Federal Employers Can Dismiss Without Cause

In a recent and ground-breaking case, the Federal Court upheld a federal government agency’s dismissal of an employee without cause.

Atomic Energy of Canada Limited (AECL) dismissed an employee without alleging cause, but with a payment of six months’ severance pay in lieu of notice. The employee protested that the dismissal was unjust.

An adjudicator under the Canada Labour Code was appointed to determine the case on its merits. The adjudicator determined that the Code only permits dismissals for cause and, as no cause was alleged, the complaint of unjust dismissal was valid. In other words, under the Code, the provision of severance pay does not relieve an employer of the requirement to allege and establish cause for dismissal.

The employer sought judicial review of the adjudicator’s decision on the basis that the adjudicator’s interpretation of the Code was erroneous. Meanwhile, the employee opposed the judicial review on the basis that the Code does not permit dismissals without just cause under any circumstances and that, since the adjudicator had not issued a decision regarding the appropriate remedy, an application for judicial review was premature.

The Federal Court addressed each of these issues in turn.

First, on the issue of prematurity, Justice O’Reilly stated that parties are generally encouraged to complete the adjudication of their dispute in its entirety before appearing in court. However, there are exceptions to this rule. One such exception occurs when, as in this case, the adjudicator has made a final determination on the substantive issue and there is thus no risk of additional costs or delays. Furthermore, the Court stated, had the compensation already paid been declared sufficient before a judicial review was permitted, the issue may have been declared moot, rendering the employer unable to bring these substantive issues before the Court.

Second, and most significantly, Justice O’Reilly established that the Code does not prevent an employer from dismissing an employee without alleging or establishing just cause. He found this position to be consistent with existing jurisprudence regarding dismissals without cause pursuant to the Code.

Rather, the jurisprudence reviewed provides only that, where an adjudicator concludes that the employer’s reason for dismissing an employee cannot be substantiated, the employee may be entitled to compensation in an amount greater than the statutory entitlement to severance pay.

Justice O’Reilly then went on to clearly delineate the regime that governs dismissals in the federal sphere:

• An employee may be dismissed without just cause, provided that notice or severance is paid pursuant to sections 230 and 235 of the Code. These sections are included in the Code for the sole purpose of governing dismissals without cause; any other interpretation would render these sections meaningless.
• Where an employee is dismissed for just cause, he or she may file a claim pursuant to section 240 alleging an unjust dismissal, for reasons such as reprisal or a failure to establish the facts of alleged misconduct, amongst others.
• Where an employee is dismissed due to layoff for lack of work or a discontinuance of the employee’s position, a claim pursuant to section 240 is not appropriate.
• Finally, on the issue of a suitable remedy, regardless of which of the above claims are brought forward, where an adjudicator concludes that the dismissal was unjust, he or she has broad remedial powers to compensate or reinstate the employee, as well as to grant other appropriate remedies.

In light of all the foregoing, the Court concluded that the adjudicator’s decision was unreasonable, and the application for judicial review was allowed.

This case is of assistance to all federal employers, as it establishes that employees of federally-regulated entities may be dismissed without just cause, provided that notice and severance pay is paid wherever applicable.