Unjust Dismissal Under Canada Labour Code

Just Cause Defence

Not Common Law Test

The definition of just cause is not one which follows common law authorities as the conclusive word on this subject. A leading case on this subject came from then Professor George Adams in 1979. It remains a guiding light today. 1 The adjudicator concluded that the standard for a just cause defence under the Code is of a higher grade than the common law standard. The intent of Parliament, he stated, was to import the law of arbitral jurisprudence into this analysis.

While this may be so, the adjudicator must be sensitive to considerations which may not “fit comfortably within the ‘industrial’ discipline model”.

Both these references above from Roberts were spoken of, approvingly in Wilson. 2

Mixed Fact and Law

The finding of an adjudicative decision on the issue of just cause is one of mixed fact and law. It is subject to review based on the standard of reasonableness.  3

McKinley Contextual Review

The Supreme Court of Canada decision in McKinley remains the guiding light for allegations of just cause under the Code, in addition to common law. 4 McKinley concluded that a the category of misconduct is not necessarily conclusive, and that a prudent review of the context of the case is needed, to ensure that the punishment is proportionate to the transgression. Added to this analysis is the observation of the importance of work to the lives of individuals and the inherent power imbalance in the employment relationship.

This test is one which is not readily achieved, in the absence of prior warnings and the imposition of lesser penalties for similar misconduct. [/efn_note] Payne v Bank of Montreal FCA Feb 2013 [/efn_note]

In cases involving “forms of dishonesty that . . . bordered on theft, misappropriation, forgery or a fraudulent sham”, this issue of proportionality may influence the impact of a single dishonest act, however negligible. The Court noted:

57            . . . I favour an analytical framework that examines each case on its own particular facts and circumstances, and considers the nature and seriousness of the dishonesty in order to assess whether it is reconcilable with sustaining the employment relationship. Such an approach mitigates the possibility that an employee will be unduly punished by the strict application of an unequivocal rule that equates all forms of dishonest behaviour with just cause for dismissal. At the same time, it would properly emphasize that dishonesty going to the core of the employment relationship carries the potential to warrant dismissal for just cause.

Fundamental Analysis

Three issues arise in the analysis of just cause. They are as follows: 5

  1. Did the employee commit the alleged wrongdoing?
  2. If so, does this warrant disciplinary action?
  3. Was the misconduct of a proper grade to allow for termination?

An example of the application of this three step process is found in a 2005 Federal Court of Appeal decision. The Federal Court of Appeal reviewed the just cause allegations made by the employer.  6 The employer succeeded before the adjudicator, a decision which was reversed on first review.

The employee had worked for the Band for 25 years, responsible for the management of finance and administration, to control income and expenditures. The Chief of the Band, whom the employee supported, had been defeated in a general election. Controversy followed with respect to the prior administration, which resulted in an investigation conducted by third parties. Following the report, the Band suspended the employee with pay due to alleged irregularities. She was terminated two months later.

The adjudicator found two of the thirteen allegations to be of merit in the just cause allegations. These related to a backdated employee contracts and a cheque issued for roughly $10,000 to the employee.

The controversial payment was a cheque intended for a band member to allow her to open a travel agency business. The funds were in fact received by the complainant and paid in cash to the intended recipient over seven payments. This was found to have been a “serious fault”, one which necessarily impacted the trust and confidence of the employer. This was also the conclusion reached for the issues involving the backdated contracts. The adjudicator also concluded that these contracts were forged.

The Federal Court of Appeal considered the analysis conducted by the adjudicator to determine if he followed the three step process required for the just cause determination, this being, as set out above.

The employee argued that the adjudicator did not properly consider the third step, that is, whether dismissal, given the context of the case, was proportionate. Arguments included the need to review the 25 year history, the nature of the controls traditionally used by the Band, that two of the thirteen allegations were proven and the impact of the new Council.

The Court of Appeal agreed that this step was conducted “somewhat too rapidly, if he went through it at all”. The adjudicator appeared to ignore the duty to complete the third step as he stated that once a breach of the relationship of trust had been established, it was up to the Band to chose the proper level of discipline. This court also found that the adjudicator conflated the second and third step. He found a breach of the relationship of trust which is a factor to be considered in the selection of penalty, which is a third stage factor.

It was also found that the adjudicator wrongly referred to an older Supreme Court of Canada case which was obsolete. 7

The decision was set aside and the case remitted back to the adjudicator to allow him to proceed to the third step of the analysis.


A further benchmark for the assessment of just cause is a civil case from Saskatchewan. 8 In this case, the employee had repeatedly failed to carry out the duties which were assigned to him. The issue was not his ability to do so, but rather his unwillingness. This case noted that short of dishonesty, the employer must have warned the employee to amend their way or face the prospect of dismissal.

The warning should contain, given a failure to meet the expected standards:

  1. Objective standards given in a clear manner;
  2. Identify the specific deficiencies;
  3. Accompanied by a unequivocal warning that failure to meet the standard will result in dismissal;

This test applies to both culpable and non-culpable conduct. Culpable is descriptive of a conduct which is “will not do” and non-culpable is “cannot do”.

For conduct which is “cannot do”, most adjudicators require that there has been such a warning provided. This is the same approach used by labour arbitrators.

For “will not do” behaviour, the employer must show that the failed performance was due to such culpable conduct.

Progressive discipline is usually required for culpable misconduct, barring evidence which may show that the employee’s behaviour will not improve by a disciplinary response. 9

The need for a warning has also been considered in common law cases, as is reviewed here.

 Progressive Discipline

The onus rests upon the employer to prove that it had provided a from of progressive discipline to allow the employee to understand the need to improve, failing which termination may follow. 10

Graduated levels of discipline are often generally important steps for the employer to take prior to termination. However, there are situations in which such a process is not required. The theory of the review of the employer discipline is to determine if the response is proportionate to the wrongdoing. 11 Cases allowing for immediate termination are generally limited to examples of egregious conduct, which displays conduct “incompatible with the employment relationship” 12 or reveals that the “relationship of trust may be irrevocably broken”. 13 14 15

The Supreme Court of Canada in Wilson, a case which was not decided on this basis, affirmed that the principle of progressive discipline will apply on a broad scale:  16

[54] … This concept generally requires employers seeking to justify the dismissal to demonstrate that they have made the employee aware of performance problems, worked with the employee to rectify them, and imposed “a gradual repertoire of sanctions before resorting to the ultimate sanction of dismissal”: ...

Issue of Probationary Status

The interpretation of the rights of a dismissed employee under the Code differs from the common law standard.

At common law, probationary employment is subject to the standard of “unsuitability” as opposed to the need to show just cause for termination. The employer must show that it acted in good faith and that it provided a fair opportunity for the employee to show their skills. 17

Employees covered by Code protections may well have agreed to a probationary term. This, however, does not revise the standards required to show just cause for termination. This is not based on the probationary status. [/efn_note] McConnell Transport Limited v Dennis McLaughlin CIRB 2021. This was not an unjust dismissal case. [/efn_note] The Board in this instance considered the defence to a claim for statutory notice based on the probationary status and, in so doing, also referred to the law on unjust dismissal. A subsequent Board decision reviewed this issue directly and came to the same conclusion. . [/efn_note] McConnell Transport Limited v Smith CIRB April 2021 [/efn_note]

Not Quite Just Cause

The adjudicator may find that while just cause was not proven, there was shown performance issues which were worthy of lesser discipline. The adjudicator has power to substitute a lesser penalty of their choice, depending on the context. 18