Dismissing an Employee in the Federal Sector? You Will Need More Than a Severance Package

Today, the Supreme Court of Canada allowed the appeal in Wilson v Atomic Energy of Canada Limitedand ruled that federally regulated employers must provide justification for dismissing a non-unionized employee or risk facing the “galaxy of discretionary remedies, including, most notably, reinstatement” provided for under the Canada Labour Code (the “Code”).  Unfortunately for federally regulated employers, this decision overturns the Federal Court of Appeal ruling we wrote about early last year and confirms the notion that federally regulated, non-unionized employees cannot be dismissed without cause or reasons.  In other words, a federal sector employer cannot simply terminate the employment of an employee by providing reasonable notice, whether measured by the statutory minimums provided under the Code or the common law.


The facts in this case are straightforward. Joseph Wilson had been employed by Atomic Energy of Canada Limited (“AECL”) for 4.5 years when he was dismissed without cause and without reasons. AECL provided Wilson with a generous severance package of 6 months’ pay in lieu of notice, well above the statutory requirements.

Wilson filed an “Unjust Dismissal” complaint claiming he was unjustly dismissed contrary to section 240(1) of the Code. The primary issue at the hearing was whether AECL could lawfully terminate Wilson on a “without cause” basis. At the original hearing, the adjudicator acknowledged that decision makers were divided into “two camps” on the issue. The first camp recognized a right to “without cause” dismissal under Code, while the second camp did not.

After reviewing the jurisprudence under the Code, the adjudicator held that AECL could not avoid an Unjust Dismissal determination by providing a sizable severance package. However, on judicial review and appeal, both the Federal Court and the Federal Court of Appeal disagreed with the adjudicator and decided that the common law rule that an employee can be dismissed without cause if provided with reasonable notice remains in place under the Code.

Wilson appealed to the Supreme Court of Canada.

The Supreme Court of Canada’s Decision

In a 6-3 decision, Justice Abella wrote for the majority and restored the adjudicator’s original decision. Ruling that the adjudicator’s decision was reasonable, the majority held that sections 240 – 246 of the Code displace an employer’s ability at common law to fire an employee without reasons if reasonable notice is given.  The majority supported its decision by reviewing the statutory language in the Code, Parliament’s intent when enacting the provisions, the arbitral jurisprudence and labour relations practice.

Implications for Federally-Regulated Employers

With this ruling, the Supreme Court of Canada has confirmed that the statutory scheme provided for under the Code offers expansive protections to non-unionized federally-regulated employees, much like the protections available to unionized employees covered by a collective agreement.  It sets the federal sector apart from most Canadian provinces (other than Québec, which offers similar protections to employees with two years of continuous service, and Nova Scotia, for employees with ten years of continuous service) by providing federal sector employees with a much higher degree of employment protection, and correspondingly higher limits on employer flexibility (while still being fair to employees in terms of severance).  It effectively applies and results in an inconsistent approach to Canadian labour laws that otherwise, particularly on the common law front, have become more uniform over past years.

We are hopeful that in the current review of the federal workplace, the Federal Government will review this ruling and realize that the Code is out of step with the majority of the rest of Canada.  In the interim, however, federally regulated employers must be careful to ensure they are able to and do justify their dismissal decisions with reasons, such as demonstrating “just cause”, a layoff for lack of work or the discontinuance of a function. Without proper justification, an employee may be entitled to a host of remedies under the Codeincluding, but not limited to, reinstatement of employment with back pay, which can be much costlier and more problematic than pay in lieu of reasonable notice.

If you have any questions with respect to the decision or how to plan for and manage the dismissal of a federally-regulated employee, please contact any member of the National Labour & Employment Group at McCarthy’s.



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