Supreme Court of Canada Confirms Federally Regulated Employees Cannot be Terminated Without Cause

On July 14, 2016, the Supreme Court of Canada (SCC) released its decision in Wilson v. Atomic Energy of Canada Limited,¹ confirming that federally regulated employers cannot lawfully dismiss employees without cause.

What You Need To Know

• The decision confirms that non-unionized employees beneath the rank of manager in federally regulated corporations have protection against dismissal without cause, much like unionized employees covered by collective agreements.
• When contemplating dismissing a non-management employee, federally regulated employers will be required to provide reasons for the dismissal, such as misconduct, incompetence, or conflict of interest. This may mean that the employer will have to first undertake progressive disciplinary steps in order to create an evidentiary record illustrating just cause for termination.
• A dismissed employee of a federally regulated business can ask for a written statement from his or her employer setting out the reasons for his or her dismissal. If an adjudicator determines that the dismissal does not meet the standard of “just cause”, s/he has broad authority to grant an appropriate remedy, including requiring the employer to reinstate the employee (with or without back pay), or provide the employee with compensation in the form of damages.
• The unjust dismissal regime of the Canada Labour Code has some limitations. It only applies to employees who have completed 12 consecutive months of continuous employment. Complaints following a dismissal cannot be brought before an adjudicator if the employee was laid off for economic reasons or because their function was discontinued following a workplace restructuring.

Background on the Case

Joseph Wilson, a supervisor at Atomic Energy of Canada Ltd. (AECL), was dismissed by AECL without reason. Wilson was offered a severance package, but chose instead to file a complaint of unjust dismissal under the Canada Labour Code (the Code).

The Code grants employees in federally regulated industries the right to file a complaint if they believe that they have been unjustly dismissed. Industries governed by the Code’s provisions include banks, marine shipping, air transportation, inter-provincial railway and road transportation, provincial border crossing infrastructure, telephone and cable systems, radio and television broadcasting, most Federal corporations, and many First Nations activities.

The adjudicator in Wilson held that the Code only permits dismissals for cause, and that paying severance—even generously—cannot override the requirement to provide reasons for a dismissal. The adjudicator’s decision was overturned on appeal by the Federal Court, which held that an employer can dismiss an employee without cause so long as it gives notice or pay in lieu of notice in accordance with the Code. This decision was upheld by the Federal Court of Appeal who ruled that the Code did not prohibit federally regulated employers from dismissing their employees without cause.

In a split decision, the majority of the SCC allowed the appeal, and confirmed that employees governed by the Code can only be terminated for just cause. The SCC further stated that the approach of providing notice or pay in lieu of notice would undermine the purpose of the legislation by permitting employers to unilaterally deprive employees of the full remedial provisions Parliament incorporated into the Code.

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¹ 2016 SCC 29 [Wilson].

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