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

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