The British Columbia Court of Appeal, overturning a Supreme
Court Judge's decision, held that an executive with an "at
will" employment contract with a US company was also an
employee of the Canadian subsidiary, and was therefore entitled to
reasonable notice of termination in accordance with Canadian law.
The "at will" employment agreement was unenforceable as
it constituted an invalid attempt to contract out of Employment
Standards legislation. The employee was therefore entitled to
reasonable notice of termination at common law.
This decision provides a strong reminder to US companies doing
business in Canada, that employment agreements must be carefully
drafted to avoid running afoul of Canadian legislation or
triggering an obligation to provide reasonable notice of
termination (or incur significant damages for failure to do
In Stanley v. Advertising Directory Solutions Inc. and
Verison Information Services Inc. (August 16, 2012), the Court
of Appeal held that the plaintiff's "at will"
employment contract with the US company, Verison Information
Services Inc., was invalid as the plaintiff was also employed by
the Canadian subsidiary, Advertising Directory Solutions Inc.
Because the employment agreement did not meet the minimum standards
of the Employment Standards Act, the plaintiff was
entitled to reasonable notice of termination at common law. In
Canada, such notice can range up to two years, depending on the
employee's length of service, age, position with the company,
and the likelihood of obtaining comparable replacement employment.
Damages are awarded on a total compensation basis where reasonable
notice is not provided.
The plaintiff, Stanley, was originally employed with the
Canadian company. It was subsequently acquired by Verison and Ms.
Stanley was offered employment with the US parent. She entered into
an "at will" employment agreement as Director-
International Finance. The employment agreement provided for her
"assignment in Canada", working with the Canadian
Upon taking up her duties in Canada, Ms. Stanley was put on the
subsidiary's payroll and paid in Canadian funds, with her
salary adjusted for the exchange rate and tax implications. Verison
argued that this arrangement was for administrative convenience
only. Ms. Stanley was enrolled in the Dominion pension plan and
benefits plans. She was terminated from her employment when Verison
sold the shares of Dominion to an affiliate of Bain Capital. She
rejected an offer of severance and sued for wrongful dismissal.
The trial judge dismissed the claim holding that for the
purposes of salary, entitlement to short term incentives and notice
of termination, the parties had agreed that the plaintiff would be
treated as an employee of Verison, but that for other purposes she
was employed by Dominion. The Court of Appeal rejected that
analysis and held that an employee may be employed by more than one
employer, who might both be liable for wrongful dismissal. It was
not necessary, said the court, to determine whether Ms. Stanley was
an employee of Verison because on the evidence she was an employee
of Dominion as defined in the Employment Standards Act:
"a person... entitled to wages for work performed for
another". That being so, she was entitled to the minimum
notice requirements of the Employment Standards Act (which
in British Columbia scales up from two weeks to eight weeks of
notice). Because her "at will" employment agreement was
inconsistent with the legislation and therefore void, she was
entitled to reasonable notice at common law.
The Court held that the proper consideration was not the
employment agreement detailing the terms of her assignment to
Canada, but rather her relationship with the Canadian subsidiary.
The issue was whether she was employed by Dominion within the
meaning of the Employment Standards legislation. Because
the court answered that question affirmatively, the plaintiff was
entitled to reasonable notice at common law (referred back to the
trial judge for assessment) as the attempt to contract out of
minimum notice by agreeing to "at will" employment was
invalid. The plaintiff was also entitled to a declaration that
stock options which formed part of her compensation would expire 5
years after the notice period rather than from the date of
US employers who assign employees to work in Canada must
consider whether they are establishing an employment relationship
with the Canadian subsidiary and, if so, ensure that agreements are
in compliance with minimum standards legislation.
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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