Federally regulated employees may have the right to challenge their termination through an unjust dismissal complaint under the Canada Labour Code. However, certain terminations are excluded from this process, including those resulting from a genuine lack of work or the discontinuance of a function.
Employers may rely on a discontinuance of function to argue that an employee is not entitled to pursue an unjust dismissal complaint. However, simply eliminating a position or describing a termination as a restructuring does not necessarily establish that a function has genuinely been discontinued.
Employees who have been dismissed for these reasons should understand their legal rights before accepting their employer’s explanation or signing a severance agreement.
What Is a Discontinuance of a Function?
A discontinuance of a function occurs when an employer genuinely eliminates a particular function or set of activities within its organization.
In Flieger v. New Brunswick, 1993 CanLII 104 (SCC), [1993] 2 SCR 651, the Supreme Court of Canada considered the meaning of discontinuance of a function in an employment context.
The Court explained that a discontinuance may occur when the activities associated with a particular function are no longer carried out as a result of an employer’s good-faith decision.
Importantly, the elimination of a particular position does not always mean that the underlying function has been discontinued. The circumstances surrounding the employer’s decision must be considered.
Discontinuance of Function vs. Unjust Dismissal
Under section 242(3.1) of the Canada Labour Code, the Canada Industrial Relations Board cannot consider an unjust dismissal complaint where an employee has been laid off because of a genuine lack of work or discontinuance of a function.
This distinction is important because eligible employees who are unjustly dismissed may have access to remedies that are not ordinarily available through a wrongful dismissal claim, including reinstatement.
However, an employer cannot necessarily avoid an unjust dismissal complaint simply by stating that a position was eliminated.
If the employee believes that the employer’s stated reason does not reflect the actual circumstances of the termination, there may be grounds to challenge whether the statutory exclusion applies.
For more information about eligibility and employee rights, read our guide to unjust dismissal under the Canada Labour Code.
Does Reassigning an Employee’s Duties Mean a Function Has Been Discontinued?
One important consideration is what happens to the employee’s duties after their employment ends.
In some circumstances, an employer may genuinely discontinue a function even if certain activities are redistributed among other employees or reorganized within the business.
However, where substantially the same function continues under a different job title or is reconstructed as another position, the employer’s claim of discontinuance may require closer examination.
In Flieger v. New Brunswick, 1993 CanLII 104 (SCC), [1993] 2 SCR 651, the Supreme Court of Canada considered earlier decisions involving the redistribution and reorganization of employment duties, including Mudarth v. Canada (Minister of Public Works), [1989] 3 F.C. 371.
Whether a genuine discontinuance has occurred depends on the nature of the work, the employer’s operational changes and the reasons for the termination.
What If an Employer Claims a Discontinuance of Function but Has Other Reasons for the Dismissal?
An employer may claim that an employee was terminated because of restructuring, financial difficulties or the elimination of a function. However, the employee may believe that other factors influenced the decision.
For example, a termination described as a restructuring may also involve concerns about the employee’s performance, conduct or relationship with management.
In Rogers Cablesystems Ltd. v. Roe, 2000 CanLII 16158 (FC), the Federal Court accepted that a termination for mixed motives, partly lack of work and partly other reasons, falls outside the exclusion. On the facts, though, it found the reorganization was genuine and made in good faith, and it set aside the adjudicator’s award to the employee
Where a termination involves more than one possible reason, the employer’s actual motivation and the surrounding circumstances may become important in determining whether the exclusion applies.
Employees should not assume that an employer’s explanation is legally sufficient simply because it refers to restructuring or the elimination of a position.
What Must an Employer Establish to Prove a Discontinuance of Function?
When an employer relies on a discontinuance of function to challenge an employee’s eligibility for unjust dismissal protection, the employer’s reasons and supporting evidence may be examined.
Relevant considerations may include:
- Whether the function was genuinely discontinued
- Whether the employer’s stated reasons reflect the actual reasons for the termination
- Whether the decision was made for legitimate operational or economic reasons
- Whether the employee’s duties continued under another position or were reorganized
- Whether other factors, including performance or disciplinary concerns, influenced the termination
Federal Court decisions, including Sedpex Inc. v. Canada, [1989] 2 F.C. 289, and Thomas v. Enoch Cree Nation Band, 2003 FCT 104, have addressed considerations relevant to discontinuance of function disputes.
The legal analysis depends on the facts of each case. An employer’s use of the term “discontinuance of function” does not, by itself, determine whether the exclusion under the Canada Labour Code applies.
Can an Employee Challenge a Termination Based on Discontinuance of Function?
An employee may have grounds to dispute an employer’s claim that their termination resulted from a discontinuance of function, particularly where the stated reason does not appear consistent with the employer’s actions.
For example, questions may arise where an employer eliminates an employee’s position but continues substantially the same work through another position, or where the termination appears to involve reasons unrelated to genuine operational changes.
The Canada Industrial Relations Board explains that simply describing a termination as a layoff does not necessarily establish that it resulted from genuine economic or operational reasons.
Employees who believe the employer’s explanation is inaccurate should seek legal advice promptly. Unjust dismissal complaints generally must be filed within 90 days of dismissal, subject to limited exceptions.
What Happens If an Employer Successfully Establishes a Discontinuance of Function?
If an employer establishes that an employee was genuinely laid off because of a lack of work or discontinuance of a function, the Canada Industrial Relations Board cannot consider the employee’s unjust dismissal complaint under section 242(3.1) of the Canada Labour Code.
However, this does not necessarily mean the employee has no other legal rights.
Depending on the circumstances, the employee may still be entitled to termination pay, severance pay or other compensation under federal employment standards, their employment contract or applicable common law principles.
Employees should understand that the minimum termination and severance entitlements under the Canada Labour Code may not represent the full compensation available to them.
Learn more about severance pay and employee rights.
Speak With an Employment Lawyer About a Discontinuance of Function
If your employer has terminated your employment because of restructuring, a lack of work or an alleged discontinuance of function, it is important to understand whether the explanation is legally justified and what rights you may have under the Canada Labour Code.
These cases can involve complex legal questions, particularly when an employer claims that a function has been eliminated but the employee believes the dismissal occurred for other reasons.
At Monkhouse Law, our employment lawyers can review the circumstances of your termination, assess whether you may have grounds for an unjust dismissal complaint and help you understand your entitlement to severance pay or other compensation.
Contact Monkhouse Law today for a free 30-minute phone consultation to discuss your employment rights and available legal options.