The transfer of employees from foreign-based companies to Canadian-based affiliates is an increasingly common feature of the Canadian labour market. Many employers are familiar with the often complicated process of obtaining the necessary work permits for such employees at the beginning of the transfer. However, ending the relationship between the transferred employee and the Canadian-based employer can present its own challenges. Some of these challenges are illustrated by the British Columbia Supreme Court's recent decision in Nishina v. Azuma Foods (Canada) Co., Ltd.

Foreign Employee Fired

Ms. Nishina was a 43-year old Japanese citizen who began employment with Azuma Foods International in California in June 2001. In August 2005, she was transferred to the B.C.-based affiliate.

The original work permit prepared by the employer was extended, and was to expire in August 2008. In September 2007, the employer offered to assist Ms. Nishina with an application for a permanent resident card so that she could continue working beyond August 2008.

One month later, in October 2007, the employer terminated Ms. Nishina's employment, alleging cause. Ms. Nishina sued for wrongful dismissal. The court determined that the employer's allegations of cause for termination were unfounded, and turned to the issue of damages.

Immigration Status Supporting Lengthy Notice Period

Despite her short six years of service, only two of which were in Canada, the court awarded Ms. Nishina 12 months pay in lieu of notice. The fact that Ms. Nishina had a work permit which allowed her to work in Canada, but only for Azuma, justified this lengthy notice period, in the court's view.

The court equated Ms. Nishina's situation to that where an employee is dismissed in a "one employer town": "Though qualified and experienced, [the employee] faces a dearth of alternate employment prospects".

The fact that the work permit was not due to expire until August 2008, and that the employer had offered to assist Ms. Nishina with applying for a permanent resident card one month prior to the her termination, may also have impacted the length of the notice period.

Employer Acted in Bad Faith, But No Provable Damages for Mental Distress

Ms. Nishina also claimed bad faith/mental distress damages. The court concluded that the employer breached its obligation to act in good faith in the manner of dismissal: it ought to have known that the manner of dismissal was not only unduly insensitive, but also that Ms. Nishina's lack of immigration status would cause her great difficulties.

While this finding could support a claim for damages for mental distress, Ms. Nishina failed to prove that she had suffered quantifiable mental distress, or that it was caused by the manner of dismissal rather than the dismissal itself. As a result, this part of her claim was denied.

$20,000 in Punitive Damages Awarded

After finding that the Plaintiff was not entitled to damages for mental distress, the court went on add a further $20,000 in punitive damages on the basis that the employer had breached the "implied obligation of good faith and fair dealing in the manner of dismissal."

The punitive damage award bears a striking resemblance to the old practice of awarding a "notice extension" for bad faith conduct, an approach that the Supreme Court of Canada expressly abolished in 2008. It remains to be seen whether this approach to awarding punitive damages will be followed in the future.

Take Home Message for Employers Employing Foreign Workers

Although a B.C. decision, this case could be followed across the rest of the country. If so, employees who are in Canada on employer-sponsored work permits may be seen as particularly vulnerable in the eyes of a Canadian court. If the employee only has clearance to work in Canada based upon the position with the employer, a court may extend the common law notice period.

Employers seeking to employ foreign workers or transfer existing employees to Canadian affiliates may wish to takes steps to ensure that termination issues are addressed in writing prior to employment or the transfer.