Last year, we blogged about the Federal Court of Appeal’s decision in Wilson v. Atomic Energy, 2015 FCA 17, specifically its determination that a dismissal without cause under the Canada Labour Code (“Code”) was not an unjust dismissal pursuant to sections 240 to 246. In July 2016, the Supreme Court of Canada weighed in 2016 SCC 29, reversing the Federal Court of Appeal in a landmark decision.

Sections 240 to 246 were enacted by amendment to the Code in 1978. These provisions, contained in Division XIV of Part III of the Code, introduced a complaints procedure for dismissed, non-managerial, federally regulated employees who:

  • Are not covered by a collective agreement; and
  • Have worked more than 12 consecutive months.

Similar to the language used in the unionized context, the Code offers a range of remedies to these employees when their dismissal is determined to be “unjust.” In the union context, an unjust dismissal generally includes any termination without cause. By contrast, in the non-unionized context, employees may be terminated without cause, provided they are given reasonable notice or compensation in lieu thereof.

The dispute under the Code centered on whether sections 240–246 displaced the basic principle that employers may dismiss non-unionized employees without cause. Until the Federal Court of Appeal’s decision, the bulk of adjudicators under the Code concluded that any dismissal without cause was unjust. The Federal Court of Appeal disagreed, holding that the Code created an alternative forum for employees but did not oust the traditional common law from which dismissed employees could seek remedies.

The Supreme Court of Canada has now confirmed that even non-unionized, federally regulated employees may only be dismissed for just cause. Writing for the majority (supported by five concurring justices), Justice Abella concluded that Parliament’s intention in enacting sections 240 to 246 was to offer “expansive protections much like those available to employees covered by a collective agreement” (para. 1). Justice Abella emphasized that the very language of “unjust dismissal” presumes that an employee can only be dismissed for just cause, a concept informed by years of dismissal decisions under collective agreements.

In addition to the government’s statements regarding the purpose of these provisions, Justice Abella noted that the requirement in section 241 for employers to provide reasons for dismissal and the “open-ended equitable relief available under s.242(4)(c)” are “utterly inconsistent with the right to dismiss without cause” (para. 63).

In reconciling her conclusion with the language of sections 230 and 235 of the Code, which mandate notice requirements and minimum severance obligations for federally regulated employees, Justice Abella stated that sections 230 and 235 “apply only to those who do not or cannot avail themselves of [sections 240–246]” (para. 47). As noted, managers, unionized employees, and persons employed for less than a year do not benefit from the complaints procedure for unjust dismissals under the Code. These employees may still be terminated without cause and are protected by the minimum standards set out in sections 230(1) and 235(1).

Moreover, nothing in the Supreme Court’s decision prohibits federally regulated employees excluded from the unjust dismissal regime from commencing legal proceedings seeking reasonable notice or other common law remedies for without-cause dismissals.

However, the Supreme Court’s decision has made it significantly more difficult for employers to adapt their personnel to the ongoing needs of their operations. Going forward, federally regulated employers can be expected to place greater emphasis on assessing the fit and appropriateness of a hire prior to their one-year anniversary date.