Dismissal of Federally Regulated Employees


The concept of unjust dismissal under the Canada Labour Code (the “Code”) is different from, and broader than, the common law concept of wrongful dismissal, causing some employers (and even adjudicators) difficulty. In this article we will discuss what is meant by unjust dismissal and provide some tips on what employers should do to minimize the risk of an unjust dismissal finding.

Employees of federally regulated employers are subject to the provisions of the Code. Section 240(1) of the Code permits an employee who is dismissed to make a written complaint to an inspector if the employee feels that the dismissal is unjust, provided the employee has completed 12 consecutive months of employment, is not subject to a collective agreement and is not excluded due to managerial status. Making a complaint pursuant to Section 240(1) of the Code does not preclude an employee from pursuing a wrongful dismissal claim in the courts.

Wrongful Dismissal

In order to better understand the concept of unjust dismissal, it is useful to first briefly review the common law concept of wrongful dismissal.

The common law permits an employer to terminate an employee without cause as long as the employer gives the employee reasonable notice of termination or payment in lieu thereof. If an employee is terminated without reasonable notice and claims a wrongful dismissal, the court will not concern itself with whether the dismissal was just. Instead, the court will determine what the reasonable notice should have been and will award damages accordingly. The courts arrive at reasonable notice by considering the employee’s age, position, years of service and likelihood of obtaining similar employment. The damages will be reduced if the employer is able to prove that the employee did not mitigate his/her damages by actively looking for work.

Unjust Dismissal

Under the Code, a person can make a written complaint regardless of whether the person was paid severance or given notice in lieu thereof. Therefore, although some adjudicators under the Code have treated the wrongful dismissal and unjust dismissal concepts in a similar fashion, it is clear that a dismissal can still be found to be “unjust” for the purposes of the Code, even if an employer has given the dismissed employee notice or pay in lieu of notice. This is why section 241(1) of the Code requires an employer to give reasons for the dismissal if the dismissed person or any inspector were to request reasons.

Thus, the underlying purpose of the unjust dismissal concept under the Code, unlike the common law, is to protect the personal dignity and autonomy of the individual employee in termination situations. Regardless of whether notice is given, in order for a termination to be “just”, an employer’s decision should be rational, made in good faith and made in a non-arbitrary and non-discriminatory manner and in a procedurally fair manner.

The unjust dismissal provision does not apply in situations where an employee is laid off as a result of shortage of work or a discontinuance of the job function. Nevertheless, a dismissed employee can challenge the elimination of the position itself i.e., that the real reason was to get rid of the employee. In such situations, the onus is on the employer to show that the position was eliminated in good faith and for bona fide business reasons.

The remedies available to an adjudicator who concludes that a dismissal is unjust includes the authority to reinstate an employee. This remedy is not available to the courts in wrongful dismissal cases. Other remedies include ordering the employer to pay damages or making any other equitable order that will remedy the unjust dismissal and protect the personal dignity of the employee.

The damages that an adjudicator can award is not limited to the amounts that a court would award under the common law. Damages could include the common law reasonable notice equivalent as well as other costs to “make the employee whole”, with the result that the damages award could exceed what a court would normally award.

Employer Tips

While it may not be possible to prevent an employee from filing an unjust dismissal claim, employers can and should take steps to minimize a finding that a dismissal was unjust. Suggestions include:

  • Having a fair reason for the termination and telling the employee (preferably in writing), the reason(s) for the termination.
  • Acting reasonably and following a fair procedure when dismissing the employee.
  • Giving the employee as much notice as you can; preferably the amount of notice or pay in lieu of notice that the employee would be entitled to under the common law, instead of the minimum notice under the Code.
  • Not using lack of work as an excuse to get rid of an employee. If you are terminating the position due to lack of work, be prepared to provide evidence.
  • Not ‘throwing in’ just cause accusations if you are not terminating for cause. If there is just cause to terminate, the proper process should have been followed and should be well documented.
  • Making a reasonable severance offer in return for a general release of all claims. Do not coerce the employee or threaten the employee to sign a release; give them sufficient time to obtain independent legal advice.

The above suggestions are not exhaustive and employers should seek legal advice before dismissing an employee if there is suspicion that they could be faced with an unjust dismissal claim.

Heather Hettiarachchi