Cost awards have often been an area of controversy for federal employees who have been unjustly dismissed. Under the Canada Labour Code, federal employees who have been terminated after working at their job for a year can exercise their statutory rights to file an unjust dismissal complaint. This statutory right can provide federal employees with significant job protections, including the possibility of being reinstated if the dismissal is found to be unjust. In circumstances where reinstatement is ordered, federal employees can also receive the benefits of “back pay”. In other words, in addition to getting their job back, federal employees can also receive payment for the period they were unjustly dismissed from their jobs, which can help mitigate employee turnover costs. Employee retention is crucial in reducing these turnover costs by avoiding the expenses associated with recruiting and training new employees. While this has the potential to be a very significant remedy for unjustly dismissed federal employees, there have been some concerns around cost awards under the unjust dismissal provision of the Canada Labour Code. Thankfully, some of those concerns have been recently addressed by a decision at the Federal Court of Appeal.
A Case of Wrongful Dismissal: Amer v. Shaw Communications Inc.
The Federal Court of Appeal in Amer v. Shaw Communications Inc. provided some clarity to the issue of costs under a wrongful dismissal complaint. There had long been arbitration cases wherein cost awards were limited, or even refused of federal employees who had been found to be unjustly dismissed. Consulting with an employment lawyer is crucial in wrongful dismissal cases to navigate the legal complexities and secure fair compensation. However, the Federal Court of Appeal’s recent ruling provides a more fulsome approach to unjust dismissal cases under the Canada Labour Code, particularly in the context of employment contracts. The Court of Appeal overturned the Federal Court’s ruling that an order of substantial indemnity costs was inappropriate in the circumstances. The Federal Court refused to award substantial indemnity costs, relying on an older case suggesting that substantial indemnity costs are only to be awarded in cases where the employer engaged in objectionable conduct during litigation.
The Federal Court of Appeal dispelled this presumption in its ruling, holding instead that substantial indemnity costs can be awarded to make the unjustly dismissed federal employee whole. The Employment Standards Act is also relevant in such cases, as it establishes minimum notice periods and severance pay entitlements. This is especially important in the context of an unjustly dismissed federal employee who has engaged in no wrongdoing. Such an employee should not be punished for having to pursue their legal rights by forcing them to expend significant sums of money on legal fees. Given the financial costs of pursuing an unjust dismissal case, employees may be substantively unable to pursue their rights, even if they have them formally under the Canada Labour Code. In order to rectify this issue, the Federal Court of Appeal acknowledged that to ensure the rights under the Canada Labour Code are meaningful, it makes practical sense to provide federal employees with the ability to recover costs upon litigation, even to the degree of substantial indemnity costs. The Court of Appeal indicated that this is especially important in circumstances where unjustly dismissed federal employees are of limited financial means and the employer has substantial resources and highly experienced counsel.
The Federal Court of Appeal also indicated that another significant element of the Canada Labour Code’s unjust dismissal provisions is that it is supposed to provide federal employees with similar protections to those enjoyed by unionized workers. The notice period and reasonable notice are critical factors in determining fair compensation for unjust dismissal. The Court of Appeal indicated that in unionized contexts, workers typically do not have to pay out-of-pocket expenses for legal representation, as such representation is typically provided to them via their union and funded through union dues. In order to ensure that non-unionized federal employees are not in a substantially worse position as compared with their unionized counterparts, it makes sense that unjustly dismissed federal employees have the opportunity to recover their legal costs. Without this opportunity, the purpose of the Canada Labour Code’s unjust dismissal provisions would be substantively thwarted. The Federal Court of Appeal aptly recognized this difficulty, hence overturned the decision of the Federal Court, and upheld the initial arbitrator’s award. In the end, the Court of Appeal’s decision provided Ms Amer with an award of substantial indemnity costs, ensuring that she was able to meaningfully pursue her rights under the Canada Labour Code, including severance pay.