When an employee has two employers, one American and one
Canadian, the language of an employment agreement that deals with
termination entitlements will only take you so far. A recent
case decided by the British Columbia Court of Appeal, Stanley v. Advertising Directory
Solutions, found that an employee of a US company who was
working for a Canadian subsidiary, is entitled to notice upon the
termination according to Canadian law. This despite a written
agreement that indicated otherwise.
The court ruled that an agreement with a US parent company will
not permit a Canadian company, which is also the person's
employer, to avoid its obligation to provide reasonable notice or
pay in lieu of notice of termination.
The US-based employee, Susan Stanley, was a Canadian
citizen. She was employed by Verizon Communications Inc. in
its Texas office. She was offered a promotion to a position in
Vancouver for Verizon's Canadian subsidiary, Dominion Directory
Company Ltd. At the time of the transfer from the US to
Canada, Susan agreed to the terms of a letter written on Verizon
letterhead. It said that while on assignment in Canada, she
would remain an employee of Verizon. Her employment would be
"at will" (that is, there would be no obligation on the
employer to provide notice or pay in lieu of notice for a dismissal
Once in Canada and on Dominion's payroll, Susan worked hard
to further its business interests. She reported to Dominion's
Canada-based president. A few years into Susan's tenure in
Canada, Dominion was sold by Verizon to Bain Capital. Susan's
employment was terminated in a meeting attended by both
Dominion's HR manager and, by teleconference, Verizon's HR
Susan sued Dominion (but not Verizon) for damages arising out of
the termination of her employment.
In court, much turned on who was the true employer. The
trial judge concluded that Susan was an employee of Verizon in the
US. Since she was not employed by Dominion, she was not
entitled to any notice of termination under Canadian
law. Stanley appealed. The B.C. Court of Appeal considered
whether the fact that the employment agreement was formed in Texas
but performed in British Columbia meant that the proper law of the
contract was that of British Columbia, and not that of Texas.
It ruled that British Columbia law applies. So the Texas employment
agreement that purported to find Susan to be an employee at will
was null and void, as rights under BC's Employment Standards
Act ("ESA") cannot be waived.
The appeal court also ruled that an employee can have more than
one employer. While it may be contended that Susan was employed by
both Verizon and Dominion, it could not be seriously argued that
she was not employed by Dominion. Thus B.C.'s ESA applied
to her. The employment at will condition was inconsistent with
the ESA. The agreement entered into in Texas was thus set
aside. Susan was entitled to reasonable notice under Canadian
common law, by her Canadian employer, Dominion. The appeal
court sent the matter back to the trial court for its determination
of the reasonable notice period.
The lessons from this case are as follows:
Do not assume that an employment agreement entered into in one
country is going to apply in total if the employee is transferred
to another country to work for a subsidiary.
Employers should carefully review all contracts and secondment
agreements, to make sure they will not be ruled void if they run
afoul of applicable minimum standards legislation. Very clear
language is needed regarding what law will apply where any dispute
is to be litigated.
Do not assume that an employee can only have one
employer. In fact, depending on the facts, an employee may
have multiple employers, as was the case here. Again, however,
this result may be avoided by an expertly drafted contract.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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