Tuesday, September 27, 2016

Canada - Where the Rubber Hits the Road, Reflections on Supreme Court Decision in Wilson v Atomic Energy of Canada Ltd

By Theodore Goloff, Robinson Sheppard Shapiro, Montreal


Time was when it was thought that, as slavery had been abolished throughout the British Empire before 1850, therefore, no one could be made to work for another in perpetuity. The corollary was that no employer could be forced to keep another in its employ in perpetuity. Hence, there was a reluctance to enforce mandatory injunctions respecting employment contracts and to order reinstatement, in the event of termination, for to do so would seem to violate these norms.

Within the British Parliamentary tradition followed in Canada, Parliament, being supreme, so long as it respected constitutional norms, could validly adopt legislation that departed from these principles and empower administrative bodies, when they found terminations of certain classes of employees to be unlawful or without just cause to be reinstated. That’s how Division XIV of Part III of the Canada Labour Code, empowering arbitrators duly seized of so-called “Section 240” complaints to determine whether a given contested termination was or was not just, and if the latter was the case, order reinstatement.

It is trite law to posit that provisions set out in labour standards legislation are matters of public order from which no one may contract out. All labour jurisdictions in Canada reject the American doctrine of “employment at will”, and oblige employers who terminate employees without disciplinary or administrative “cause” to provide them with both statutory and common law notice or pay in lieu thereof. In their respective labour standards legislation, three jurisdictions in Canada — the federal jurisdiction, Quebec and Nova Scotia — provide employees satisfying certain threshold seniority levels the ability to contest their termination as being “unjust” and seek, from the appropriate administrative agency, an order of reinstatement and back pay if the employer is unsuccessful in proving “cause” that is “sufficient” to justify termination. What to do if one part of such legislation provides and allows an employer to terminate an employee without “cause”, on condition that it favour the employee with a specified notice or pay in lieu thereof, while another provides the possibility of contestation of the “justness” of the termination? Does the fact that “cause” is not alleged make such termination per se unjust?

At the same time, non-statutory employment law, whether resulting from the common law of nine provinces and three territories of Canada or the civil law of the Province of Quebec, recognizes that an employer could, on providing “reasonable notice” or pay in lieu thereof to an employee, terminate any employment contract that was not for a definite term, at any time, the whole in line with the principles noted above. Indeed, the very provisions of Civil Code of Québec that recognize such reciprocal rights and obligations declare that the right thereto cannot be renounced to by the employee, in advance of its crystallization (Arts. 2091-2092 C.C.Q.).

Because labour and employment law is a combination of both statute law and the general law that results from either the common law or the Civil Code, the question of how to conjugate both in a manner which does not offend one or the other becomes supremely relevant. Put succinctly, if the authority of an administrative body to reinstate an employee lies in its finding that a particular termination challenged before it was without “just and sufficient cause”, is a termination without “cause” but with “reasonable notice”, defined in its widest sense, hence “legal”, per se unjust and therefore amenable to any such compulsory reinstatement order?

The Issue Succinctly Stated

Such was the issue that came before an arbitrator hearing the complaint of one Joseph Wilson, whose employment of four and a half years without discipline of any kind was terminated in November 2009 with what the employer termed “a generous dismissal package that well exceeded the statutory requirements”. Mr. Wilson claimed that his dismissal was unjust via a Section 240 complaint. A labour arbitrator was appointed to hear the complaint. Atomic Energy sought a preliminary ruling on whether a dismissal without cause but with a sizeable severance package was nonetheless “unjust”, or whether given the substantial package, the arbitrator’s jurisdiction or “vires” to rule on the justness or sufficiency of the grounding of the termination was therefore absent or removed. If a termination with a generous package was a) legal and b) not per se unjust, what was there left to litigate? The arbitrator held against Atomic Energy that however generous the severance payments he had jurisdiction to determine whether the dismissal was unjust. As no “cause”, either disciplinary or administrative had been alleged or proven, Mr. Wilson’s complaint was allowed.

Applicable Principles of Judicial Review

Decisions of such administrative tribunal are immune from challenge otherwise than by way of judicial review. Therefore a review of the rules of this branch of administrative law is in order to understand the significance of the case.
Back in the day, the prerogative writs of English common law provided a powerful tool to ensure that the “rule of law” and a full and fair application of the rules of “natural justice” were guaranteed before administrative tribunals. With the proliferation of statute law whose application and interpretation was largely given over to such administrative boards and tribunals, deemed to have “specialized knowledge” of the subject matter, coupled with the adoption of privative, preclusive and/or finality clauses in such enabling legislation, the scope of intervention of the common law superior courts were successively and effectively diminished. There developed a conscious and ever prevalent “deference” to the inferior tribunal’s decision provided it was “reasonable” i.e. one which the facts and law could rationally countenance and support. While the Supreme Court in Dunsmuir v. New Brunswick, 2008 SCC 9, had said that the “function of judicial review is […] to ensure the legality, the reasonableness and the fairness of the administrative process and its outcomes” [par 28], it also noted that judicial review “seeks to address an underlying tension between the rule of law and the foundational democratic principle, which finds an expression in the initiatives of Parliament and legislatures to create various administrative bodies” [par 27].

On the other hand, while recognizing that deference should be accorded and a reasonableness test should be applied (1) where the enabling statue contains a privative or preclusive clause, indicating therefore a statutory direction from the legislative authority indicating an inclination against intervention and (2) where a discrete and special administrative regime in which the decision maker has “special expertise” was set up — e.g. for instance in labour union certification where a labour relations board has particular, recognized and discreet expertise, the Court recognized exceptionally that where the issue concerns a question of law that is of central importance to the legal system and lies outside the specialized area of expertise of the administrative decision maker, such an issue would attract a “correctness” standard of review. A substantive error of law, or mixed fact and law, would therefore vitiate the decision. “Correctness” is a go/no go binary standard. A decision is either correct or incorrect, and cannot be halfway valid.

Ostensibly, the “reasonableness” test is concerned with the intelligibility and transparency of the grounds upon which a judgement relies, and its consonance with the myriad of solutions that the facts and the laws might allow. By definition, even conflicting and contradictory positions might qualify as “reasonable”.

Atomic Energy of Canada sought judicial review of the arbitral decision before the Federal Court — Trial Division and the Federal Court of Appeal. It won in both instances, the Trial Division holding that the standard of review was the “reasonableness” of the decision but that the arbitrator’s outcome was itself unreasonable. The Court of Appeal agreed on the merits of the case but, applying the standard of “correctness”, found that the decision of the arbitrator was flawed and inconsistent with a proper interpretation of the law. The Court quashed the decision and ruled that, provided the required level of notice or severance is paid to the employee, such a termination was not in and of itself unjust. Hence, Mr. Wilson’s referral of the case to the Supreme Court of Canada.

The Supreme Court’s Judgment and the Issues it Raises

Applying the “reasonableness” standard means that once a court finds that a decision passes muster, anything else it finds is entirely obiter. From this author’s point of view, if the reviewing court ventures beyond, it begins to deal with the correctness of the decision which is not one strictu sensu before it.

As the Supreme Court minority in Wilson pointed out, Atomic Energy of Canada was in the unenviable position of having come before two arbitrators with the identical issues raised i.e. whether a termination without “cause” but with a package was or was not per se unjust. These cases resulted in two contradictory decisions on the same issue from two different arbitrators involving the same employer.

Apparently, in one case, because the arbitrator ruled that a termination without cause but with a generous package was not “unjust” and was legal, the Section 240 complaint was dismissed. In the other case, precisely the opposite resulted. If both positions are reasonably consonant with the statute what is a conscientious employer to do? Is predictability in the law one facet of the rule of law? If judicial review has as its object the preservation of the rule of law, does this affect the choice of standard of intervention i.e. “reasonableness” or “correctness”? While the Supreme Court opined in Domtar Inc. v. Québec (Commission d’appel en matière de lésions professionnelles), [1993] 2 SCR 756, without deciding the point definitively - that jurisprudential conflict did not constitute an “independent” basis for review - the question could it seemed, be revisited and was indeed by three of the judges.

The Federal Court of Appeal and the minority in the Supreme Court found that because administrative decision makers are not bound by the principle of stare decisis and lack an institutional umbrella under which these issues can be debated openly for a consensus position to emerge where there are conflicting interpretations that go to the heart of the employment law regime i.e. is an employer ever permitted to dismiss a non-unionized employee without cause, finding that some arbitrators say yes and some say no, the minority ruled that:

“The rule of law and the promise of orderly governance suffer as a result. When reasonableness review insulates conflicting interpretations from judicial resolution, the identity of the decision-maker determines the outcome of individual complaints, not the law itself. And when this is the case, we allow the caprice of the administrative state to take precedence over the “general principal normative order”. [par 84]”

In the minority’s view (Justices Côté, Brown and Moldaver), among the foundational principles of the rule of law are that (a) there is one law for all, whether prince or pauper and (b) what the law requires must be intelligible at the outset, not only after the game has been played. Indeed, the minority held that “the cardinal values of certainty and predictability — which are themselves core principles of the rule of law […] — are also compromised” [par 86]. Unless the Supreme Court determines the issue on the basis of correctness, federally regulated employers unpredictably determine when and how they can dismiss their employees so long as conflicting adjudicative jurisprudence could only be challenged on the basis of reasonableness. Indeed, the minority opinion held such a situation “creates the risk that the very same federally regulated employer might be subjected to conflicting legal interpretations, such that it may be told in one case that it can dismiss an employee without cause, while being told in another case that it cannot” [par 87]. Those judges pointed out that this was not mere conjecture — it had already happened to Atomic Energy of Canada. Finally, the minority reasoned that it makes little sense to defer to the interpretation of one decision maker when it is clear that other similarly situated decision makers whose decisions are equally entitled to deference have reached different results. Put differently “as long as there is one conflicting but reasonable decision, its very existence undermines the rule of law” [par 89].

On the merits, the minority found that a dismissal without cause but with adequate notice and/or severance was not per se unjust. Other circumstances would have to be examined to sustain a Section 240 claim.

The Majority Opinion

But what of the majority composed of the six remaining judges? Justice Abella, in obiter, first suggested a revision of the standard of review jurisprudence, something none of her colleagues would buy into. Justices Cromwell, Karakatsanis, Wagner, Gascon and Chief Justice McLachlin asserted that since the standard of reasonableness was appropriate and the arbitrator’s decision met that standard, Mr. Wilson’s appeal should be allowed with costs.
While three separate majority opinions might have settled the litigation particular to the two litigants before the Court, in this author’s most respectful view, the more general question is not quite so settled: does termination with a package but without disciplinary or administrative cause, attract a Section 240 challenge ? Which school of thought should be preferred?

To be sure, Madam Justice Abella put forward the position to the effect that “the foundational premise of the common law scheme — that there is a right to dismiss on reasonable notice without cause or reasons — has been completely replaced under the [Canada Labour] Code by a regime requiring reasons for dismissal“ [par 63] and the Chief Justice and Justices Karakatsanis, Wagner and Gascon together agreed “with her disposition of the appeal on the merits and with her analysis of the two conflicting interpretations of the Unjust Dismissal provisions of the Canada Labour Code […] proposed to the Court” [par 70]. Mr. Justice Cromwell, on the other hand, made no such endorsement of what is, at least in this author’s point of view, entirely obiter.

A Critique Thereof

Parenthetically, when a court comes to the conclusion that a decision of an inferior tribunal is reasonable, and therefore immune from judicial review, does its analysis of competing and conflicting points of view amount to doing indirectly what a correctness standard would require? It is not without a good deal of circumspection that I am of the view that this is what in essence happened.

With the greatest of respect for my betters, I ask the simple question as to whether having decided that (a) the standard of review was reasonableness and (b) that the arbitrator’s decision has passed muster, the analysis of the “two conflicting interpretations of the Unjust Dismissal provisions of the Canada Labour Code” [par 70] is tantamount to an end run, an attempt in effect to adjudge which of the two conflicting points of view is more reasonable. Mindful always of the great respect that the aforementioned judges are due, both personally and as respects their high office, their statements made with respect to Justice Abella’s efforts to stimulate a discussion on “how to clarify or simplify our standard of review jurisprudence to better promote certainty and predictability” [par 70] with respect to the “reasonableness standard” and to the effect that “it is unnecessary to do so in order to resolve this case” [Ibid] is equally apt and equally applicable to the analysis made by her of the two conflicting interpretations above mentioned.

Having determined that the arbitrator’s decision in the case at Bar was reasonable, discussion should have ended at that point! It has always been understood that no court should decide more than required to dispose of the matter before it. Reasonableness, like a rose by any other name, smells as sweet. Declaring that an arbitrator’s decision is reasonable is not tantamount to deciding that another point of view is any less reasonable. Indeed, for a court, any court, eminent judges of the Supreme Court included, to so decide is to, most respectfully, cross the line into the standard of “correctness”.

If there are two standards that determine judicial review — “reasonableness” on the one hand and “correctness” on the other — preferring one competing, contradictory but reasonable analysis over another competing, contradictory but no less reasonable analysis is to violate the rule that one cannot be just a wee bit pregnant.

Either the standard is the “reasonableness” of the decision or it is the “correctness” of the decision. While recognizing that those judges may have sought to indirectly settle matters, I fear they may have provided grist for a new debate about the legitimacy of so doing, at least in the eyes of the legal “purist” that I might be accused of being.
For this author then, the question of which point of view will ultimately triumph is yet to be decided. While a challenger of Madam Justice Abella’s analysis may have a tough row to hoe, in strict law it is still open to he or she who is brave and stout enough, at heart, to do so. A bit like pushing water uphill, perhaps, but doable – even necessary! Difficult maybe, but certainly not a Don Quijote situation!

And if my views above differ with those of my betters then, most respectfully, I differ with deference.