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In Canada, employment law matters often boil down to established first principles that employers should be cognizant of, particularly those from foreign jurisdictions.

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First principles include, not contracting out of statutorily mandated employment standards, the provision of reasonable notice or pay in lieu thereof when dismissing an employee on a without cause basis and, the notion that an employee can have multiple employers despite a contract indicating they are an employee of a single corporation.

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The British Columbia Court of Appeal recently discussed these principles in the context of multinational subsidiaries operating within Canada in its decision in Stanley v. Advertising Directory Solutions Inc., 2012 BCCA 350, 2012 CarswellBC 2491 (B.C.C.A.).

 

Facts

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In the summer of 1998, Susan Stanley commenced her employment with Verizon Information Services Inc. (”Verizon”). Ms. Stanley’s employment in the United States at Verizon was “at will” and therefore could be terminated without notice.

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In the spring of 2001, Verizon Information Services began to consider expanding its Canadian market. Ms. Stanley was intimately involved in this project and accepted a position that would see her move to British Columbia in July 2001.

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On July 30, 2001, Verizon sent Ms. Stanley a letter setting out the compensation that she would be afforded. Ms. Stanley signed this offer letter on July 31, 2001.

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Within the aforementioned letter, some of the language included [at para. 8]:

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• . . . during your assignment in Canada . . .

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• In the event revenue Canada imputes 12 months’ salary when calculating a partial year tax liability, Verizon Information Services will cover all incremental Canadian taxes for 2001.

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• . . . Both you and Verizon information Services have the choice of ending your employment at any time, for any reason, with or without notice.

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While in Vancouver, Ms. Stanley carried out her duties for Verizon’s Canadian Subsidiary, Advertising Directory Solutions (”Dominion”). She was also compensated by Dominion. At the time, Dominion, a Vancouver based company was owned by Verizon, an American corporation. Dominion was in the business of publishing the “Yellow Pages” telephone directory.

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In 2002, the Board of Verizon decided to divest itself of its international operations and, in September of 2004, Verizon agreed to sell the shares of Dominion to an affiliate of Bain Capital.

 

Wrongful Dismissal

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On November 8, 2004, Ms. Stanley was terminated without cause and shortly thereafter commenced a wrongful dismissal action, asserting Dominion was her employer and responsible for pay in lieu of reasonable notice.

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At trial, the focus of the analysis largely revolved around the contract between Ms. Stanley and Verizon. It was determined that Verizon was Ms. Stanley’s employer and therefore Dominion was not liable for any damages. The reconsideration of this finding was a central issue in this appeal.

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Despite the existence of the contract between Ms. Stanley and Verizon, the Court of Appeal embarked on a more thorough analysis of the true nature of the employment relationship between Ms. Stanley, Dominion and Verizon.

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Upon taking up her new job in Canada, Ms. Stanley was paid by Dominion. She was put on the Dominion payroll, received employee benefits and was included in two Dominion pension plans.

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The trial judge [at para. 18] even remarked that she “worked long and hard to initially integrate, and then grow Dominion’s business in Canada”.

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The trial judge concluded that Ms. Stanley’s employer was Verizon at least for purposes of her entitlement to notice upon termination.

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The Court of Appeal found otherwise [at para. 46]:

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It is apparent that the parties and the trial judge focused very much on the July 30, 2001 letter. In my view, this led the judge into the error of analyzing the notice issue as though it hinged on the so-called terms of employment as set out in the letter, while failing to look at the actual employment relationship. He focused on the basis on which Ms. Stanley came to Canada. In my view, the proper inquiry was her relationship with Dominion in Canada. As an employee working in British Columbia, Ms. Stanley was entitled to notice of termination. As her employer in the Province, Dominion was obliged to give her at least the minimum notice under the Act. Any agreement providing for less notice was void.

 

Analysis — First Principles

 

An employee may have more than one employer

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While Dominion was of the opinion that Ms. Stanley was employed by Verizon, the facts clearly indicated she was also an employee of Dominion.

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Prior to concluding Dominion was also Ms. Stanley’s employer, Chiasson J.A. first reiterated the established principle that an employee may have more than one employer. In British Columbia and Ontario this concept has received appellate level support both in Sinclair v. Dover Engineering Services Ltd. (1988), 49 D.L.R. (4th) 297, 9 A.C.W.S. (3d) 30 (B.C.C.A.), and Downtown Eatery (1993) Ltd. v. Ontario (2001), 200 D.L.R. (4th) 289, 54 O.R. (3d) 161 (Ont. C.A.), leave to appeal refused 207 D.L.R. (4th) vi, [2002] 1 S.C.R. vi sub nom. Downtown Eatery (1993) Ltd. v. Alouche (S.C.C.). In Stanley, the court also acknowledged that one or more employers might also be held liable for a wrongful dismissal.

 

Ultimately, the court did not rely on the aforementioned principle to make its finding. Rather, the court held [at para. 40]:

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For its part, Dominion was an employer as defined by the Employment Standards Act, which states in s. 1 that “‘employer’ includes a person (a) who has or had control or direction of an employee”.

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As a result of Stanley’s employment being performed in British Columbia, she was subject to the provinces Employment Standards Act, R.S.B.C. 1996, c. 113. In this regard the definition of employee and employer was relied upon by the Court of Appeal to rule that Dominion was an employer of Ms. Stanley. Ms. Stanley participated in Dominion’s bonus plan, health care plan and dental plan, among others. She also had use of a company car and was covered by Dominions pension plan. Moreover, she reported to and was evaluated by Dominion’s president who approved increases in her wages.

 

No “At-Will” Employment in Canada

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In the United States, at-will employment permits either the employee or employer to end the relationship with no liability, provided there are no contractual terms specifying a definite term of employment and no collective agreement providing otherwise. While Ms. Stanley had a contract of employment from the United States, the employment was performed in Canada and was required to comply with statutory minimums for termination pay and severance.

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In Canada, if an employee is terminated without cause, they are entitled to reasonable notice or pay in lieu thereof. Outside of statutory remedies, one may commence a civil action for wrongful dismissal if they dispute their severance and are not subject to a valid contractual termination clause.

 

Contracting Out of Statutory Minimums

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Ultimately, while Ms. Stanley’s contract of employment was formed in Texas, it was performed in British Columbia. On that basis, the Court of Appeal held that Ms. Stanley’s employment was subject to the laws of British Columbia and she was at least entitled to the minimum protections of the statute. As a result of this violation, Ms. Stanley was entitled to reasonable notice at common law, as that contractual provision was rendered null and void.

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A contractual term asserting her employment was “at will” is contrary to the laws in Canada and is viewed as an attempt to contract out of remedial legislation. When this occurs an employer exposes themselves to damages for breach of contract as a result of a wrongful dismissal at common law; not simply termination pay and severance pursuant to the statute.

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Chiasson J.A. specifically stated [at paras. 43-4]:

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On the basis of Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986, 91 D.L.R. (4th) 491, as explained by this Court in Macaraeg v. E Care Contact Centers Ltd., 2008 BCCA 182, 295 D.L.R. (4th) 358, Ms. Stanley was entitled to proper notice at common law.

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In Machtinger, the appellants had provisions in their employment contracts providing less notice than was required by the applicable employment standards legislation. The Court held that because the attempt to provide less notice than was required by legislation was void, the employees were entitled to reasonable notice at common law. In Macaraeg, this Court rejected the proposition that in such circumstances the statutory minimum notice periods could be imported into the employment contract.

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The result, an employee can sue civilly for much more than their statutorily guaranteed termination pay.

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Ultimately, those companies sending employees to work in Canada for a related entity, subsidiary or sister company must ensure they are in compliance with remedial employment legislation or that they are exempt. Furthermore, those companies inheriting employment contracts from other jurisdictions will often want to revisit them up so as to comport with provincial standards and minimize liability.

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This case goes to show us, while an employment contract may formally dictate the terms of the relationship, the common law and remedial legislation will generally be superimposed upon the relationship to determine its true nature and one’s corresponding entitlement. Ultimately, it is important that substance follows form, as an employment relationship is generally contextualized and a contract is but one factor that evidences the party’s intentions and the reality of the situation.

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If you have a workplace issue or concern call a Toronto employment lawyer, Toronto labour lawyer and Toronto Human Rights lawyer at Stitz Litigation. Michael Stitz is an employment and labour lawyer in Toronto with over half a decade of winning experience. Call for a free case assessment.

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