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Ending an employment relationship can be fraught with legal risk for employers.

Ending an employment relationship can be fraught with legal risk for employers; this has been especially true for federally-regulated employers subject to the Canada Labour Code, R.S.C., 1985, c. L-2 (the “Code”), where a number of cases suggested that employees could only be dismissed for “just cause” (extremely high threshold of misconduct is traditionally found in unionized workplaces).

As a result, federally-regulated employers were often subject to claims under the Code from former employees alleging that their termination was “unjust”, and the possibility that dismissed employees could be reinstated and awarded lost wages by a Code adjudicator, even where the employer has provided the employees with any required termination and/or severance pay.

There is, however, good news for federally-regulated employers: a number of recent court and Code-adjudicator decisions suggest that employers generally need not fear a finding that they have “unjustly dismissed” an employee under the Code, provided that they have complied with their obligations under the legislation and any applicable employment agreement.

The Recent Case Law

Last summer, the Federal Court of Canada in Atomic Energy of Canada v. Wilson, 2013 FC 733, rejected the idea that employers may only dismiss employees for “just cause”, stating “[a]n employer can dismiss an employee without cause so long as it gives notice or severance pay” (at para. 35) (emphasis added). The Court concluded that federally-regulated, non-unionized employees may allege that their dismissal was “unjust” only if the employer fails to give notice (or pay in lieu) and/or severance pay, where the employer alleges “just cause”, or where the dismissal was unjust for other reasons, such as discrimination or reprisal.

More recently, in Sigloy v DHL Express (Canada), Ltd, 2014 CanLII 22985, an employee alleged that he was unjustly dismissed after being provided with his full entitlements to pay in lieu of notice and severance pay, as required by both the Code and the employee’s contract of employment.

The employer argued that the case ought to be dismissed because the employer had complied with its notice and severance obligations under the Code, and that it had not alleged “just cause”. The adjudicator agreed, finding no indication of impropriety in the employer’s actions. The adjudicator found that the employer had maintained from the outset that it had dismissed the employee on a without cause basis, pursuant to the contract of employment. Accordingly, given that the employee had entered into a valid and enforceable contract of employment, the terms of which were in compliance with the Code, and that the employee had not alleged that his dismissal involved discrimination, reprisal or bad faith, the adjudicator granted the employer’s preliminary objection and dismissed the complaint.

Guidance for Federally-Regulated Employers

Employers must meet an extremely high bar when attempting to make out a case that a termination of employment has been for “just cause”. Indeed, there is the risk in all but the clearest of cases that a reviewing authority will find that just cause for termination did not exist and order the employer to pay damages. Furthermore, alleging “just cause” where such case does not exist can expose employers to liability for further damages resulting from the damage to an employee’s reputation that can result from an improper allegation of wrongdoing. As a result, employers often consider dismissing employees on a “without cause” basis, and providing the employees with at least their minimum statutory entitlements to termination and/or severance pay.

For federally-regulated employers, the foregoing cases illustrate yet another reason to refrain from terminating the employment relationship for “just cause”; relying on “just cause” may result in the employee being reinstated to his or her position in the event that the case for cause is not made out. Rather, where the employer complies with the provisions of a well-drafted employment agreement (with clear language discussing the terms under which the agreement may be terminated), as well as the employer’s obligations under the Code, the employer may be protected from a complaint that it has “unjustly” dismissed the employee pursuant to the Code (provided that the dismissal was not discriminatory, a reprisal, or in bad faith).

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