Is frustration 'just cause' for termination?

by Cristina Tomaino

As you may know, federal employers require just cause to terminate non-union and non-management employees. Recently in Lewis v Whiteline Trucking Ltd, an arbitrator under the Canada Labour Code considered a complaint by a transport driver seeking pay in lieu of notice and severance pay after he was dismissed on the basis that he did not qualify for insurance coverage with his employer’s new insurance provider. The employer argued that it had just cause to dismiss the employee as his employment contract was frustrated by his inability to receive insurance coverage and, as such, it was not required to provide pay in lieu of notice or severance pay.

Arbitrator Pallard rejected this argument and found that the common law doctrine of frustration does not amount to just cause termination under the Canada Labour Code as it does not involve culpable behavior on the part of the employee.

He noted that while the Canada Labour Code does not define “just cause”, it is well-accepted in common law that the conduct which generally meets the standard of just cause dismissal includes serious misconduct, habitual neglect of one’s duties, and willful disobedience.

Pallard held, at paragraph 19, that “in the absence of any conduct on the part of the Complainant that would have justified discipline, there is no incident that would constitute just cause for his termination.”

In coming to this conclusion, he noted that the unjust dismissal provision in Part III of the Canada Labour Code is intended to allow non-unionized workers who have been unjustly dismissed to benefit from protections similar to those available to unionized employees under a collective agreement. Accordingly, to allow an employer to dismiss and employee due to frustration of contract without pay in lieu of notice or severance pay would deny that employee the protections of sections 230(1) and 235(1) of the Canada Labour Code.

As a secondary issue, Arbitrator Pallard considered whether a four-month break in employment was sufficient to sever the continuity of the employment relationship. He noted that a gap in employment does not necessarily terminate the employment relationship with regards to the calculation of length of service and severance pay. The factors to be taken into consideration include the length of the gap in relation to the total period of employment, the circumstances occasioning the gap, and the means of reintegration into the workplace.

In this case, Arbitrator Pallard held that a four month gap due to injury was not sufficient to constitute a break in the employment relationship and awarded the employee his full statutory termination and severance entitlements.

This decision is a reminder to all employers of the high threshold for just cause termination. If you are a federally regulated employer who requires assistance in navigating an employee claim of unjust dismissal the lawyers at CCPartners are well versed in navigating terminations for federal employees and can assist employers throughout the process.

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