Civil service employment “not feudal servitude”, SCC rules

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When Andrew Wells accepted the position of Commissioner with the Public Utilities Board in Newfoundland in 1985, he believed he had secured an essentially tenured position. Under the province’s Public Utilities Act, he was entitled to hold office during good behaviour, and under the agreement he negotiated before taking on the job, his term was to last until he reached age 70.

However, the Board’s days were numbered. Over the next few years, it lost much of its jurisdiction, resulting in a substantially decreased workload. Following a review of the Board’s functions, the government decided to halve the number of Commissioners, and introduced a new Public Utilities Act to restructure the Board. Wells was terminated four and a half years after his appointment, six months short of having his pension vest. By Cabinet order, he was to receive no compensation.

Wells sued for damages but lost the first round. The trial judge, relying on a 1934 Privy Council decision, Reilly v. The King, held that there was no right of compensation for appointees whose positions were abolished by statute, unless compensation was provided for in the abolishing legislation.

In the Newfoundland Court of Appeal, however, a majority sided with Wells and awarded him two and a half years’ salary plus the pension benefits to which he would have been entitled. The government appealed to the Supreme Court of Canada.

In Wells v. Newfoundland, a decision released on September 15, 1999, a unanimous Court upheld the Appeal Court’s award of damages to Wells. The decision represents another stage in the modernization of civil servant employment law.

A CONTRACTUAL RELATIONSHIP

The Court observed that the outcome of the case hinged primarily on the nature of Wells’ relationship with the Crown. If the relationship was contractual, he was entitled to damages for his termination. If it was statutory, only administrative remedies were available. The Court held the relationship was contractual.

The law surrounding the status of senior civil servants is uncertain, the Court noted, as these individuals are “caught between the feudal condition of servants serving at the pleasure of the Crown, and a modern environment of mutual contractual obligation”. Under the traditional view, expressed in Reilly, if the relationship is statutory, and the position is then abolished by statute, the Crown is relieved of any obligations, including those in a contract of employment. This allows the Crown to dismiss its servants at will, without compensation. In upholding the contractual nature of Wells’ employment, the Court ruled that it was now time to move beyond the approach in Reilly:

“[I]t is time to remove uncertainty and confirm that the law regarding senior civil servants accords with the contemporary understanding of the state’s role and obligations in its dealings with employees. Employment in the civil service is not feudal servitude. …

While the terms and conditions of the contract may be dictated, in whole or in part, by statute, the employment relationship remains a contract in substance and the general law of contract will apply unless specifically superseded by explicit terms in the statute or the agreement.”

Exceptions to this rule are necessary, however, for judges, ministers of the Crown, and others “who fulfill constitutionally defined state roles”, the Court stated.

“SPECIFIC AND UNAMBIGUOUS” LANGUAGE REQUIRED TO EXTINGUISH RIGHTS

The Court agreed that the Crown certainly had the sovereign legislative authority to restructure or eliminate the Board. However, if it wished to extinguish Wells’ contractual rights, it would have to pass legislation explicitly to this effect. The situation is anomalous, the Court noted, in that it combines the elements of a tenured position with the government’s unfettered right to eliminate that position. This anomaly is resolved, however, by distinguishing between Wells’ right to hold the office of Commissioner and his right to the financial benefits of having agreed to serve in the office. Removing the office did not strip Wells of his rights under the contract. It would take more to do that:

“In a nation governed by the rule of law, we assume that the government will honour its obligations unless it explicitly exercises its power not to. In the absence of a clear express intent to abrogate rights and obligations — rights of the highest importance to the individual — those rights remain in force. To argue the opposite is to say that the government is bound only by its whim, not its word. …

[T]he use of legislation to strip a specific individual of a legal right to compensation for breach of an employment relationship is a harsh and extraordinary use of governmental authority which, because it should not be done lightly, requires specific and unambiguous language.”

Accordingly, the Court ruled in favour of Wells and upheld the damages awarded by the Court of Appeal.

In Our View

It should be noted that there are still appointees who serve “at pleasure” and can be dismissed without notice or cause. These persons, however, are owed a duty of fairness before being dismissed. This duty, as was pointed out in the January 1997 issue of FOCUS, requires that the employee be given notice of the reasons for the dismissal, and an opportunity to respond. (See “Dismissal of public sector employees and the duty of fairness” on our Publications page.)

It is interesting to note that Wells based much of his argument on an alleged failure by the Crown to act fairly. This ground of attack was, however, rejected by the Court. Wells lost his job by way of a legislative, not personal, decision, the Court noted, and such decisions are not subject to a duty of fairness: “[L]egislative decision making is not subject to any known duty of fairness. Legislatures are subject to constitutional requirements for valid law-making, but within their constitutional boundaries, they can do as they see fit. The wisdom and value of legislative decisions are subject only to review by the electorate.”

For further information, please contact Andrew Tremayne at (613) 563-7660, Extension 236, or Jennifer Birrell at (613) 563-7660, Extension 261.