Canada: Where Will Disputes About Your International Employment Contracts Be Resolved?

This question can be a vexing one. Will disputes be resolved in the employee's country of origin? In the country in which the employee is now working? In the country in which your head office is located? In the country in which the employment contract was executed? All of the above? And how will you know?

You can be forgiven for being confused about this. The courts have been too. What's more, a Canadian court's answer will not necessarily be the same as that of a foreign court's. Fortunately, we can at least provide a brief outline of how a Canadian court will look at this issue.

First, one must recognize that this question is different from the issue of what country's laws apply to the contract of employment. The applicable law is not the same as the selection of the appropriate forum for dispute resolution. A Canadian court may enforce foreign laws, and a foreign court may enforce Canadian laws.

Failing a binding agreement on where and by whom a dispute will be resolved, how will this be decided? To answer this, Canadian courts will look at two distinct issues:

  • Do they have jurisdiction to consider the dispute?

  • Are they a convenient forum for considering the dispute?

Somewhat different, but related, factors apply to each question. Therefore, even though a Canadian court concludes it could entertain a dispute insofar as it has jurisdiction to do so, it may still decide it should not do so, if it is not the most convenient forum.

Jurisdiction Factors

In general, the factors determining whether a Canadian court has jurisdiction may include some or all of the following:

  1. Is one or both parties present in the province or territory in which the court is located?

  2. Have the parties consented, implicitly or explicitly, to have disputes resolved by that court?

  3. Is there a real and substantial connection between the claim and the province or territory in which the court is located? For example:

    1. Was the contract carried out in the province?

    2. Did the alleged breach of contract occur in the province?

    3. Were the damages suffered in the province?

    4. Did the employee embark from or will he return to the province?

    5. Does either party reside or do business in the province?

  4. Would any unfairness befall either party if the court assumes jurisdiction?

  5. Would the party's claim or defence be significantly prejudiced? Would the difficulty or expense of fighting the case be materially increased for one of the parties?

  6. Would the judgment of the Canadian court be recognized abroad, to the extent that this may be important? For example, must the judgment be enforced in another country and is that feasible?

Convenient Forum Factors

The factors for determining whether the dispute should be heard by the Canadian court may include some or all of the following (some of which overlap with the jurisdiction factors outlined above):

  1. the location where the contract was signed;

  2. the applicable law of the contract, which may be stated explicitly or may be implied in the terms of the deal;

  3. the location where the majority of witnesses reside;

  4. the location where the bulk of the evidence is located;

  5. the place where the dispute actually arose; and

  6. the residence or place of business of the parties.

What This Means For You

It is important to think through these and related issues before you send executives abroad, or before you temporarily bring foreign employees into Canada. We can advise you on how Canadian law will apply, help you find foreign legal advisors if necessary, and advise you on drafting appropriate employment contracts or appointment letters.

For example, your company and an executive placed abroad might attempt to agree on:

  1. recognizing the jurisdiction of a specific country's courts;

  2. stipulating which court has exclusive jurisdiction; or

  3. ousting the jurisdiction of the courts in favour of the exclusive jurisdiction of arbitrators and defining the nature, process and location of an arbitration proceeding.

Stating these kinds of measures in a well-drafted appointment letter or employment contract can save you many headaches and potential liabilities in the future.

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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