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 need to clarify what jurisdiction will apply, especially if an employee is being terminated. For instance, some Canadian notice requirements may only apply in some parts of the world. It is also important to know which jurisdiction’s laws will apply to the terms of an employment contract because if it does not follow its standards, the contract could be invalidated.
This post will discuss what laws might apply if the employee works for an international company and has relocated to another company in a different country. Generally, the employment agreement terms will set out what laws apply, but there may be some situations where the local laws may apply instead. We will go through a case example, Mittra v. Royal Bank of Canada et al, 2024 ONSC 636, which discusses possible arguments for why the local laws might apply over the jurisdiction specified in the employment contract. This post will provide important takeaways for employees and employers seeking to understand their rights and obligations when the employer is an international company.
Jurisdiction Terms in the Employment Contract
Generally, the employment contract will specify what jurisdiction will apply 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 that they are not protected by the standards set out in Canadian law.
In most cases, the court will find that the employee and employer agreed to have their employment law issues dealt with under a certain jurisdiction, which is generally 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 often have different locations across the world, local laws will generally be set as the jurisdiction that applies to an 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 within the company, 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? These questions have been addressed in the recent Mittra case.
Court Upholds Jurisdiction in Employee Contract for Relocated Employee
In the Mittra case, 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, U.K. 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. He continued working in this role in Toronto until he was dismissed in 2019. The temporary assignment was meant to last about 3 years, after which he could repatriate to the U.K.
The employer claimed that the U.K. laws applied, as specified in the employment contract. As per U.K. laws, the employer had provided 3 months of notice for his termination.
After termination, the employee claimed that the Ontario laws should apply, as he worked in Toronto at the time of termination. He claimed 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 that the Ontario laws on reasonable notice of termination under the employment contract would not apply because the contract specified that it was subject to the laws of the U.K. unless Canadian laws, such as mandatory provisions of the Employment Standards Act, superseded these.
Under the new agreement, the employee could continue working in Toronto and transition to local employee status. By choosing to localize, the home country would no longer employ the employee, and the local employment laws would apply (i.e., the laws of the hiring country, Canada, in this case). However, the U.K. laws would apply if the employee did not participate in the localization process.
The court found that the parties agreed that the U.K. laws would apply. The U.K. laws were consistent with public policy; the parties had a genuine agreement for the U.K. laws to apply, and there were no other factors that would make it unfair for the U.K. laws to apply over the Ontario laws. There was also nothing to suggest that the U.K. laws were superseded by Canadian law, as contemplated in the contract.
The employee also claimed that 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 U.K. 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 that the parties contemplated that this would be a temporary assignment and he did not have permanent status as a Canadian employee. This was another reason the Canadian laws would not apply in this case.
Contact Haynes Law Firm in Toronto for Advice on Employment Contracts
Employers and employees should carefully consider the terms of the employment contract, including the jurisdiction that will apply if the employer is an international company. Our experienced employment law legal team at Haynes Law Firm in Toronto can assist you with disputes concerning employment contracts. For employees, our goal is to ensure that they understand their rights and receive maximum compensation. Haynes Law Firm also assists employers in avoiding liabilities that may arise. We are dedicated to finding the best resolution for you.
To book a consultation, please contact us online or by phone at 416-593-2731.
