Cross-border companies need to be aware that even with an American employment contract, Canadian law may apply in favour of an employee. In Stanley v. Advertising Directory Solutions Inc.,1 the employee had more than one employer: the American parent and the Canadian subsidiary. Although the employment contract with the American parent stipulated at-will hiring (termination without notice), the court struck this out as being void and held that Canadian law of reasonable notice applied, because the employee was effectively working for the Canadian subsidiary. Importantly, the court focused its analysis on the  “actual employment relationship” rather than a letter setting out the terms of employment.

Canada does not allow “at-will” employment contracts.There are minimum statutory requirements, and “at-will” is below this minimum. Where an employer attempts to provide less notice than the statutory minimum, the statutory minimum notice period will not be imported into the employment contract.2 Instead, the provision is void and the employee becomes entitled to reasonable notice at common law.3 At common law, reasonable notice of termination is a presumption or implied term of the employment relationship, which the parties can depart from only if the agreement meets or exceeds the statutory minimum.4

THE STANLEY CASE

An American corporation (“Verizon”) owned a Vancouver-based company (Advertising Directory Solutions, formerly “Dominion”). Ms. Stanley was initially employed by Dominion, following which she  had an “at-will” employment contract with Verizon. Ms. Stanley returned to Dominion and worked in Canada. When Dominion merged with an affiliate, Ms. Stanley was terminated. She sued Dominion for damages for wrongful dismissal and additional benefits claims. The trial judge dismissed Ms. Stanley’s claim for damages for wrongful dismissal on the basis that her employer was Verizon. She appealed that decision. The British Columbia Court of Appeal granted her appeal and held that Dominion was Ms. Stanley’s employer and that she is entitled to damages for its failure to give reasonable notice of termination.

The law may recognize that an employee has more than one employer. In this case, the plaintiff was employed by both Verizon and Dominion. The court held that Dominion was Ms. Stanley’s employer, defined by the Employment Standards Act s. 1(a) as including a person “who has or had control or direction of an employee”. In that regard, Ms. Stanley reported to and was evaluated by Dominion’s president, who was her immediate superior.

In assessing whether reasonable notice applied here,  the court looked at the “actual employment relationship” and held that as an employee working in British Columbia, Canadian law applied and Ms. Stanley was entitled to notice of termination. The Court of Appeal determined that the trial judge had erred in analyzing  the notice issue by placing too much emphasis on a letter setting out the terms of employment.

The court left the length of reasonable notice, and calculation of damages to be determined by the trial judge.

PRACTICAL TIPS FOR EMPLOYERS

American law is significantly different from Canadian law with regards to employees’ rights upon termination South of the border employers can terminate employees “at-will”, without notice. In Canada, there is a statutory minimum, and unless there is a contractual limitation, the greater common law reasonable notice will apply.

If there is any possibility of “co-employment”, or that the identity of the employer could be in dispute, employers are wise to clearly set out in the employment agreement which entity employs the employee (i.e. “who” the employer is).

Nadia Zaman