Employment contracts can help determine jurisdiction
In many situations, employees find themselves working at an international company. Sometimes, an employee may also be relocated to a different company location in a different part of the world. This raises the question of what jurisdiction will apply if an employee moves to a new country.
Even if the contract specifies which laws will apply, there may be some situations where the local laws could apply. Both employees and employers must clarify what jurisdiction will apply, especially if an employee is terminated. For example, some Canadian notice requirements may only apply in certain parts of the world. It is also essential to know which jurisdiction's laws will apply to the terms of an employment contract because if it does not follow its standards, the agreement could be invalidated.
Generally, the employment contract will specify which jurisdiction applies when there is a dispute, including what standards will apply when an employee is terminated. For example, most Canadian jurisdictions require the employer to provide a minimum amount of reasonable notice or pay in lieu if they decide to terminate their employee. However, this may not be the case for other jurisdictions outside of Canada, and the employee may find they are not protected by the standards set out in Canadian law.
In most cases, courts find the employee and employer agreed to have their employment law issues dealt with under a particular jurisdiction. This agreement will usually be upheld as long as the laws that apply are not contrary to public policy, the parties made a genuine decision to have this jurisdiction apply, and there are no vitiating factors that would otherwise invalidate the application of the specified jurisdiction.
What if an employee relocates to a different country?
As international companies have different locations worldwide, local laws are commonly set as the jurisdiction that applies to any particular employee. However, it is not uncommon for employees to transfer to different company locations, which raises the question of what laws will apply in these situations.
For instance, if an employee is transferred to a new location in a different country, does this mean that the local laws apply while working there? What if the company assigned this relocation? Can the jurisdiction continue to be the laws of the original home country where the employee began working?
The Ontario Superior Court addressed these questions earlier this year in its decision in Mittra v. Royal Bank of Canada et al, 2024 ONSC 636. In Mittra, the employee worked as a managing director for RBC. He first started working with RBC in 2005 and then returned in 2009, working in London, UK. Over the years, he received several promotions and, from 2016 to early 2017, he worked as Managing Director for the London location.
In early 2017, the employee was asked to accept a temporary expatriate assignment to Toronto for the same role but in the Toronto division. The employee accepted and relocated to Toronto at the start of 2017. The temporary assignment was meant to last about three years, after which he could repatriate to the UK.
Court upholds jurisdiction stated in employment contract for relocated employee
In 2019, while the employee was still in Toronto, the employer dismissed him. The employer claimed that, as specified in the employment contract, UK laws applied and it provided three months' notice of the termination.
The employee claimed Ontario laws should apply, as he worked in Toronto at the time of termination. He argued that under Ontario law, his reasonable notice period should be 24 months based on common law principles. He also claimed punitive and aggravated damages under Ontario law.
The court found the Ontario laws on reasonable notice of termination under the employment contract would not apply as the contract specified it was subject to the laws of the U.K. unless Canadian laws, such as mandatory provisions of the Employment Standards Act, superseded them.
International laws applied due to employee's failure to localize
Under the employment agreement, the employee could continue working in Toronto and transition to local employee status. By choosing to localize, the employee would no longer be employed by the home country, and the local employment laws would apply (i.e., the laws of the hiring country, Canada). However, the UK laws would apply if the employee did not participate in the localization process.
The court found the parties agreed that the UK laws would apply. The UK laws were consistent with public policy, the parties had a genuine agreement for the UK laws to apply, and there were no other factors that would make it unfair for the UK laws to apply over the Ontario laws. There was also nothing to suggest that the UK laws were superseded by Canadian law.
Employment contract terms superseded residency and work location
The employee also claimed Canadian employment law would apply to anyone living and working in Canada. However, the court found that this may only apply if the parties had yet to select their jurisdiction in an employment contract. Here, it was clear that the parties agreed that the UK laws would apply, so there was no presumption that Canadian employment law would apply.
Another factor that the court considered was the temporary nature of the reassignment to Toronto. The court found the parties contemplated that this would be a temporary assignment and that he did not have permanent status as a Canadian employee. This further bolstered the reasoning that the employee's termination would not fall under local employment laws.
Paulette Haynes is the founder of Haynes Law Firm, a boutique employment law firm in Toronto.
