In a recent decision, Machado v. The Catalyst Capital Group Inc., the Ontario Superior Court considered whether Ontario is the more appropriate forum for a wrongful dismissal action between a New York-based employer and an employee who was employed in New York at the time his employment was terminated.
Andre Machado was employed by several related companies of the defendant, Catalyst Capital Group Inc. (Catalyst), from 2005 until his employment was terminated for cause in 2014.
In 2012, Mr. Machado was employed in Ontario by an affiliate of Catalyst, Natural Markets Restaurant Corp. (NMRC), for a three-year term as the Senior Vice President of Operations and Finance; however, in 2013, Catalyst requested that he transfer to NMRC's new head office in New York for the purpose of managing another company in the Catalyst group based in the United States.
Although Mr. Machado resided in New York State and worked out of NMRC's New York office at the time his employment was terminated, he commenced a claim for wrongful dismissal in Ontario. Catalyst then brought a motion to have the proceeding stayed on the basis that, while the Ontario court has jurisdiction to hear the proceeding, it should not exercise that jurisdiction because Ontario was a forum non conveniens. In other words, Ontario was not the most appropriate forum.
Decision
As discussed in more detail in a previous post, the two main issues to be determined in jurisdictional challenges are: (i) whether the Ontario court has jurisdiction to hear a matter (jurisdiction simpliciter); and (ii) if so, whether it should decline to exercise that jurisdiction on the grounds that there is a more appropriate forum (forum non conveniens). In this case, only the latter issue was before the court.
In order to stay the wrongful dismissal proceeding in Ontario, Catalyst had the burden of demonstrating that the forum it was proposing (New York State) was the "clearly more appropriate" forum. In determining that Ontario was the more appropriate forum, the Court found the following factors to be relevant:
- Location of the contract: The initial employment contract in dispute was clearly signed in Ontario. The Court was not convinced that the parties' subsequent conduct in New York changed the location of the contract.
- The applicable law of the contract: The contract was made in Ontario between an Ontario corporation and an Ontario resident and was for employment located in Ontario. Further, Mr. Machado's transfer to New York was expressly understood to be for a temporary period and he continued to perform duties in Ontario from time to time while employed in New York.
- Location of the evidence: The location of the evidence relating to the plaintiff's dismissal weighed slightly in favour of New York; however, the relevant evidence concerning the issues of mitigation and mental distress were found in Ontario.
- Residence or place of business of the parties: Both Catalyst and NMRC were established and maintained pursuant to Ontario laws and their head offices were located in Ontario. While they conducted business in both New York and Ontario, they had a legal residency in Ontario.
- Juridical Advantage: The presence of "at will" employment in New York State (in which an employer may terminate an employee without severance or termination pay) was an important factor. Emphasizing the importance of fair treatment of both parties and efficiency of the litigation process, the Court found that Mr. Machado would experience a serious loss of a juridical advantage if the matter were to be tried in New York.
Catalyst argued that the location of the witnesses weighed in favor of New York being the appropriate forum. The Court acknowledged that the witnesses with knowledge of events relating to Mr. Machado's alleged unjustified dismissal were mostly located in New York; however, the Court noted that location of witnesses is not a weighty consideration for a "cross-border, sophisticated" company as arrangements for travels or live video conferencing of witnesses can be easily made.
Interestingly, the Court also commented on the Catalyst's assertion that it was the wrong party to be sued. Catalyst is an independent portfolio manager who merely controls its related entities for its investors and does not directly employ the employees of such companies. The Court was not persuaded and cited case law which suggested that the element of common control would establish a sufficient degree of employment relationship, and that the complexity of corporate structures should not defeat the legitimate entitlements of wrongfully dismissed employees. The Court held that the determination of this issue could be equally well performed in either jurisdiction.
Our Views
In a previous post, we discussed a decision, Sullivan v. Four Seasons Hotels Limited, in which an Ontario court decided the issue of whether Ontario was the more appropriate forum for hearing a wrongful dismissal claim by an employee of a multinational employer. Like Mr. Machado, the employee in Sullivan was originally based in Ontario but later transferred to a related company in New York. Her employment was terminated in the United States. In Sullivan, however, the Court determined that, while the Ontario Court had jurisdiction to hear the claim, the more appropriate forum was New York. There was no specific factor or factors that led to the Court's decision in Sullivan; the Court simply considered all factors and decided that, on balance, New York was the more appropriate forum.
Taken together, these decisions demonstrate that courts will consider particular and unique circumstances of each case in jurisdictional challenges to an employee's wrongful dismissal claim. Accordingly, it is prudent for employers, when transferring an employee between locations to perform work for an affiliate entity, to specify the terms of the transfer in a written agreement and include a governing law clause and choice of law provision. In the absence of such contractual provisions, the burden will be on the employer to demonstrate the clearly more appropriate alternative forum.
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.
