Crossborder employment litigation: When can international employees sue in Canada?

The number of employees working across and between borders is increasing at a rapid rate.  Specifically, the steady increase in global trade means employees are regularly moving between jurisdictions in order to assist an organization with both setting up and managing its operations.  This trend is particularly prevalent in Canada which is highly dependent on international trade, particularly when compared to the United States.

Canada has accordingly seen a steady increase in the number of foreign temporary workers.  The increase has been so substantial that the number of temporary foreign workers in Canada is now comparable to the number of permanent residents accepted to Canada each year.

With so many employees working in multiple jurisdictions, an important question arises: Can employees who work in Canada and then subsequently work outside of the country sue in Canada for issues relating to their employment?

A recent decision of the Ontario Superior Court of Justice, Sullivan v. Four Seasons addresses this question.

The case involved an employee who was employed with Four Seasons Hotels and Resorts (Four Seasons) in Toronto.  She was subsequently transferred to Four Season’s operations in Nevis in the West Indies.  The employee then moved to New York City to work with Four Seasons as a Director of Sales.  She continued to work with Four Seasons in New York City until the termination of her employment in 2011.

The employee subsequently brought a claim in Ontario against both Four Seasons’ Canadian and US entities.  In response, Four Seasons requested that the case be dismissed on the basis that the Ontario courts did not have jurisdiction to determine the matter.  Four Seasons specifically argued that the employee was terminated from her employment in New York and accordingly, this was a foreign matter that could not be determined by the courts in Ontario.

In determining whether it had jurisdiction to review the case, the court examined several factors, including the following:

  • The applicable law of the contract in dispute
  • The location where the disputed contract was signed
  • The location of evidence necessary to determine the case
  • The location of witnesses necessary for determining the case
  • The location of the facts that arose giving rise to the case
  • The location(s) where the evidence was to come from
  • The residence/place of business of the parties
  • The potential loss of advantage to one side or the other of accepting jurisdiction

The court ultimately determined that it could not take jurisdiction over the case.  In reaching this decision, the court pointed to the following factors:

  • Four Seasons, while carrying on business in Ontario, equally did so in the United States, including in New York State
  • It was not clear whether the employee’s contract of employment was most closely connected to Ontario or outside of Ontario
  • It was not clear that the laws of New York State did not apply to her contract
  • New York State was where most of the evidence was located
  • The factual matters giving rise to the claim arose in New York State
  • Although New York State is not as generous with respect to severance as Ontario, this was only one of several factors to determine jurisdictional matters

What does this mean for employers?

This case makes it clear that employers with employees working in multiple jurisdictions should be careful to ensure that they define the employment relationship as clearly as possible.  Specifically, employers should strongly consider having in place documentation that clearly indicates the jurisdiction governing the employee’s relationship.

Further, and in order the maximize the chance that a court will respect this choice of jurisdiction, employers should ensure that its practice reflects its intention.  Specifically, if it is the intention of an employer that Canadian law should not apply to an employee working outside of Canada, then all the documentation (including the employment contract) should make this clear, it should be clearly agreed to by the employee and, to the extent possible, the employee should be managed by the foreign jurisdiction as opposed to the company personnel in Canada to reduce the chance that a court overrules the employer’s intention.

These measures can help to reduce uncertainty when a conflict arises and significantly improve the chances that a court will support the employer’s position in response to any dispute and/or claim.