Wrongful Dismissal – Wells v Newfoundland: Supreme Court of Canada Rules that
Crown Bound by its Employment Contracts
Janice Payne and Sonia Virc, Nelligan O’Brien Payne LLP
(Originally published in the Executive Employment Newsletter – Volume VIII, No. 1, 2001)
Introduction
Although the employment of most of the public service is governed by collective agreements and
labour statutes, a number of individuals still receive appointments to public office, boards and
tribunals through orders-in-council. Until the recent decision of the Supreme Court of Canada in
Wells v. Newfoundland, 1 persons holding such offices were subject to dismissal “at the Crown’s
pleasure”. In other words, unless there existed a clear statutory or contractual provision to the
contrary, the Crown possessed the common law power to dismiss or reassign its employees as it
saw fit, with no requirement to pay compensation. 2 Prior to the decision in Wells, those
individuals were precluded from bringing civil actions for wrongful or constructive dismissal.
Canadian courts have often recognized the inequity of the common law rule allowing the Crown
to dismiss its servants at will without any requirement to provide compensation and have even,
on occasion, found ways to circumvent the rule. It was this environment of burgeoning
resistence that provided the setting for the Supreme Court of Canada’s decision in Wells.
In Wells, the Supreme Court reviewed the “at pleasure” doctrine and concluded that it was no
longer justifiable in the context of modern employment relationships. In affirming that most
appointees to the public service have contractual employment relationships with the Crown, the
Supreme Court has allowed dismissed and demoted civil servants to argue that they are entitled
to periods of reasonable notice equivalent to those commonly awarded to employees in the
private sector. In addition, the Supreme Court held that while the legislature may have the power
to pass a law specifically denying compensation to an aggrieved individual with whom it has
broken an agreement, clear and explicit statutory language would be required to extinguish
existing rights previously conferred on that party.
The Facts
In 1985, Andrew Wells was appointed as a Commissioner to the Public Utilities Board under the
provisions of the Public Utilities Act. 3 Pursuant to the Act, Mr. Wells was entitled to hold his
office “during good behaviour” and until he reached the age of 70.
1
(1999), 177 D.L.R. (4th) 73 (S.C.C.).
2
S.R. Ball, Canadian Employment Law (Aurora: Canada Law Book Inc., 1999), at pp. 4-5.
3
R.S.N. 1970, c. 322.
In early 1990, due to a substantial decrease in the Board’s workload, the government of
Newfoundland enacted a revised Public Utilities Act. 4 The revised Act, which restructured the
Board, reduced the number of Commissioners and abolished Mr. Wells’ position. As of the date
of proclamation, Mr. Wells’ employment was terminated and he was not offered any
compensation for the loss of his position.
The issue to be determined in Wells was whether a senior civil servant who held a tenured
appointment “subject to good behaviour” is owed compensation in the event that his position is
eliminated by legislation. In a unanimous decision written by Major J., the Court held that while
the terms and conditions of the contract may be dictated, in whole or in part, by statute, the
employment relationship remained a contract in substance and the general law of contract will
apply unless specifically superceded by explicit terms in the statute.
The Nature of the Relationship
The Government attempted to rely on the traditional rule set out in Reilly v. R. in which the Privy
Council held that the relationship between the government and a member of the Federal Appeal
Board was fundamentally statutory in nature. 5 Consequently, when Parliament amended the
statute, the Crown was relieved of its obligations to the Board member. The Supreme Court
rejected this argument declaring that it was “time to remove the uncertainty” surrounding the
applicability of Reilly and to confirm that the law regarding senior civil servants “accords with
the contemporary understanding of the state’s role in its dealings with employees”. The
Supreme Court wrote:
Employment in the civil service is not feudal servitude. The respondent’s position
was not a form of monarchical patronage. He was employed to carry out an
important function on behalf of the citizens of Newfoundland. The government
offered him the position, terms were negotiated, and an agreement reached. It
was a contract. 6
Terms of Employment
The Court stated that the terms of a civil servant’s contract are to be found in the “written and
verbal manifestations of the agreement, applicable statutes and regulations, and the common
law”. Based on the applicable 1970 version of the Public Utilities Act, a commissioner, such as
Mr. Wells, was entitled to hold office during good behaviour, until attaining the age of 70 years.
Accordingly, the only contemplated reasons for termination of the agreement were misconduct,
age, resignation or death.
4
S.N. 1989, c. 37.
5
(1933), 103 L.P.J.C. 41, [1934] 1 D.L.R. 434 (Canada P.C.).
6
Supra, note 1, at p. 83.
The Court held that the Crown had created a tenured position and while this position, and the
authority flowing from it, could be eliminated by legislative action, Mr. Wells could not be
deprived of the benefits of his position without compensation unless the statute clearly and
explicitly said. It was reasonable to infer that Mr. Wells’ financial security was intended to
survive elimination of his position. As such, by cutting off his remuneration, the Court
concluded that the Crown had breached its ongoing obligation towards him.
In conclusion, the Supreme Court of Canada affirmed the Appellate Court’s award of two and
one-half years’ salary to Mr. Wells.
So what does Wells mean to other Crown appointees? The Wells decision clearly states that all
government employees and appointees have essentially contractual relationships with the Crown.
In directing that the terms of the employment contract are to be found in the “written and verbal
manifestations of the agreement, applicable statutes and regulations, and the common law”, the
Supreme Court has called on the lower courts to implement the same principles as those applied
in private sector dismissals.
The impact of Wells can be seen in Danilov v. Atomic Energy Control Bd. 7. Bell J. had granted
summary judgment against a plaintiff after finding that the he was employed by the Crown “at
pleasure”, and was therefore not entitled to any notice of termination. In allowing the appeal, the
Ontario Court of Appeal relied on the Supreme Court’s decision in Wells, stating that:
[Wells] appears to shed a new light on contracts of employment covering what
the court describes as “the feudal condition of servants serving at the pleasure of
the Crown.” It seems to suggest that such contracts should now be viewed more
strictly through the lens of modern employment law.
The Court of Appeal in Danilov ordered that the matter proceed to trial in order to determine the
precise terms and conditions of the plaintiff’s contract of employment.
Final Thoughts
The Supreme Court of Canada has sent a clear message to governments that equivocal legislative
action cannot be used to eliminate clear contractual rights. While such a message has provided a
welcome measure of equalization to what has long been an uneven field in the employment law
landscape, the Wells decision also appears to recognize the legislature’s inherent right to pass
legislation without restriction, provided it does so in clear and explicit terms.
The Wells decision is the most recent in a series of decisions that have eroded the common law
doctrine of service at pleasure. It remains to be seen how the courts will continue to progress in
this area given the observations of the Supreme Court of Canada in this case.
7
(1999), 48 C.C.E.L (2) 34 (Ont. C.A.).