Northern Exposure

U.S. employment agreement ruled inapplicable after transfer to British Columbia

By Katherine Pollock

A recent decision of the British Columbia Court of Appeal, Stanley v. Advertising Directory Solutions, considered the rights of an employee of a U.S. company who was working for a Canadian subsidiary when terminated. The court found she was entitled to notice or pay in lieu of notice upon termination according to Canadian law. This despite a written agreement with the U.S. parent that said she was employed at will.

The court ruled that an agreement with a U.S. parent company won’t 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 U.S.-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 United States to Canada, she 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 continue to be “at will.”

Once in Canada and on Dominion’s payroll, Stanley worked hard to further its business interests. She reported to Dominion’s Canada-based president. A few years into her tenure in Canada, Dominion was sold by Verizon to Bain Capital. Her employment was terminated in a meeting attended by both Dominion’s HR manager and, by teleconference, Verizon’s HR manager.

Stanley 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 Stanley was an employee of Verizon in the United States.

Since Stanley wasn’t employed by Dominion, she wasn’t entitled to notice of termination as she would be under Canadian law. But the British Columbia 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.

The appeal court ruled that British Columbia law applies. So the Texas employment agreement that purported to find Stanley to be an employee at will was null and void. Her rights under BC’s Employment Standards Act (ESA) couldn’t be waived.

The appeal court also ruled that an employee can have more than one employer. While it may be contended that Stanley was employed by both Verizon and Dominion, it couldn’t be seriously argued that she wasn’t employed by Dominion. Thus British Columbia’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.

Stanley 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:

  1. Don’t assume that an employment agreement entered into in the United States is going to apply in total if the employee is transferred to Canada to work for a subsidiary.
  2. Employers should carefully review all contracts and agreements to make sure they won’t be ruled void if they run afoul of applicable minimum standards legislation. Very clear language is needed regarding what law will apply and where any dispute is to be litigated.
  3. Don’t assume that an employee can have only one employer. In fact, depending on the facts, an employee may have multiple employers, as was the case here. But this result may be avoided by an expertly drafted contract.

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