Canadian Employment Claims: Global Employers Can Challenge Jurisdiction 


January 2014

Employment and Labour Bulletin
Many multinational employers blindly assume that they are required to defend a case wherever it is commenced, without considering the prospect of a jurisdictional challenge. A recent Ontario Superior Court decision offers some encouragement for organizations faced with termination and discrimination claims arising from executive employment that has straddled borders. The ruling also offers a caution to dismissed executives about where to initiate legal proceedings.

In Sullivan v Four Seasons Hotels Limited, 2013 ONSC 4622 (CanLII), the employer successfully obtained a permanent stay of Ontario wrongful dismissal proceedings. Even though the Court found that there was a valid basis to assert that the Ontario Courts had jurisdiction over the matter, New York was held to be the more convenient forum.

From 2002 until 2007, Kathryn Sullivan was employed by the Four Seasons Hotel, Toronto, as Director of Sales. In 2007, she entered into a new employment agreement in conjunction with her requested transfer to work in New York as Director of Sales for Nevis Resort, which is a Four Seasons-branded property. The transfer to New York was arranged by the Four Seasons head office in Toronto, which also assisted Sullivan with her immigration process.

After Sullivan's employment was terminated in September 2011, she sued in the Ontario Courts, claiming against both the Ontario company that had originally employed her and the New York entity. The Four Seasons challenged the Ontario Superior Court's jurisdiction and claimed in the alternative that New York was the more convenient forum.

Following the Supreme Court of Canada's recent decision in Club Resorts Ltd. v Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572, the Ontario Superior Court found that it could legitimately assume jurisdiction over the matter, but that New York was the more convenient forum. Accordingly, the plaintiff's action was permanently stayed.

The finding that the Ontario Court had jurisdiction to hear the claim was based in large part on the fact that the Four Seasons is resident in and carries on business in Ontario, and that Sullivan's transfer and new employment contract had been facilitated by the Ontario entity. Indeed, a Toronto head office human resources manager drafted the updated contract and assisted with the immigration of the plaintiff to the U.S. for purposes of her transfer. The Court also noted that the new contract failed to expressly address the jurisdiction or governing law applicable to the New York employment. As a result, the jurisdiction of the Ontario Courts was found to exist due to the "real and substantial connection" between Ontario and Sullivan's employment.

The existence of jurisdiction was not, however, the end of the matter. The Four Seasons prevailed on its alternative argument that New York was the more convenient forum. The success of the Four Seasons in that regard was based on a number of factors, including the location of relevant witnesses (especially the "main witnesses") and evidence. Notably, the Court highlighted that the main allegations by the plaintiff were not merely about her termination, but also of discrimination and other mistreatment during her employment by her direct supervisors, all of whom were located in New York. The head office human resources manager was based in Ontario, but she was not as key a witness as those on site in the New York facility. New York was where most of the evidence at the core of the dispute would be found. The fact that Sullivan was not living in Ontario (she was in Alberta) at the time of the motion may have also worked against her.

Interestingly, in many prior comparable decisions, the Ontario Courts have placed emphasis on the fact that the plaintiff employee would lose a legitimate juridical advantage if forced to litigate his or her termination claim in the U.S. instead of Ontario. In Ontario, an employee dismissed without cause may claim under common law for reasonable notice or pay in lieu of notice, which may run up to twenty-four (24) months in duration (or even more in rare cases); that is not the case in the U.S. Some may call this an "end justifies the means" approach to deciding jurisdictional matters that clearly favours the employee. In any event, the Ontario Court cited a recent Supreme Court of Canada authority for the proposition that juridical advantage should not weigh too heavily in the analysis and noted the Four Seasons argument that the plaintiff's discrimination and tort claims are recognized under U.S. law, before concluding that New York was clearly the more appropriate forum for the matter.

The decision serves as an important reminder for multinational organizations about the potential for jurisdiction disputes in the context of employment litigation. Disputes about jurisdiction are not uncommon, particularly if the governing law and jurisdiction is not clearly agreed in advance and in writing, especially in cases of employee transfers. In any event, litigants will be best served if they consider the prospect of jurisdictional challenges in appropriate cases.

by George Waggott and Darryl Hiscocks

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014