The Supreme Court of Canada's response to this question in Dunsmuir v. New Brunswick, 2008 SCC 9, was to focus on the existence of an employment contract: "where a dismissal decision is properly within the public authority’s powers and is taken pursuant to a contract of employment, there is no compelling public law purpose for imposing a duty of fairness" (at para. 106). Subsequently, in Canada (Attorney General) v. Mavi, 2011 SCC 30, the Court characterized Dunsmuir as creating a "rather narrow Dunsmuir employment contract exception from the obligation of procedural fairness" (at para. 51).
More recently, the Court of Appeal of New Brunswick had to address the issue in Ouellette v. Saint-André, an incorporated rural community, 2013 NBCA 21.
The applicant was the Clerk, Treasurer and Administrative Officer of the respondent township, a position from which she could be dismissed for cause by a super-majority of the municipal council. A series of concerns arose over her stewardship of the township's finances. Auditors were appointed and reported negatively on the applicant. The applicant was made aware of the auditors' findings. She had several meetings with the mayor and the council in which she failed to explain herself satisfactorily. Inquiries were made by council with a financial institution. The responses to these inquiries -- of which the applicant was not informed -- indicated that the financial institution was not responsible for any discrepancies. On receipt of these responses -- though without giving the applicant a further opportunity to respond -- council voted unanimously to dismiss the applicant.
First, Bell J.A. held that the applicant did have a right to procedural fairness. Dunsmuir was distinguishable, in part because Mr. Dunsmuir had:
...the opportunity to challenge a for cause dismissal. Had the employer terminated him for cause, he would have had the opportunity, without commencing court action, to have an independent third party determine whether cause existed. Such a hearing mechanism, absent the institution of court proceedings, is unavailable to Ms. Ouellette. There are strong policy reasons for ensuring that governmental decisions (municipal, provincial or otherwise), with respect to termination of public office holders, are not arbitrary and are made in good faith. Those policy reasons include, but are not limited to: (1) ensuring public office holders feel confident to advise elected officials, based upon their own opinion, rather than what they think the elected officials wish to hear; and (2) ensuring public office holders administer and enforce applicable legislation, objectively and fairly, without fear of reprisals from elected officials.The reference to policy reasons is interesting and persuasive. Here, as elsewhere, sunlight is the best disinfectant. Strangely, however, there is no mention of the importance of the individual office holder's dignity interests, which are surely also quite pressing.
In addition, the fact that the applicant could only be dismissed for cause and by a supermajority suggested that procedural rights should attach: "joint requirements of cause and a 2/3 majority would lead one to conclude that Ms. Ouellette was entitled to an opportunity to address Council. In my view, it would not be reasonable for the Legislature to impose such stringent conditions on termination, particularly the percentage vote by Council, without intending to provide the public officer an opportunity to respond and present her position to Council".
Bell J.A. was also able to rely on two limitations mentioned in Dunsmuir (at paras. 115-116): the Court had held that (a) where a public employee is not protected by contract; or (b) the duty of fairness flows from a statutory power governing the employment relationship, a right to procedural fairness would survive. In the Dunsmuir framework, this seems right. Here, the statute was dominant. There was no contract. Terminating the applicant's employment was an exercise of public power par excellence.
Second, however, the duty of fairness had been discharged in this case. Bell J.A. considered it important to avoid "procedural gridlock" by imposing too strict a duty:
The procedural fairness required in this case must, in my view, be minimal, yet reasonable and efficient. Those minimal features consist of an opportunity to know the concerns about one’s performance that could lead to termination, and an opportunity to explain them or demonstrate why they have no merit. Obviously, an appropriate opportunity should be afforded to the office holder to make the necessary enquiries and prepare a response. Whether that response is in writing or in person, would no doubt be a matter to be determined by the Council.I am not sure about the last sentence. Courts have generally seen themselves as the sentinels of procedural fairness and have not deferred blindly to administrative decision-makers' determination of whether an oral hearing is required. Otherwise, though, Bell J.A. is surely entirely right that there can be no right to endless back-and-forth in a situation like this one.
On the facts, the applicant had been treated fairly. She had been given adequate notice of the concerns and adequate opportunity to respond to them:
Context is important...Ms. Ouellette had personal knowledge of Council’s general concerns for some time. The November 10, 2010 letter from the auditors to the Council was the “triggering event” that pushed Council into action. Council’s response was to meet with Ms. Ouellette on November 23 in order that she could respond to the concerns raised in the auditors’ letter. Council did not suspend Ms. Ouellette. She maintained access to her office and any material necessary to respond to concerns raised in the report. On November 29, Ms. Ouellette attended another meeting of Council called specifically for the purpose of giving her an opportunity to respond. That meeting was followed by another on November 30, with the auditors present. It is at this point that Ms. Ouellette was suspended without pay and told to return for another meeting on December 3, 2010. Until that time, she had access to her files and all that she needed to respond to Council’s concerns...
Clearly, the applicant was not afforded the full trappings of a trial. But in the politically charged circumstances, the township surely acted with appropriate restraint and did not rush to judgment.Following Ms. Ouellette’s suspension, Council contacted the Caisse populaire de Grand-Sault to follow up on her suggestion that the Caisse records might explain the discrepancy in the water and sewer account. When the Caisse confirmed the accuracy of its statements, Council voted, in a closed door session, to dismiss Ms. Ouellette...Saint-André afforded Ms. Ouellette the opportunity to show that money was not missing or explain its absence. She could do neither...