The Remedy of Unjust Dismissal

As discussed previously, the Canada Labour Code (the Code) provides a unique remedy known as “unjust dismissal”. This statutory provision applies to non-unionized persons employed in federally regulated industries with more than one year of service provided that they are not “managers”.

The remedy is very different from a normal lawsuit. It can lead to awards of back pay, aggravated damages for unfair conduct, and reinstatement.

The Code has a very short limitation period of 90 days within which the complaint must be filed.

Settlement of the Unjust Dismissal Case

One would expect that the employer and employee would be free to negotiate a full and final settlement of all claims arising from the termination of employment and that such a settlement agreement would be an effective bar to an unjust dismissal complaint. That expectation, however, would be wrong.

The Precedent Case

Ms. Myrelle Paris was terminated by the National Bank. Shortly after termination, she entered into a full and final release by which she gave up all claims, including any remedy under the Code. In exchange for this release, she was paid $33,000 plus given relocation counselling. She then, nonetheless, proceeded to file an Unjust Dismissal complaint under the Code.

Section 168 (1) of the Code contains a term that is similar to that of the Employment Standards Act that governs provincially regulated employees. This provision basically states that the unjust dismissal remedy will not take away from any contract or agreement which provides rights or benefits which are more favourable to the employee.

The precise wording is as follows:

This Part and all regulations made under this Part apply notwithstanding any other law or any custom, contract or arrangement, but nothing in this Part shall be construed as affecting any rights or benefits of an employee under any law, custom, contract or arrangement that are more favourable to the employee than his rights or benefits under this Part.

These words were read by the adjudicator, and confirmed by the Federal Court on review, to mean that the executed settlement agreement was not an impediment to the filing of this complaint.

This was so even though a subsequent section of the Code appeared to acknowledge that the parties may well be able to settle the case.

Section 241(3) of the Code seems to propel this argument. It states, in context, as follows:

241 (1) Where an employer dismisses a person described in subsection 240(1), the person who was dismissed or any inspector may make a request in writing to the employer to provide a written statement giving the reasons for the dismissal, and any employer who receives such a request shall provide the person who made the request with such a statement within fifteen days after the request is made.

 (2) On receipt of a complaint made under subsection 240(1), an inspector shall endeavour to assist the parties to the complaint to settle the complaint or cause another inspector to do so.

(3) Where a complaint is not settled under subsection (2) within such period as the inspector endeavouring to assist the parties pursuant to that subsection considers to be reasonable in the circumstances, the inspector shall, on the written request of the person who made the complaint that the complaint be referred to an adjudicator under subsection 242(1),

(a) report to the Minister that the endeavour to assist the parties to settle the complaint has not succeeded; and

(b) deliver to the Minister the complaint made under subsection 240(1), any written statement giving the reasons for the dismissal provided pursuant to subsection (1) and any other statements or documents the inspector has that relate to the complaint.

The above section, the Court determined, applies only to settlements that were achieved through the inspector appointed to resolve the case.

It would appear to make no sense to recognize a settlement by the federally appointed inspector but not by the parties dealing with one another directly. The case revolved around the interpretation of the statute and not necessarily common sense.

The Court did state that the settlement agreement would be considered and given credit when fashioning a remedy, given success in the case.

What’s an Employer To Do?

The issue then becomes what steps may be completed by the employer to ensure a valid agreement. One obvious solution is to involve the federal inspector but that, of course, requires a complaint to be filed. This would require the employer to encourage the terminated employee to file the complaint and then proceed to settle the case by means of the inspector, a somewhat unwieldy process.

A second alternative may be to wait until the 90-day limitation period has expired prior to negotiating an agreement. This settlement would presumably require a covenant by the employee that no unjust dismissal complaint has been filed by the date of the settlement. That does not necessarily mean that all employees will be honest but it will certainly allow for recovery of all funds paid on account of the fraudulent conduct.

Absent such steps the employee may well be at liberty to sign a settlement agreement, receive payment and proceed with a complaint within the 90 day limitation period.

Strategy of the Employee

As unthinkable as they may be, the employee may well elect to accept a settlement offer as was reflected in the above-cited case, receive payment and then consider the filing of a complaint. It does seem unfair but a terminated employee facing financial issues may well consider this a course of action. Legal counsel would be obliged to advise on this as a possible stratagem.

Canada Labour Code a Minefield

The Code is difficult to navigate. Employers must proceed cautiously and take proper advice before acting. Employees must consider all options at their disposal, including that as referenced above. The law is not necessarily intuitive. Federally regulated employees must be aware of their rights and how to exercise them.

Get Advice Before You Act

If you are an employer or an employee in a federally regulated industry, take the time to get advice before actions are taken. Contact the offices of Toronto employment and labour lawyers Mallins Law. We regularly advise employees and employers on legal workplace issues. Contact us online or by phone at 647-792-0310 to schedule a consultation.