismissal (paras. 53 – 55). No matter what, the Court has ruled that federal employers must provide “reasons” for a dismissal.

This decision will have vast consequences for both federally regulated employees and employers, including First Nation employers. Not only have the positive rights to statutorily defined notice periods and severance pay been stripped from the majority of employees under Part III of the Code, but it also binds federal employers to employees, who, for a variety of reasons might not be a good fit for their business. In light of this decision, it will be important for federally regulated employers to review their employment policies and agreements to ensure compliance with the results of this complex ruling. As the dissent noted (para. 98), under section 168(1) of the Code, the common law still applies and employment contracts that confer greater rights or benefits than Part III of the Code will prevail over the statute.