An employee (“Dunsmuir”) who was dismissed from his employment at the Department of Justice of the Province of New Brunswick (the “Province”) was unsuccessful in appealing the dismissal. The pragmatic and functional approach was replaced with a standard of review analysis with only two standards of review (correctness and reasonableness) for courts reviewing decisions of administrative tribunals. No consideration needed to be given to a public law duty of procedural fairness because the employment relationship between Dunsmuir and the Province was governed by private law and contract law.

Administrative law – Employment law – Terms of agreement – Termination of employment – Adjudications – Jurisdiction – Decisions of administrative tribunals – Labour and employment boards – Judicial review – Patent unreasonableness – Reasonableness simpliciter – Correctness – Procedural requirements and fairness – Privative clauses – Compliance with legislation

Dunsmuir v. New Brunswick, [2008] S.C.J. No. 9, 2008 SCC 9, Supreme Court of Canada, March 7, 2008, McLachlin C.J. and Bastarache, Binnie, Le Bel, Deschamps, Fish, Abella, Charron and Rothstein JJ.

Dunsmuir had been employed by the Department of Justice of the Province in February 2002. He was placed on a probationary term for the first six months. In March 2002 he was appointed to the offices of Clerk of the Court of Queen’s Bench, Trial Division, Administrator of the Court of Queen’s Bench, Family Division and Clerk of the Probate Court of New Brunswick.

Dunsmuir’s probation was extended twice to the maximum of twelve months. His performance review at the end of twelve months identified four areas for improvement. A second review was conducted three months later citing the same four areas for development. At the end of his third probationary period, he had met the expectations and his employment was continued on a permanent basis.

Dunsmuir was reprimanded on three occasions. First, in July 2002, he sent an e-mail objecting to the request of a judge of the Fredericton Judicial District and received a formal letter of termination.

The letter cited a mismatch between Dunsmuir’s skill set and the needs of the employer given his current position. The letter did not allege cause for termination but terminated his employment on reasonable notice pursuant to section 20 of the Civil Service Act.

Dunsmuir commenced the grievance process under s. 100.1 of the Public Service Labour Relations Act (“PSLRA”). Non-unionized employees of the Provincial Public Service have the right to file a grievance with respect to a “discharge, suspension or financial penalty”. Dunsmuir’s grievance alleged that he was not provided with the reasons for his employers dissatisfaction, that he did not receive a reasonable opportunity to respond to those concerns, that he was terminated without notice, due process or procedural fairness and that the length of the notice was not adequate. Dunsmuir’s grievance was denied. Dunsmuir appealed that to an adjudicator appointed by the Labour and Employment Board jointly with the parties. The adjudicator determined that he had the jurisdiction to determine whether the discharge purportedly made with notice or pay in lieu thereof was actually for cause.

The adjudicator also found that termination with pay in lieu of notice was effected in this case and that the employer did not allege cause. The adjudicator determined that Dunsmuir’s termination was not disciplinary but was based on his employer’s concerns about his work performance and suitability for the positions he held.

The adjudicator held that the appellant’s employment was a hybrid between an ‘at pleasure’ appointment and a contractual appointment. He determined that, given his finding that as a clerk Dunsmuir was an office holder at pleasure, he was entitled to procedural fairness in the employer’s decision to terminate his employment. The adjudicator declared that termination void ab initio and ordered Dunsmuir reinstated.

The Province applied for judicial review of the adjudicator’s decision on several grounds. The Province argued that the adjudicator had exceeded his jurisdiction in his preliminary ruling where he held that he was authorized to determine whether the termination was for cause, despite the statement that it was effected with pay in lieu of reasonable notice.

The Province also argued that the adjudicator acted incorrectly or unreasonably in deciding a procedural fairness issue.

The Court of Queen’s Bench of New Brunswick reviewed the decision using the pragmatic and functional analysis. There was a full privative clause present in the PSLRA but the purposes of the Act and the nature of the question militated in favour of a less deferential standard, despite some relative expertise of the adjudicators appointed under the PSLRA when compared with a court. A correctness standard of review was applied.

The Court held that the adjudicator should have applied ordinary rules of contract when considering the employment of Dunsmuir and that he was not an “at pleasure” appointment. As such, the reviewing judge felt that the adjudicator did not have jurisdiction to inquire into the reasons for termination and that this authority was limited, under the PSLRA, to determining whether the notice period was reasonable.

The reviewing judge found that the adjudicator had exceeded his jurisdiction and quashed his preliminary ruling on that point.

With respect to the decision on the merits, the reviewing judge felt that some aspects of the decision were factual and should be reviewed on a patent unreasonableness standard, while others were questions of mixed fact and law which should be subject to a reasonableness simpliciter standard.

The reviewing judge found that the reasons of the adjudicator did not stand up to a “somewhat probing examination”. Dunsmuir was held to have received procedural fairness by virtue of the grievance hearing before the adjudicator. The reviewing judge quashed the reinstatement order but upheld the alternative finding of the adjudicator that eight months notice would have been an appropriate period of notice.

Dunsmuir appealed to the Court of Appeal of New Brunswick. At the Court of Appeal, the reviewing judge was found to have erred in adopting the correctness standard with respect to interpretation of the adjudicator’s authority under the PSLRA. The standard should have been reasonableness simpliciter. The court once again conducted a pragmatic and functional analysis, but placed more emphasis on the presence of the full privative clause and the relative expertise of the adjudicator in the labour relations and employment context. The court applied the reasonableness simpliciter standard and held that the adjudicator’s decision was unreasonable. Again, the ordinary rules of contract should have been applied. The PSLRA provisions only allowed the adjudicator to substitute such other penalty as seems just and reasonable in the circumstances where the employee had been discharged or disciplined “for cause”. Where the employer elected to dismiss with notice or pay in lieu of notice, that section of the act did not apply. In that case, the employee was restricted to grieving only the length of the notice period.

On the procedural fairness issue, the Court of Appeal found that the appellant had exercised his right to grieve and therefore the finding that the duty of fairness had been breached lacked a legal foundation. The appeal was dismissed.

Dunsmuir appealed to the Supreme Court of Canada. The first issue for the Supreme Court of Canada was to revisit the approach to be taken in judicial review by the courts of the decision of an adjudicative tribunal.

The court reviewed the jurisprudence forming the foundations of judicial review. The court noted that administrative powers are exercised by decision makers pursuant to specific statutory regimes and that such a decision maker may not exercise authority that is not specifically assigned to him or her. The standard of review analysis is employed to determine what authority was intended to be given to the administrative body in relation to the subject matter, within the context of the court’s constitutional duty to ensure that public authorities do not overreach their powers.

The existence of a privative clause alone, is not determinative of legislative intent, although it provides a strong indication that deference should be paid.

The Court held that the Canadian approach to judicial review of administrative decisions should be reworked and that there should be only two standards of review, correctness and reasonableness.

Distinguishing between a patently unreasonable decision and an unreasonable decision was not something that could be determined in a practical way by looking to either the magnitude or the immediacy of the defect in a tribunal’s decision. Therefore, the patent unreasonableness standard was removed.

Reasonableness, as a standard of review, is a deferential standard, but one that recognizes that tribunals have a margin of appreciation within the range of acceptable solutions. A court conducting a review for reasonableness should make inquiries into whether the decision is reasonable both in terms of the articulation of the reasons and the outcome of those reasons. Reasonableness should concern itself with the existence of justification, transparency and intelligibility within the decision making process and also with whether the decision falls within a range of possible acceptable outcomes, defensible in respect of the facts and law. Reasonableness should employ some deference to the decision maker which is “not submission but a respectful attention to the reasons offered or which could be offered in support of a decision”.

Correctness, on the other hand, is a standard that should be applied in respect of jurisdictional issues and some questions of law. A court applying the correctness standard should undertake its own analysis of the question before the administrative body. The court will not show deference to the decision maker’s reasoning process and the analysis should bring the court to decide whether it agrees with the determination of the decision maker. If not, the court can substitute its own view and provide the correct answer. The question on the correctness standard is whether the tribunal’s decision was correct. Many legal issues, and jurisdictional issues, will attract the standard of correctness.

Questions of fact, discretion and policy and questions where legal issues cannot be easily separated from factual issues will generally attract a standard of reasonableness. The existence of a privative clause will be a strong indicator that reasonableness should be the applicable standard. Deference will usually result when a tribunal is interpreting its own statute or statutes closely connected to its function with which it has particular familiarity. Deference will also be applied when a tribunal has particular expertise in the application of a general common law or civil law rule in a specific statutory context, such as labour law.

A correctness standard will apply where questions of law are those of “central importance to the legal system” and outside the specialized area of expertise of the administrative decision maker.

Where questions of law do not engage issues of central importance to the legal system, they may be compatible with a reasonableness standard.

Where existing jurisprudence has conducted this analysis, it need not be repeated.

A correctness review has been found to apply to constitutional questions about the division of powers.

Correctness must be applied as the standard where administrative bodies take on true questions of jurisdiction or vires. Jurisdiction here is intended in the narrow sense of whether or not the tribunal had the authority to make the inquiry which was made. Where a tribunal must explicitly determine whether its statutory grant of powers gives rise to the authority to decide a particular issue, that is a question of jurisdiction or vires and correctness should be the applicable standard.

The phrase “pragmatic and functional” approach should no longer be used. The court will now refer simply to the “standard of review analysis”.

The analysis for standard of review must be contextual and will depend on considering the following factors:

1. The presence or absence of a privative clause;
2. The purpose of the tribunal as determined by its enabling legislation;
3. The nature of the question; and
4. The expertise of the tribunal relative to the expertise of the court.

It is not necessary to consider all factors in all cases, as some of them may be determinative in their application of the standard of review.

The court then turned to the issue of what the proper standard of review should be on the question of statutory interpretation of the PSLRA and whether it permitted the adjudicator to inquire into an employer’s reason for dismissing an employee with notice or pay in lieu of notice. The court characterized this as a question of law. The PSLRA contained a full privative clause. The statutory regime also favours a less deferential standard of reasonableness. The court has previously recognized the relative expertise of labour arbitrators and the interpretation of collective agreements. Here the adjudicator was interpreting his own enabling statute. He was presumed to hold relative expertise in the interpretation of that legislation.

The purpose of the legislation was to create a time and cost effective method of resolving employment disputes and this militated in favour of a reasonableness standard of review. The legal question was not one of central importance to the legal system and it fell within the specialized expertise of the adjudicator.

The court reviewed the adjudicator’s interpretation of the statute on a reasonableness standard.

The court held that the reasoning process of the adjudicator was deeply flawed and that the construction of the statute, in the result, fell outside the range of admissible statutory interpretations.

The decision of the adjudicator effectively treated Dunsmuir as an unionized employee, when he was, in fact, a non-unionized employee. Non-unionized employees under the Act are given a statutory right to grieve the discharge if they are discharged for cause and without notice. However, there is no reasonable interpretation of this statute which would remove the employer’s right under contract law to discharge an employee with reasonable notice or pay in lieu of notice, as was done in this case. The adjudicator’s statutory interpretation was held to be unreasonable and was set aside. However, the court commented that the adjudicator’s interpretation of the PSLRA was ultimately inconsequential to the result of the grievance. The decision on its merits, which resulted in an order that Dunsmuir be reinstated, turned on the separate issue of whether Dunsmuir was entitled to procedural fairness with regard to the employer’s decision to terminate his employment.

The court then reviewed the adjudicator’s decision where it had been found that the employer did not accord procedural fairness to Dunsmuir. The question for the court was whether Dunsmuir had the right to procedural fairness in the employer’s decision to terminate him, as a person who held an office “at pleasure” in the civil service of New Brunswick.

Dunsmuir was a public employee who was employed pursuant to a contract of employment. The court held that, in the Supreme Court of Canada decision in Knight v. Indian Head School Division No. 19 [1990] 1 S.C.R. 653, the majority of the court properly recognized the important place of a general duty of fairness in administrative law, but incorrectly analysed the effect of a contract of employment on the duty of fairness. The decision in Knight was premised on the understanding that a duty of fairness based on public law applied unless expressly excluded by an employment contract or a statute. In Dunsmuir’s case, the court held that what matters is the nature of the employment relationship between the public employee and the public employer. Where that employee is employed under a contract of employment, regardless of whether that employee is a public office holder, the applicable law governing his or her dismissal is the law of contract and not general principles arising out of public law.

The court noted that a grievance adjudicator can consider a public law duty of fairness where such a duty exists and that it is within their jurisdiction to consider that issue in the appropriate case.

However, here, the relationship between the public employer and Dunsmuir was contractual and so a public law duty of fairness was not engaged and should not have played a role in resolving the grievance.

Dunsmuir had legal protections and remedies that he could follow in the face of his dismissal. He had access to all the statutory and common law protections that surround private sector employment, including the provisions of the Employment Standards Act, SNB 1982 c.E-7.2.

The distinction between an office holder and a contractual employee for the purposes of a public law duty of fairness should be dispensed with. The distinction proved difficult to apply in practice and did not correspond with justifications for imposing public law procedural fairness requirements. When considering whether there is an issue with respect to procedural fairness, the analysis should start with a determination of the nature of the employment relationship with the public authority. The dismissal of public employees should generally be viewed as a typical employment law dispute. There may, however, be occasions where a public law duty of fairness will still apply such as where a public employee is not protected by a contract of employment (as with judges, ministers of the crown and others who “fulfill constitutionally defined state roles”). In addition, the terms of appointment of some public office holders expressly provide for summary dismissal or are silent on that matter. Where an employee is truly subject to the will of the crown, procedural fairness is required to ensure that public power is not exercised capriciously.

Dunsmuir was a contractual employee of the Province in addition to be being a public office holder. He could only be dismissed in accordance with the ordinary rules of contract. The Province was within its rights to dismiss Dunsmuir with pay in lieu of notice. The adjudicator erred in his application of the duty of fairness. The variation of the payment notice, from four to eight months, was upheld. The adjudicator’s reinstatement of Dunsmuir did not stand. The majority dismissed Dunsmuir’s appeal without an order for costs. There were two additional sets of reasons issued by members of the court who disagreed with some aspects of the Reasons for Judgment in the majority.

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