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Employment & Labour

Two-pronged test for lack of work issue in Canada Labour Code

By Barry B. Fisher

In this case, the adjudicator commented on the test to be used in determining whether an employer could rely on the “lack of work” or ”discontinuance of a function” exemption from the unjust dismissal section of the Canada Labour Code (s. 242 (3.1) (a)). I note that although the CanLII cite is 1987 the case was actually decided in 2017.

The adjudicator confirms that it is a two-stage process:

  1. There must be a valid economic justification. Generally speaking, this means that the employer must show that they did not simply replace the dismissed employee with another employee. However, they need not show that the job duties have been eliminated as it is perfectly proper to lay off one employee and then to redistribute his or her duties amongst the remaining employees. The onus of proof for this stage is on the employer.
  2. Once it has been shown that there was a real layoff, the employer must show that they had a reasonable explanation for choosing the employee in question as the one to be laid off.

The adjudicator made the following comments on this second branch of the test:

[113] This leaves the issue of the “reasonable explanation for the choice of employee laid off”, the second prong of the afore-mentioned test described in [this case], supra.

[114] In her review of a passage from the Christie, England, Christie, Employment Law in Canada (Loose leaf, 3rd edition, 1998) textbook cited and relied on by the adjudicator in [this case], supra, para. 40, Federal Court judge Eleanor R. Dawson, as she was at the time, restores its context by citing in turn the preceding and following passages. They read:

Unlike some other country’s legislation, which expressly encompasses the notion of unjust selection procedures in layoffs, s. 240 does not empower adjudicators to review the intrinsic fairness of such procedures. Nevertheless, the fairness of selection procedures is relevant as evidence in determining whether the employer’s motive is to terminate the claimant for economic organizational reasons or for some other reason unrelated to the layoff conditions. As Adjudicator Swan puts it, an adjudicator can review the selection procedure applied by the employer in order to determine whether it was utilized as a “colorable attempt to avoid the restrictions on unjust dismissal set out in the Code “. [footnotes omitted]

The quote is then followed by this passage:

Those words are generally interpreted as establishing a test of subjective intention: does the employer intend to release the claimant for economic reasons or for some other reason? The employee carries an “evidentiary” burden of raising a prima facie case of bad motive on the employer’s part, whereupon the onus shifts to the employer to “clearly” establish a “reasonable explanation for the choice of the employee to be laid off’. It must be emphasized that adjudicators will review the employer’s selection procedures only for this limited purpose of ascertaining the presence of a bona fide motive. The choice of appropriate selection procedures, however, is for the employer alone to make, be it operational factors, straight seniority, comparative skill and ability, or a mixture of both seniority and ability. Indeed, the employer can even choose on the basis of who is paid the least. If the employer makes comparative skill and ability the determinative factor, adjudicators will review the employer’s decision only so far as is necessary to ensure that there is no bad faith; adjudicators will not second-guess the substantive correctness of the employer’s decision since the employer has the superior expertise to make such judgments, not the adjudicator. 

This is similar to the analysis when one brings a human rights complaint in respect to whether or not a layoff was discriminatory. In most cases, there is a legitimate reason, free of human rights issues, in deciding whether to reduce the workforce. However, in deciding which employee stays and which is laid off, this decision is sometimes improperly affected by Code based criteria.

For instance, a front line manager may be told that he has to reduce his team by one member but is not given any guidance on how to select the appropriate candidate for layoff. The manager then uses illegal criteria, i.e.: age, disability or gender, to decide that this employee is to be laid off. This would be a breach of the Human Rights Code.

It seems that this same analysis now applies to unjust dismissal terminations. If the adjudicator determined that the predominant motivation behind choosing the complainant over one of his co-workers for layoff was done in bad faith, then the adjudicator has jurisdiction over the case. Absent the employer proving just cause, the default remedy would then be reinstatement.

What would constitute bad faith? In the case in question, the complainant argued that the reason that they laid him off was because he had a long-standing feud with a co-worker about which he had complained about to management and they had done nothing about it. The adjudicator found that the employer had simply chosen the most qualified candidate to stay, (who was not the co-worker with whom the complainant had the feud) and that was not the complainant.

Bad faith can be many things. The only restriction is a lawyers’ creativity.

This case means that adjudicators will now look more closely at employers who contest jurisdiction under this provision and give more opportunities for complainants to argue that even though there was a legitimate shortage of work, the selection of who would be selected for layoff was so flawed that the result is an unjust discharge and that reinstatement with full back pay is the appropriate remedy.

This case should be a consideration when deciding whether a federally regulated employee should proceed by way of an unjust dismissal remedy under the CLC or a wrongful dismissal action in the courts.

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