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The Canadian Institute’s 6th Annual Advanced Forum on
EMPLOYMENT LAW
October 19, 2006
ESSENTIAL INFORMATION FOR MANAGING NON-UNIONIZED WORKFORCES
Managing Employment Across Borders
Employment Law Considerations
by David Elenbaas Partner, Employment and Labour Relations Group
with the assistance of Emily White Student-at-Law
MCMILLAN BINCH MENDELSOHN
B C E P l a c e , S u i t e 4 4 00 , B a y W e l l i n g t o n To w e r , 1 8 1 B a y S t r e e t , T o r o n t o , O n t a r i o , C a n ad a M 5 J 2 T 3 T E L : 4 1 6 . 8 6 5 . 70 0 0 ⏐ w w w . mcm b m. co m ⏐ F AX : 4 1 6 . 8 6 5 . 7 0 48
Managing Employment Across Borders
Employment Law Considerations
Well known Pulitzer Prize winning op-ed columnist for the New York Times,
Thomas Friedman, has been gracing the non-fiction best seller lists for the last two years with his
book: The World Is Flat: A Brief History of the Twenty-First Century. Friedman’s work is
intended to demystify the effects of the globalization of the world’s economy and what
globalization means to governments and societies.
One area where the “flattening” of the global economy has had an effect is in the
accelerated pace of executive transfers, both in and out of Canada. A 2005/2006 International
Assignments Survey conducted by Mercer Human Resources Consulting indicated that
international assignments from subsidiary to subsidiary among multinational companies were on
the rise. This raises the following question posed in a leading Canadian text:
Should Canadian courts adopt special conflict of laws rules applicable to problems that may arise when employment has an international character? This is a particularly relevant question today as many workers move freely from one province to another or from one state to another within the framework of the North American Free Trade Agreement when employed by a multinational corporation at its head office or in one of its branches or subsidiaries…a balance must be found between freedom of choice and the protection afforded to employees by the mandatory rules of the law that would be applicable in the absence of choice.1
This paper will attempt to identify the major employment issues created in
executive transfer situations from an Ontario perspective and demystify the manner in which
they ought to be addressed.
1 Castel & Walker, Canadian Conflict of Laws (Sixth edition) 2005 at p. 31-72
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Cross-Border Terminations
While employers and their transferring executives are normally astute enough to
consider the tax and immigration implications of a cross-border transfer, more often than not
they fail to address the consequences of a breakdown of the employment relationship.
The cross-border transfer of executives and senior managers can often result in
the necessity of determining what law will apply in the event of a termination of employment.
Separate and apart from the question of the applicable law, when will the courts of Ontario
assume jurisdiction? In some cases a written agreement may be in place which expressly points
to the application of the law of a different jurisdiction than the one in which the dismissal occurs.
Or there may be a written agreement which gives jurisdiction to the courts of another country.
Similarly, what law will apply and what courts have jurisdiction when there is no written
agreement or, even when one exists, it fails to address those issues?
Jurisdiction – The Tests
An examination of the circumstances in which a court in Ontario has or will take
jurisdiction in a cross-border employment law dispute when jurisdiction is in issue requires an
examination of two issues: (1) assumed jurisdiction or jurisdiction simpliciter and (2) forum non
conveniens.
The leading Ontario case on the question of jurisdiction over an alleged wrong
committed outside the province is that of the Ontario Court of Appeal in Muscutt v. Corcelles et
al2. In that case the Court addressed the jurisdictional issue in the context of an action
commenced in Ontario against out-of-province defendants for damages sustained in Ontario as a
result of a tort (negligence in a motor vehicle accident) committed in Alberta. The Court in
Muscutt distinguished the assumed jurisdiction issue from the discretionary forum non
conveniens doctrine. As noted by the Supreme Court of Canada in Morguard Investments Ltd. v.
DeSavoye3 the question of assumed jurisdiction requires an evaluation as to whether the
jurisdiction selected by the plaintiff has a “real and substantial” connection to the action. Mr.
2 (2002), 60 O.R. (3d) 20 3 [1990] 3 S.C.R. 1077
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Justice Sharpe, writing for the Court of Appeal in Muscutt, noted that the issue of assumed
jurisdiction requires a weighing of various factors to assess whether the case favours the
assumption of jurisdiction against an out-of-province defendant. These factors are:
1. The connection between the forum and the plaintiff’s claim.
2. The connection between the forum and the defendant.
3. Unfairness to the defendant in assuming jurisdiction.
4. Unfairness to the plaintiff in not assuming jurisdiction.
5. The involvement of other parties to the action.
6. The courts’ willingness to recognize and enforce an extra-provincial judgment rendered on the same jurisdictional basis.
7. Whether the case is interprovincial or international in nature.
8. Comity, that is the principle by which the courts of one jurisdiction give effect to the laws of another.
With respect to the issue of whether the case is interprovincial or international in nature, the
Court recognized that the assumption of jurisdiction is more easily justified in interprovincial
cases where there is less cause to be concerned about sovereignty or the difficultly of applying
“foreign” law.
The matter does not end when the real and substantial connection test of assumed
jurisdiction is met. As identified by the Court in Muscutt, very often there is more than one
forum capable of assuming jurisdiction. The Supreme Court of Canada in Amchem Products Inc.
v. British Columbia (Workers’ Compensation Board)4 cited with approval its previous
formulation of the forum non conveniens doctrine in Antares Shipping Corp. v. The Ship
“Capricorno” 5:
The overriding consideration which must guide the Court…must…be the existence of some other forum more
4 [1993] 1 S.C.R. 897 5 [1977] 2 S.C.R. 422 at 448
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convenient and appropriate for the pursuit of the action and for securing the ends of justice.
Mr. Justice Sharpe stated for the Court in Muscutt6:
Where more than one forum is capable of assuming jurisdiction, the most appropriate forum is determined through the forum non conveniens doctrine, which allows a court to decline to exercise its jurisdiction on the ground that there is another forum more appropriate to entertain the action.
Courts have developed a list of several factors that may be considered in determining the most appropriate forum for the action, including the following:
• the location of the majority of the parties
• the location of key witnesses and evidence
• contractual provisions that specify applicable law or accord jurisdiction
• the avoidance of a multiplicity of proceedings
• the applicable law and its weight in comparison to the factual questions to be decided
• geographical factors suggesting the natural forum
• intiff of a legitimate juridical advantage available in the domestic court
ly applied outside the tort context and is highly
relevant to cross-border employment disputes.
Application of the Tests in Employment Disputes
e courts in Ontario have
dealt with the jurisdictional issue in cross-border employment disputes.
whether declining jurisdiction would deprive the pla
As the Court in Muscutt stated “Ontario has an interest in protecting the legal rights of its
residents”. The Muscutt analysis has been wide
There have been a number of recent decisions in which th
6 Supra, fn 2 at pp. 34-35
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One such decision in which the issue was considered in an employment law
context is Hodnett v. Taylor Manufacturing Industries Inc.7. There the Ontario Superior Court
considered a motion to set aside service of a claim outside Ontario under Rule 17.06 of th
of Civil Procedure and to stay a wrongful dismissal action in Ontario under s. 106 of the Co
of Justice Act. The action has been commenced against an Ontario corporation, its sister
corporation in Georgia and the individual principal of both companies. The employee had
originally been hired by the Ontario company and had worked in Ontario from 1992 to 1997.
his employer’s req
e Rules
urts
At
uest, he moved to Georgia in 1998 to assume control of the sister company.
When his employment was terminated without notice in Georgia in 2001, he commenced his
action in Ontario.
,
the United States, “a consideration of
those factors is not appreciably different”. The judge noted with approval the observations of
the court in Ga
l the
d is whether there are sufficient connecting factors between the foreign defendant and the domestic jurisdiction such
In first dealing with the issue of assumed jurisdiction, the court noted the then
recent decision of the Court of Appeal in Muscutt. It held that the factors identified in Muscutt
were equally applicable to the employment dispute at hand. In applying those factors the court
found that the real and substantial connection test for assumed jurisdiction was met. The fact
that the dispute was international rather than interprovincial simply required, in the court’s view
a closer look at the factors. And where the other country is
uthier v. Dow Jones Markets Canada Inc.8:
On balance, Ontario has a strong connection with the principafacts in dispute giving rise to the claim. In the current world inever-increasing forces of ‘globalization’, it is very common to see a business enterprise that is active in many jurisdictions. It is common for employees to move within the affiliated corporate entities of the single enterprise among those several jurisdictions. The legal significance of the corporate entity as a separate juristic person is, of course, to be respected. However, the underlying reality of the factual connecting factors to the several jurisdictionsis to be taken into account. The real question on a motion such as the one at han
7 (2002), 18 C.C.E.L. (3d) 297 (Ont. S.C.J.) 8 (1998), 41 C.C.E.L. (2d) 10 (Ont. Gen. Div.) at p. 18
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that it is just (and is seen to be just) for the domestic court to retain jurisdiction.
Turning to the argument that Ontario was not a convenient forum, in weighi
those factors the judge found the most significant consideration to be the loss of juridical
advantage if the employee was forced to litigate the matter in Georgia, which is an at-will
employment jurisdiction. At-will employment means of course that the employee can be
dismissed at any time without notice or compensation, even in the absence of caus
ng
e. The judge
noted the absence of any suggestion that the employee had waived the “benefit” of common law
reasonable not
r
nt was
n brought an action in Ontario for damages for
wrongful dismissal. The defendant, which was a British Columbia corporation with Ontario
operations, sou
uscutt
ts. It also
assert his claim in Nevada and no suggestion
was made that British Columbia would be a more appropriate forum. As in Taylor
Manufacturing
ice in accepting the transfer. The motion was accordingly denied.
The real and substantial connection test was also applied in Newton v. Larco
Hospitality Management Inc.9. Newton was initially an employee in Ontario of a hotel
management chain headquartered in British Columbia. He was asked to relocate to anothe
property in Las Vegas, Nevada where he signed a letter agreement in which his employme
to be governed by the laws of Nevada. Under Nevada law, employment is at-will. When
subsequently dismissed in Nevada, Newto
ght a stay of proceedings.
In considering the motion the court held that the matter of at-will employment
was a matter for trial and not open for consideration on the motion. However it refused to order
a stay of the proceedings. It did so by applying the analysis of the Court of Appeal in M
noting that the presence of both the plaintiff and the defendant in Ontario “serves to bolster the
real and substantial connection to the action or parties”. The court went on to find no
unfairness to the defendant in requiring it to defend the claim of a former employee where it had
originally employed him and where it continued to have substantial business interes
noted that it would be unfair to require Newton to
Industries, Inc.10 the court found:
9 (2004), 70 O.R. (3d) 427 (Ont. S.C.J.) 10 IBID at p. 435
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Refusal to assume jurisdiction would result in the loss of a substantial juridical advantage, with the probable result ofplaintiff would be without a remedy. Canadian courts view employees as vulnerable p
the
arties to employment contracts, deserving of protection from more powerful employers. Nevada
Interestingly, t
xistent
er 1,
r
erself, Cornell USA and
Cornell Canad
an at-will state, he held
that Ontario w
courts apparently do not.
he validity of the choice of law (Nevada) was to be left to the trial judge.
An Ontario court again had the opportunity to consider the issues of assumed
jurisdiction and forum non conveniens in a more complex employment context in the very recent
decision of Mr. Justice Perell in Tisi v. Cornell Trading, Inc.11. The case involved a motion for
an order staying a wrongful dismissal action brought in Ontario. The circumstances were such
that the plaintiff employee was resident in Ontario and was hired pursuant to an employment
agreement on the letterhead of Cornell Trading, Inc. (“Cornell USA”), a New York corporation
with its headquarters in Vermont, for a position with “Cornell Trading Company” (a non-e
entity). Cornell USA had a sister company Cornell Trading Ltd. (“Cornell Canada”) with
headquarters in Montreal. Under the employment agreement remuneration was payable in
Canadian dollars and the initial contract was for a fixed term of 15 months ending Septemb
2005. It included a relocation provision requiring the employee to relocate to Vermont by
September 1, 2005 on the condition that Cornell USA was able “to acquire a business visa fo
you to travel from Canada to the United States”. There was no choice of law provision. In
addition, the employee had signed a confidentiality agreement among h
a. That agreement was subject to the laws of Vermont.
Based on the affidavit evidence, the judge held that there was a real and
substantial connection between the action and Ontario. In turning to the discretionary matter of
forum conveniens, the motions judge ruled in favour of the employee, a “particularly weighty
factor” being the matter of juridical advantage. Noting that Vermont is
as a preferable jurisdiction for the claim to be advanced.
(Ont. S.C.J.) 11 [2006] O.J. No. 3468
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In a similar vein is the decision of the Ontario Superior Court of Justice in
McCrea v. Philips Electronics Ltd.12. In this case McCrae has worked for Philips for over 20
years before his transfer to Michigan to take over North American sales. There was no written
employment agreement. McCrea’s employment was terminated two years later without cause
and he returned to Ontario where he commenced an action for damages for wrongful dismissal
against both the U.S. and Canadian entities. The U.S. corporation brought a motion for an order
setting aside service of the statement of claim and dismissing or staying the proceedings against
it in Ontario. The m
ng
s a U.S. corporation did not sway the court as it was part of a global enterprise that
operates in Canada and which exerted significant influence over the Canadian entity and its
employees.
rts of
e employee’s potential loss of juridical advantage if forced to litigate in
Michigan. She held that these factors in fact led to Ontario being the most appropriate forum in
which to try the action.
enient forum in
an employment law scenario. This is not surprising given the view of employment relationships
expressed by the Suprem
tained
requirements established under the Ontario Employment Standards Act (the “ESA”) and
otion was unsuccessful.
The judge first applied the Muscutt factors in determining that there was a real
and substantial connection to the jurisdiction of Ontario. In particular, the fact that the movi
defendant wa
She then dealt with the defendant’s alternative argument that even if the cou
Ontario have jurisdiction, they should decline to exercise it because Ontario is a forum non
conveniens. In applying the discretionary factors outlined in Muscutt, the judge appeared
particularly swayed by th
As can readily be seen from the foregoing cases, the loss of juridical advantage is
a significant factor in the exercise of the court’s discretion in considering a conv
e Court of Canada in Machtinger v. HOJ Industries13.
In Machtinger the Supreme Court found that the termination provision con
in a written employment agreement was null and void as it did not meet the minimum notice
12 [2004] O.J. No. 412 13 (1992), 91 D.L.R. (4th) 491 (S.C.C.)
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accordingly constituted an unlawful attempt to contract out of the legislation. In the majority
judgment, Mr. Justice Iacobucci cited with favour the words of the Supreme Court in Reference
re Public Service Employee Relations Act14 where Mr. Justice Dickson said:
f his or her sense of identity, self-worth
y
rder employment disputes, even where there is express agreement as to the place of
jurisdiction.
d
e
f the
io under section 7 of the Arbitration Act, 1991 (Ontario) staying the
wrongful dismissal action.
ay
Work is one of the most fundamental aspects of a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component oand emotional well-being.
Mr. Justice Iacobucci went on to state: “I would add that not only is work fundamental to an
individual’s identity, but also that the manner in which employment can be terminated is equall
important”. This policy consideration appears to drive many of the Ontario decisions dealing
with cross-bo
When in fact jurisdiction has been expressly addressed by the employer and
employee, the facts may still dictate an unusual result. The complexities of the various scenarios
are no better illustrated than in the decision of Madam Justice Swinton in Ross v. Christian an
Timbers, Inc.15. Ross was a Canadian working in Ontario for the Canadian office of an Ohio-
based executive search firm. When his employment was terminated Ross commenced an action
in Ontario for damages for wrongful dismissal. The company responded by filing a demand for
arbitration in accordance with the arbitration provision in what the company argued and Justic
Swinton agreed was the employment agreement between the parties. Under the terms o
agreement arbitration was to take place in Ohio under Ohio law in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The company then
moved for an order in Ontar
Among the arguments put forward by the employee against the motion for a st
of his action was the fact that the employment agreement being relied upon by the employer
provided that the employment was at-will. As previously stated Ontario law does not recognize
14 [1987] 1 S.C.R. 313 15 (2002), 18 C.C.E.L. (3d) 165 (Ont. S.C.J.)
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at-will employment. The employee argued that at-will employment was an attempt to contrac
out of the ESA and that to enforce the arbitration clause with its submission to Ohio l
t
aw was
therefore contrary to Ontario legislation. The court rejected that argument stating16:
l as ate remedy between these parties in light of their
n order to enforce the minimum standards to which he is
er, had independent legal advice when he signed his
offer letter and bargained over its terms.
of
The plaintiff fears that the arbitrator will give effect to the Ohio law of employment at-will, and will not give consideration to the illegality of such termination with respect to employment in Ontario. I have no evidence about Ohio conflicts rules with respect to public policy, so I do not know how Ontario law will be treated. However, the parties have agreed that the arbitrator shall determine their disputes in this employment relationship in accordance with Ohio law. In doing so, he or she will also have tointerpret their agreement. Thus, it is for the arbitrator to determine the effect of the Ontario law under Ohio law, as welthe appropriagreement.
The Arbitration Act makes it clear that the courts are to defer to arbitration where the parties have chosen to arbitrate their disputes, except in very limited circumstances…However, if Mr. Ross’ rights under the Ontario legislation are not respected in the arbitration proceedings, he may have further remedies to pursue inOntario ientitled.
In making this finding, the court appeared to be influenced by the fact that the employee was a
sophisticated executive, trained as a lawy
A similar result occurred in Ruggeberg v. Bancomer, S.A.17. There the court
addressed the appropriate forum for resolving the termination of a foreign bank employee in
Ontario. The plaintiff was a Mexican citizen who worked for one large Mexican bank first in
Mexico, then Germany and finally in Toronto before accepting employment as representative
a second Mexican bank in Toronto. She worked at the Toronto office for one year when the
bank ceased operations in Canada. She commenced an action for damages for breach of her
16 IBID p. 172 17 [1998] O.J. No. 538 (O.C.J. Gen. Div.)
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employ t ag
basis that:
ent relationship and that disputes would be submitted to the Federal Conciliation and Arbitration Board in Mexico; and
nt
ent agreement, the fact that the language of the
witnesses and documents was predominantly Spanish, there were a number of references in
documents to M
the American Arbitration Association of Santa Clara County,
California”. The clause went on to provide that arbitration would not apply with respect to any
claims relating
men reement in the Ontario courts, with the bank moving to stay her action on the
(1) the employment contract between the parties provided that the laws of Mexico applied to the employm
(2) the doctrine of forum non conveniens dictated that Mexico, and not Ontario, was the appropriate forum.
The motions judge first determined that the jurisdictional clause in the
employment agreement ought to be upheld, subject to the forum non conveniens argument. On
that analysis too, he found that the law of Mexico was the proper law and that any juridical
advantage did not outweigh this principle. An appeal of this decision was dismissed by the
Ontario Court of Appeal18. It held that in addition to the jurisdiction clause in the employme
agreement, other relevant factors included the employee’s decision to initiate a claim in Mexico
for certain compensation under her employm
exico as the place of employment and both parties has substantial and long-
standing connections to Mexico.
In contrast, in the recent decision of Houston v. Exigen (Canada) Inc.19 a New
Brunswick judge refused to uphold a similar motion. Houston commenced an action for
damages for wrongful dismissal in New Brunswick, while her employer moved for a stay of the
action based on the provisions of the parties’ employment agreement. The parent of the
Canadian subsidiary was located in California and the employment agreement provided for at-
will employment. It also provided that all disputes or claims were to be finally resolved “by
binding arbitration conducted by
to misuse or misappropriation of the company’s trade secrets or proprietary
information.
18 [1999] O.J. No. 1432 19 [2006] N.B.J. No. 26 (N.B. Court of Q.B.)
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Notwithstanding the Christian and Timbers decision which both counsel refer
to, the court ref
red
used to grant a stay of Houston’s action. It distinguished the Christian and
Timbers decision on the basis that Houston was a vulnerable employee. The judge stated at
paragraph 12:
tire
loyee
or on in Santa
Clara, California and then in the final sentence of that paragraph,
employees under our law here in our courts here.
eed on its merits in New Brunswick.
s an
ecutive
commences an action for wrongful dismissal in Ontario against both the U.S. parent and Ontario
subsidiary. Would the courts in Ontario
theory at least an Ontario court may take jurisdiction when the real and
substantial connection and forum non conveniens tests are met. What about the application of
New York law?
One must distinguish the law of the contract from the applicable statutory law.
Section ) of
As I see it paragraph 6 [at-will employment] is so abusive of the rights of an employee of this jurisdiction that it taints the endocument, including the arbitration clause and the resulting reiteration of the arbitration clause subsequently in the emphandbook. In my view paragraph 6 and paragraph 8 [the arbitration clause] are void at law and unenforceable in this jurisdiction. With regard to paragraph 8, it is particularly offensive that Exigen would purport to bar its employees in this jurisdiction from suing in our courts with an arbitration clause fmatters to be dealt with by an arbitration associati
purport to preserve its rights to pursue its employees or former
The judge ordered the action to proc
Governing Law
Separate and apart from the issue of jurisdiction is that of the governing law of the
contract. Consider for example an executive of a U.S. parent company located in New York,
who after five years of employment is transferred to an Ontario subsidiary. The executive ha
employment contract in which his employment is at-will and subject to the laws of the state of
New York, but the contract is silent on the issue of jurisdiction of the courts. On having his
employment terminated in Ontario without notice three years after his transfer, the ex
take jurisdiction and apply New York law?
In
3(1 the ESA provides that the Act applies if
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(1) the employee’s work is to be performed in Ontario, or
the emplo(2) yee’s work is to be performed in Ontario and outside Ontario and the work performed outside Ontario is a continuation of the work performed in
vision would
be void as an u
in
a)
at
k applies and there is no entitlement to reasonable notice over and above the
statutory minim
le
to find a case on point. The closest is the Ruggeberg decision where the motions judge in the
Ontario.
The ESA Policy and Interpretation Manual states that factors such as where the offer of
employment was made and accepted, where a contract was signed, where the employer is
located, etc. are all irrelevant. The ESA therefore would apply and the at-will provision of the
contract would fail to meet the minimum entitlement to notice of termination under the statute.
In accordance with the Machtinger decision discussed earlier, the termination pro
nlawful contracting out of the legislation. Where does that lead?
To begin with the executive would have an entitlement to minimum notice (pay
lieu) in accordance with Section 57 of the ESA based on his length of service. However, it is
only his service in Ontario which would be considered for notice (and severance pay) purposes
and not his service with the parent in New York [See Singer v. Tulley & Tokyo Forex (Canad
Ltd.20]. Moreover the issue then arises as to whether the Machtinger result would ensue. In
Machtinger, once the termination provision was held to be void, the Supreme Court found th
the employees were entitled to reasonable notice of termination under the common law, the
normal expectation in Ontario on the termination of an employment contract of indefinite
duration. In our example the law of New York applies. In theory at least, having assumed
jurisdiction an Ontario court would then apply New York state law to determine the executive’s
entitlement. The question framed by the majority of the Court in Machtinger, on declaring the
notice provision of the employment contract to be null and void, was stated to be: “What did the
parties intend should the notice provisions be found to be null and void?” The Court found that
there was no evidence with which to answer that question. Perhaps one answer is that the law of
the state of New Yor
um.
Whether this would in practice happen remains to be seen. The writer was unab
20 (Ont. Div. Ct. – unreported 1998 – leave to appeal denied)
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first instance found that Mexico was the proper law of the employment contract. In so doing he
stated21:
There is no doubt that, in some cases, the fact that the proper law of a contract may be foreign will not be a decisive, or even a particularly significant, consideration in applying the principle of forum non conveniens. However, it is also established that, depending upon the circumstances, it can have relevance and weight.
In upholding the judge’s decision to grant a stay of the Ontario action, the Court of Appeal made
no mention of the law of the contract as a relevant factor.
A not uncommon occurrence is to see an Ontario-based employee party to a non-
competition or confidentiality agreement subject to the laws of a U.S. state prepared by a U.S.
parent company. There is nothing preventing an Ontario court from assuming jurisdiction and
applying U.S. law in the appropriate circumstances. That said, there appear not to be any
reported cases in Ontario in the employment law sphere on point.
Drafting Tips
In light of the foregoing, the following are suggested guidelines for employment
contracts in cross-border employment situations.
1. In any transfer situation it would be prudent to put in place a new employment agreement which, among other things, addresses entitlements on the termination of employment.
2. Any new employment agreement, whether for a foreign executive to be transferred to Canada or a Canadian executive being relocated to another country, should be conditional on the individual employee successfully obtaining such immigration permits/visas as are required to be lawfully employed in the other country.
3. From the transferring employer’s perspective, whether Canadian or foreign, both applicable law and the jurisdiction of the courts (or arbitration) should be expressly addressed.
21 Supra fn 17 at para. 43
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4. An employment contract for a U.S. based executive originally subject to at-will employment should specify a particular notice/severance entitlement that, at a minimum, meets the standards established under the ESA (or other applicable provincial employment standards legislation).
5. For Canadian employees transferred outside Canada, if specified notice/severance provisions can be negotiated, they should be. Of course entering into a new employment agreement during the term of employment raises the issue of whether there is valid consideration for entering into the agreement. Normally in an executive transfer situation where promotions and/or compensation increases follow, consideration should not be an issue.
6. Employers should always ensure that an employee has an adequate opportunity to obtain, and should be encouraged to obtain, independent legal advice.
7. The costs of relocation are often addressed up-front in transfer situations. The costs of repatriation are often ignored. From an executive’s perspective this can be devastating if the person is dismissed abroad.
8. Every contract of employment should have a severability provision in order that the remainder of the contract will be upheld notwithstanding the unenforceability of a specific provision.
Concluding Remarks
It is impossible to predict with any certainty in cross-border employment
transfers, both in and out of Ontario, when the courts in this province will assume jurisdiction. It
is equally uncertain what law will apply even in the face of an express agreement. That said,
employers are well advised to bear in mind public policy as reflected in the Supreme Court’s
decision in Machtinger which strongly suggests that Ontario courts will apply rules of law which
are most favourable to employees.
October 2006
MBDOCS_3268789.1
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