As I explained yesterday, there was a three-judge dissent which found that the adjudicator's decision should be reviewed on the standard of correctness (which makes sense to me), and that the adjudicator's decision was, in fact, incorrect. This bears some deeper analysis.
As a preliminary remark, I should highlight that the dissent frequently refers to the question as being whether Division XIV has the effect of "prohibiting all dismissals without cause". Respectfully, that's a drastic oversimplification of the question, which has an important impact on the reasoning. There is no question that, even for employees that fall within the Division XIV framework, the not-for-cause dismissal framework continues to apply for dismissals arising from a 'lack of work' or 'discontinuance of a function'.
What is Unjust Dismissal?
This question is at the crux of the case. Non-lawyers will often confuse the term "unjust dismissal" with the similar-sounding term "wrongful dismissal". Yet whereas "wrongful dismissal" is well-defined at law, meaning a dismissal in contravention of the implied or express contractual terms surrounding dismissal, "unjust dismissal" is quite devoid of definition altogether. It's a construct that, to my knowledge, only exists under Division XIV of the Canada Labour Code.
The language in the Code is fairly simple: A non-managerial non-union employee who has been dismissed, after at least 12 months of employment, is entitled to ask for a reason - this differs from the common law, where employers have no free-standing obligation to give a reason for dismissal (though one might argue about how the duty of good faith and fair dealing would apply to such an issue). If the employee feels that the dismissal is 'unjust', he or she may make a complaint. Following a brief investigation process, the matter may be referred to an adjudicator; if the adjudicator determines that the dismissal was 'unjust', there's a wide range of remedies available, including lost income damages and reinstatement.
So what does it mean for a dismissal to be 'unjust'?
That is, perhaps, less clear. There's a clear exclusion for employees dismissed due to lack of work. I think we can safely assume that a 'just cause' termination generally isn't going to be 'unjust'. But where exactly is the line to be drawn?
The Wakeling Interpretation
Adjudicator Wakeling, now a Judge on Alberta's Court of Appeal, decided several cases on this issue, and essentially led the movement to the interpretation favoured by the dissent.
In essence, it appears that he viewed Division XIV as creating a statutory procedure for redress, without modifying substantive rights. Bearing in mind that most employees are entitled to some form of contractual or common law notice, he regarded Division XIV as primarily being a means of redress for the failure to give such notice - thus, "unjust dismissal" is basically indistinguishable from "wrongful dismissal".
As Associate Dean Ross of the University of Alberta put it in Jalbert v. Westcan Bulk Transport Ltd.:
Adjudicator T. Wakeling determined [in Knopp v. Westcan Bulk Transport Ltd.] that for a dismissal to be unjust, there must not only be a lack of just cause, but also a failure to provide the employee with “the more generous of the dismissal packages required by sections 230(1) and 235(1) of the Code and at the common law”... . He was of the view that the Code’s preservation of common law remedies, and its lack of an express provision giving employees a “right to the job” meant that s. 240’s reference to “unjust” dismissal should be interpreted in the manner consistent with common law principles, and not in a manner that would create a “drastically different legal order”.
The Consensus Interpretation
Wakeling, Ross, and a handful of others were among a small minority who viewed the Code in this light.
Most adjudicators would find that, subject to the exceptions indicated above, most not-for-cause dismissals were 'unjust', and reinstatement was a presumptive remedy. When it went to court on judicial review (before the Wilson case, of course), while there was a great deal of deference to adjudicators, the courts tended to side against the Wakeling interpretation. For instance, in AECL v. Sheikholeslami in 1998, Justice Letourneau remarked:
It is true that reinstatement is not a right even after a finding of unjust dismissal, but, as I. Christie et al. properly point out, the exception to reinstatement should be applied very cautiously otherwise the risk exists that an unjustly dismissed employee will be penalized by losing his job. Indeed, a finding of unjust dismissal is a finding that the work relationship should not have been severed in the first place. In such cases, the presumption is, in my view, clearly in favour of reinstatement unless there is clear evidence to the contrary.So there are a number of cases where reinstatement isn't ordered, sometimes because the relationships involved are just too strained to have a productive relationship moving forward, but it's available in many cases, and it's an onerous remedy to impose on employers.
It has led to a number of interesting cases, where employers have tried to avail themselves of the Wakeling logic by providing a generous package in lieu of notice, to argue that this cures any 'unjust' nature of the dismissal, immunizing them against reinstatement. The argument usually failed.
(This slightly reminds me of something my articling principal said in my first week of work, many years ago, that a dismissal can't contravene the Human Rights Code if it's accompanied by an offer of a generous package. That seemed strange to me at the time, and I have no hesitation now in saying that she was wrong. Practically speaking, that's something that happens often enough - employers dismissing employees for highly questionable reasons, but offering them enough money that the employee would rather just take the payout and sign the release rather than trying to litigate. Every release has its price. But that shouldn't be confused with saying that the package makes it legal.)
The Intellectual Basis for the Wakeling Interpretation
In many ways, the Wakeling Interpretation is the more intellectually rigourous one. I respect the approach, even if I disagree with its conclusions.
Essentially, the argument advanced by the Wilson dissent hinges significantly on the issue of 'concurrent jurisdiction': Division XIV expressly leaves intact the civil action in wrongful dismissal, giving employees the option of pursuing the issue through the statutory mechanism, or through the courts.
But a civil action in wrongful dismissal is premised on a breach of contract, of the employer being required to give employees 'reasonable notice' of dismissal. If the Code has the effect of displacing the common law, to the extent that an employer simply cannot terminate on reasonable notice, then it is incoherent to say that the employee still has a civil action for a termination without reasonable notice.
I very frequently have to explain to employee clients, "Yes, your employer is entitled to fire you without any reason at all; they just have to give you notice." That's the entire basis of the wrongful dismissal regime, and if the employer is not entitled to dismiss in the first place in certain Federal contexts, the intellectual basis for wrongful dismissal appears to fall apart.
Why That's Wrong:
The Existence of a Reinstatement Regime Doesn't Preclude Contractual Notice Requirements
The majority has a number of good reasons to infer a Parliamentary intention to create new substantive rights - for instance, the Hansard actually indicates an intention to protect employees against arbitrary dismissals - and the dissent's response to these, that the Hansard shows they didn't want to give exactly the same protections as to unionized employees, is unsatisfying.
Similarly, the dissent argues that the provision directing the adjudicator to "consider" whether the dismissal was unjust seems to be at odds with a contention that all not-for-cause dismissals are inherently unjust. This is a particularly weak argument: One can fairly assume that, if the dismissal were legitimately for cause, the adjudicator would not 'consider' the dismissal to be unjust.
But the 'concurrent jurisdiction' issue is trickier, more compelling on its face, so I'll focus on that.
The Trites Trap: Reading Employment Standards as Permissive
To oversimplify the point a little, employment standards provisions don't so much displace the common law as get superimposed on top of it. When courts start referring to employment standards legislation as actually displacing the common law, we start getting whacky decisions like Trites v. Renin Corp. (Yes, that is, fundamentally, where the misinterpretation started: "Renin relies on Elsegood in support of the proposition that statutes enacted by the legislature displace the common law.")
Yes, the language of 'displacement' is strictly correct, but they don't purport to displace the common law in any comprehensive way. This is an important nuance, because the common law has evolved in a way that gives employees a number of face-value rights and protections in the first place, and employment standards laws usually leave those protections in place, quite expressly, while creating additional protections for employees that exist in parallel.
Employment standards laws typically create a bare minimum entitlement to notice and/or termination pay and/or severance pay. Under Ontario's ESA, an employer can provide notice or termination pay. At common law, the default obligation is notice - and failure to give appropriate notice is usually a breach of contract. These aren't inconsistent. An employer can comply with its statutory obligations, but still breach its contractual obligations, and then be held liable for breaching its contractual obligations. Or common law doctrines might allow a 'just cause' dismissal without notice, under circumstances where statutory termination pay is still required because the statutory test for such misconduct is slightly different.
These different regimes co-exist simultaneously.
Part III of the Canada Labour Code is no different. Section 168(1) specifies that the Part doesn't affect any rights or benefits more favourable to the employee; section 261 specifies that no civil remedy of an employee is affected by the Part. This is the combination of factors that exists in every Canadian employment standards legislation I've read, that prevents us from ever reading an employment standard as being permissive on the employer - which is, in part, why Trites v. Renin Corp was so wrong, concluding that the ESA created a free-standing right for employers permitting them to implement temporary layoffs, regardless of what express or implied terms might be in the contract.
When interpreting the provisions of the Code that guarantee minimum notice and severance, sections 230 and 235, the dissent falls into the Trites trap of reading the provisions as being permissive:
Therefore, as a baseline, Part III of the Code permits federally regulated employers to dismiss their employees without cause. To conclude otherwise would ignore the text of ss. 230 and 235 of the Code.Part III of the Code does no such thing. Period. It presupposes that there are circumstances where employees can be dismissed without cause (and nobody's saying there aren't), and guarantees minimum entitlements in such cases. It does not stand, on its own, as authority permitting a dismissal without cause in any particular class of cases.
That is, perhaps, not a critical error in this case. But falling into the Trites trap appears to have led the dissent down the wrong path, in failing to appreciate the quintessentially typical interplay between reinstatement regimes and traditional wrongful dismissal remedies.
Reinstatement Regimes Coexisting with the Wrongful Dismissal Framework
Many employment statutes, from many different Canadian jurisdictions, have express or implied reinstatement remedies. Ontario's ESA has its own reinstatement remedies, albeit expressly narrower than those in the Canada Labour Code: Section 104 of the ESA specifies that reinstatement is available where an employee was dismissed in contravention of the provisions dealing with employer reprisals, among other things. This, too, co-exists with the contractual requirement to give reasonable notice of dismissal.
As do the provisions in the Labour Relations Act, Human Rights Code, and Occupational Health and Safety Act, which prohibit dismissal for certain reasons, and allow for reinstatement as a result of such terminations. (I refer to such dismissals as being 'unlawful' - prohibited by statute - as distinct from merely 'wrongful'.)
These all impose limitations on the employer's contractual right to dismiss on notice, but none of them actually fully displace it. The right to dismiss on notice is residual: In circumstances where dismissal isn't unlawful, you may still dismiss on notice.
And it is NOT a defence to a wrongful dismissal action to say that the dismissal was, in fact, unlawful.
If, for example, a Federally regulated employer dismissed an employee for a reason which contravenes the Canadian Human Rights Act, and the employee sued in wrongful dismissal seeking pay in lieu of notice (NB: not human rights damages), the employer could not defend the action on the basis that the unlawful nature of the termination somehow undermined the employee's contractual entitlements that would have flowed from a lawful termination. That's simply not an argument that makes any sense whatsoever. Yet it's fundamentally the same logic that grounds the Wakeling Interpretation.
And this is where we see the importance of the preliminary note I made earlier: The Code most certainly does not prohibit all dismissals without cause. On the consensus interpretation, it creates a much wider scope of 'unlawful' termination than exist in most statutory regimes, but it still leaves the traditional wrongful dismissal framework as having residual application in cases where, for example, the dismissal is due to a lack of work or discontinuance of a function.
In other words, the consensus interpretation doesn't imply a right not to be fired, so as to be fundamentally inconsistent with an express or implied obligation to give notice of termination in the way argued by the dissent. An employee's job is still in jeopardy in circumstances of good faith restructuring, and in those cases the employee will be contractually entitled to notice, per the 'usual' case.
Other Problems with the Wakeling Interpretation
There are, in my view, two key things that tell us that this isn't just a procedural option for enforcing existing common law rights. Firstly, at common law, reinstatement simply doesn't exist. A regime where employers are entitled to terminate is fundamentally inconsistent with a reinstatement regime.
Secondly, the dissent's belief that the purpose of Division XIV is to "provide a low cost, efficient, and effective procedural mechanism" is simply irreconcilable with the differential treatment between 'lack of work' dismissals and other dismissals.
Reinstatement Does Not Exist At Common Law
The fact that Adjudicator Wakeling admittedly never ordered reinstatement, and was sparse and 'flimsy' in his reasons for doing so, is telling, and is where the intellectual rigour of the approach fails. Any reasonable interpretation of Division XIV simply must include some circumstance in which reinstatement would be an appropriate remedy.
The dissent argues, in what I believe is the only semi-cogent way of delineating such a test, that the reinstatement remedy is reserved for cases where the dismissal was "discriminatory or retaliatory" - and points to the fact that Provincial employment standards statutes do have reinstatement regimes in such cases. Yes, they do. Quite expressly, and very specifically and narrowly. It is rather self-defeating that the dissent tried to make this argument right after arguing that Nova Scotia and Quebec, in creating 'only just cause' regimes, did so "expressly".
But let's be clear, we're still talking about the creation of a substantive right and remedy. For all the dissent's discussion of there needing to be an express intention to displace the common law, etc., there's no read possible read here which doesn't do so. Reinstatement is only a viable remedy in the face of an 'unlawful' termination. Full stop. The dissent's claim is simply that the scope of the unlawful terminations created and remedied by Division XIV is narrower than the consensus interpretation, limited only to cases where there's discrimination or retaliation. Or maybe certain bad faith cases?
'Discriminatory' is tricky, because while labour adjudicators aren't "wholly without jurisdiction" to apply the Canadian Human Rights Act, that's not a simple analysis. Creating a structure within the Canada Labour Code to address a wrong under the CHRA needs a bit more guidance than that.
Furthermore, given the already restricted range of cases to which Division XIV applies in the first place (non-managerial, employed for 12 months or more, not dismissed for lack of work), it's strange that they would put the reinstatement remedy into that quasi-wrongful-dismissal process, instead of the other processes available to everyone...
...except, to a very limited extent, they actually did.
As it happens, the anti-reprisal provisions in Part III are actually pretty thin. There's no guarantee of non-reprisal, but there's an offence designated for certain narrow classes of reprisal: If you dismiss somebody for testifying in an inquiry under Part III, or for giving information to the Minister or an inspector regarding wages, hours of work, annual vacation, or working conditions, then that's an offence under s.256, and s.258 requires that, on conviction, there will be an order to reinstate the employee in question.
Ultimately, creating a reinstatement power, with zero direction as to how it is to be used, seems deeply inconsistent with a contention that it's only to be applied in a narrow range of cases, and it seems very weird to create a substantive anti-reprisal remedy and then only apply it to a portion of your employees.
And perhaps most importantly, the Wakeling Interpretation simply provides no cogent reason for drawing the line there. Given that this point absolutely requires a concession that Division XIV creates substantive rights and remedies, you need some rational basis for assigning which circumstances will call for the reinstatement remedy. The consensus interpretation says, presumptively, all terminations of non-managerial employees with 12 months or more of service that aren't for cause or for lack of work or discontinuance of a work function. That's pretty well grounded on a face value reading of the statute. When you start moving away from that, and trying to add additional qualifiers on what makes a dismissal 'unjust'...well, then you're just making stuff up that Parliament didn't put in.
The Effect of Exclusion on Interpretation
The dissent ultimately concludes that Division XIV is really quite simple and minimalistic, creating a simpler and easier-access road to adjudication of wrongful dismissal disputes.
For some people.
An administrative tribunal capable of determining common law dismissal entitlements is, arguably, a good idea. Professor David Doorey has argued that the processes under Ontario's ESA should be interpreted as including an adjudication of common law pay in lieu of notice. (To be clear, they aren't presently, and I disagree with his argument on the point.)
But to exclude people dismissed, on a good faith basis, for lack of work or discontinuance of a function, from such a framework, would be completely nonsensical. All other things being equal, these cases are simpler and easier in every way (and more suitable to summary adjudication in an administrative tribunal context) by contrast to the 'lack of fit' or 'alleged cause' cases. To send these employees to the longer, more expensive, more drawn out court process to claim their entitlements flowing from dismissal, and to give a more accessible process to the employees with more complex claims, would be frankly bizarre and completely irrational.
Likewise with the exclusion of employees who have not completed 12 months of service. Such employees will usually have entitlements, but, all other things being equal, they'll tend to be lower-value claims, more in need of a cost-effective accessible administrative process.
If the dissent were right, that Parliament's intention was simply to create a process that improves access to justice, these exclusions would be roughly the opposite of what we would expect to see. Typically, an expeditious process with less rigourous procedural protections, relaxed rules of evidence, etc., is more suited to claims that are simpler and lower-value in nature, and less suited to high-value complex claims (such as long-service employees who have been dismissed for contentious reasons).
On the other hand, if we're looking at creating substantive protections against not-for-cause termination, then this is exactly what we would expect to see: Something that gives greater protection to employees who have been there for longer, but which doesn't constrain employers against making legitimate and good faith changes to their business model.
Ultimately, I continue to be of the view that the dissent got the 'standard of review' question 100% right: The standard should be correctness, for a question like this.
But, at the end of the day, in my view, the consensus interpretation is the correct one. So, all things considered, I think the case was resolved correctly, if for the wrong reasons.
This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.
The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.