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.
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.
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.
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.
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.
1(1999), 177 D.L.R. (4th) 73 (S.C.C.).
2S.R. Ball, Canadian Employment Law (Aurora: Canada Law Book Inc., 1999), at pp. 4-5.
3R.S.N. 1970, c. 322.
4S.N. 1989, c. 37.
5(1933), 103 L.P.J.C. 41,  1 D.L.R. 434 (Canada P.C.).
6Supra,note 1, at p. 83.
7(1999), 48 C.C.E.L (2) 34 (Ont. C.A.).