Under the Canada Labour Code (CLC), federally regulated employers cannot terminate an employee with 12 months or more of continuous service without just cause resulting from misconduct unless termination is due to a work slowdown (a layoff). This differs significantly from provincially regulated workplaces, where employers may provide a notice or payment in lieu when wishing to end an employment relationship for reasons other than misconduct. Accordingly, this may place a considerable constraint on employers seeking organizational changes under federal law.
A common method of severing an employee under such situations is by offering an enhanced severance package in exchange for a final release. The release is an agreement that the employee will not pursue further remedies under the law in consideration or exchange of the additional compensation offered by the employer. A release would provide to be a useful tool; is this, however, valid under the Canada Labour Code?
The answer to this is found within the CLC itself. Specifically, s. 168 (1) reads “ this part … applies notwithstanding any other law, custom, contract or arrangement …. (unless) more favourable to the employee than his rights or benefits under this part”. Put simply, an employer cannot enter into an agreement with an employee that offers less than the provisions granted in Part III of the CLC. This includes limiting the right of the employee to seek adjudication for a wrongful dismissal, which under the CLC includes dismissals without just cause or misconduct. Additional compensation in exchange for a release would not be a greater benefit to the employment security offered under the provisions of the CLC.
Overall, employers cannot rely on a final release agreement to avoid an employee challenging a dismissal under the adjudication process granted by the CLC. To do so would still allow the employee to pursue this avenue, as a written agreement contravening the CLC under Part III would be void. As an employee or employer faced with a similar scenario, it is advisable to seek legal consultation. Whitten and Lublin’s team will ensure you take the best avenue possible whether you are an employer or employee.