Dismissal due to business reasons in Canada
| Autor | Eric Tucker - Christopher Grisdale |
| Páginas | 86-94 |
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Canada is a liberal market economy and as such the law places few restrictions on the employer’s freedom to dismiss an employee. In particular, the law places no restriction on the freedom of employers to dismiss employees for business reasons. However, dismissed employees are entitled to certain rights, the most important of which is notice of termination or pay in lieu of notice.
It must also be noted at the outset that the unionized and non-unionized employees operate under somewhat different legal regimes. Non-unionized employees derive their rights from their individual contracts of employment, which are governed by the common law and minimum standards laws. Unionized employees (about 31% of the labour force27) derive their rights from the collective agreement. They cannot make claims under the common law but they are covered by minimum standards laws.
Unionized employees are generally better protected against dismissal than non-unionized employees. This is because collective agreements typically restrict the employer’s freedom to dismissal by providing that dismissals shall only be for just cause. However, just cause protection does not restrict the freedom of the employer to dismiss for business reasons. In principle, individual employees could also negotiate protection against dismissal, including dismissal for business reasons, but this is very unusual.
Canada does not publish statistics on dismissals for business reasons, but we can get a sense of the extent of the phenomenon from other data. During the last recession, beginning in October 2008 and bottoming out in July 2009, total employment declined by 431,000 or 2.5% of the workforce. While not all job loss was due to economic reasons, it is fair to assume that a significant proportion was. Since July 2009, there has been net job growth, although the current unemployment rate is still higher than it was in 2008.28Even while there is net job growth, some workers continue to lose jobs due to
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business reasons. Unemployment statistics report that job losers constitute about 50% of the newly unemployed, but not all job losers lose their jobs for business reasons.29Data on firm entry and exit rates discloses that between 2000 and 2008 12.3% of all firms exited the market annually, affecting 1.9% of the labour force, but not all firms exit for business reasons.30
Canada is a federal state and labour and employment is primarily of provincial jurisdiction. In this brief survey, we cannot discuss the laws of every province, so we have chosen to focus on the province of Ontario, Canada’s most populous, and occasionally consider federal labour laws, which govern about ten percent of the labour force. With the exception of Quebec, the differences between provincial laws tend to be small.
As a liberal market economy that does not restrict the freedom of employers to dismiss workers due to business reasons, there has been no need to define the term.
At common law, an employer is permitted to dismiss an employee for any reason and, indeed, is not required to provide the dismissed employee with the reasons for the dismissal.
In Ontario, the Employment Standards Act (ESA) deals with minimum standards, including several matters related to termination.31However, it does not require the
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employer to provide reasons for dismissal and it does not restrict the employer’s common law freedom to dismiss for business reasons. The Canada Labour Code (CLC)32, which applies to federally regulated employees, is similar, except that it provides that in certain circumstances an employee is entitled to reasons for dismissal. This is in aid of a provision that entitles individuals to challenge their dismissal as unjust. However, the CLC specifically provides that it is not an unjust dismissal to terminate an employee "because of lack of work or because of the discontinuance of a function."33
Labour relations statutes do not prohibit unionized employers from shutting down for business reasons. While collective agreements typically provide that there shall be no lay-offs or dismissals without just cause, arbitrators interpreting collective agreements have consistently held that just-cause protection does not restrict the freedom of employers to dismiss for business reasons. Unions have rarely been able to negotiate more substantial restrictions on the freedom of employers to terminate employees for economic reasons.
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Must the business reasons that justify the dismissal concur in the whole company or can they concur in the workplace where dismissal occurs?
Employers are free to dismiss employees in any part of the company they choose.
At common law, there is no set procedure that must be followed to conduct a dismissal for business reasons. There is, however, an implied duty to give employees reasonable notice of termination or pay in lieu of notice (discussed below). The courts have developed a doctrine that employees are entitled to good faith and fair dealing in the manner of dismissal, but this is unlikely to arise in the context of dismissals for economic reasons.34
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Pursuant to the ESA, s. 54, absent...
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