Increasingly, it seems, Canadian employees are reporting to U.S. companies while continuing to live in Canada. There are many reasons for structuring the employment relationship in this way and, when the employer and employee are working together, the it works. As is often the case, the rubber hits the road when the relationship sours or ends.
That's what happened in Hilton v. K & S Services Inc., a recent case out of the Ontario Court of Appeal.
Mr. Hilton lived in the Windsor area, and worked for Ford Motor Company for 12 years. K & S Services Inc. is a US company having its head office in Michigan. The Company had plants in a number of states as well as in Oakville, Ontario "through a wholly owned subsidiary, MCS Facility Support Ltd."
The Company approached Mr. Hilton about employment and Mr. Hilton made it clear that he had to remain in the Windsor-Detroit area because of certain parental responsibilities. The Company said that this could be accommodated. Mr. Hilton accepted the offer of employment as Vice-President in Charge of Operations and quit his job with Ford. The offer was reduced to writing and, according to the court:
The court discussed the manner in which the employment operated and I set it out in detail as it is relevant to the point I will make shortly:
It seems that Mr. Hilton was terminated. According to the court, he was provided with a Record of Employment and received Employment Insurance benefits from the Government of Canada. He sued the company in Ontario.
The company brought a motion to have the action stayed on the basis that the matters in dispute had no real and substantial connection to Ontario, and that the employment relationship was governed by the laws of Michigan. It argued that the Ontario courts were without jurisdiction over the action and, in any event, that Michigan was the more convenient forum.
The motion's judge disagreed with the Company. The Court of Appeal also disagreed with the Company and in so doing provides a number of important lessons to employers when hiring employees, generally, but specifically where the reporting relationship is somewhat unusual.
The Court of Appeal considered the one-page written employment contract and noted that it did not express the governing law nor that the contract represented the entire agreement of the parties. As a result, which law governed the relationship was "a live issue" that would have to be decided by the trial judge.
The Court of Appeal also agreed with the motion's judge to the effect that there were many factors that point to a real and substantial connection to Ontario and that Mr. Hilton would lose a juridical advantage if the action was tried in Michigan instead of Ontario.
The point I want to make is that the opportunity to spell out, in writing, the terms of the employment relationship should not be taken lightly. I've seen some pretty interesting contracts over the years, including hieroglyphs scrawled on the back of a napkin, water mark from the bottom of a glass and all. At the time of hire, I'm sure it all made sense. Some employers are worried about "scaring the employee away" with a written agreement that sets out, clearly, the terms of the relationship including a termination clause. They believe that it starts the relationship off on a sour note and decide to err on the side of informality. I get it.
However, when the relationship sours or ends, that is another matter. Ambiguity in the contract will generally (not always) be decided in the employees' favour. Where the contract is silent, the court will imply certain terms into the contract. The best time for setting out the agreement is at the front-end when goodwill is at its highest.
It doesn't take much time to put one of these agreements or contracts together, but, when done properly, it is well worth the money. Don't assume that anything is forever. Spend a few dollars at the front-end and try to save yourself some aggravation at the back-end. Easy for me to say, I suppose, but this is one proactive way to not only bring clarity to the relationship (not a bad thing, in my view) but also address those things that are important to the parties.
That's what happened in Hilton v. K & S Services Inc., a recent case out of the Ontario Court of Appeal.
Mr. Hilton lived in the Windsor area, and worked for Ford Motor Company for 12 years. K & S Services Inc. is a US company having its head office in Michigan. The Company had plants in a number of states as well as in Oakville, Ontario "through a wholly owned subsidiary, MCS Facility Support Ltd."
The Company approached Mr. Hilton about employment and Mr. Hilton made it clear that he had to remain in the Windsor-Detroit area because of certain parental responsibilities. The Company said that this could be accommodated. Mr. Hilton accepted the offer of employment as Vice-President in Charge of Operations and quit his job with Ford. The offer was reduced to writing and, according to the court:
".... stated that the offer would serve as a 2 and a half year contract and, thereafter, employment would be the “same” as all other K & S employees. It then stated that K & S is an “at will” employer and, therefore, either party could sever the employment relationship at any time, with or without cause."
The court discussed the manner in which the employment operated and I set it out in detail as it is relevant to the point I will make shortly:
"He became a commuter employee, travelling from his home in Tecumseh. He often worked from home or from the K & S office in Oakville. He was treated as a Canadian employee working in Michigan. He was placed on K & S’s Canadian payroll and treated similarly to other Canadian commuter employees who were on the Canadian payroll. His pay cheque was issued from the Bank of Montreal in Toronto. He was paid in Canadian dollars through K & S’s subsidiary in Oakville. Canada Pension Plan and Employment Insurance deductions were taken from his pay and remitted to the Canadian government on his behalf. He was given a Canadian blackberry with a Canadian phone number. All health and insurance benefits were from Canadian providers."
It seems that Mr. Hilton was terminated. According to the court, he was provided with a Record of Employment and received Employment Insurance benefits from the Government of Canada. He sued the company in Ontario.
The company brought a motion to have the action stayed on the basis that the matters in dispute had no real and substantial connection to Ontario, and that the employment relationship was governed by the laws of Michigan. It argued that the Ontario courts were without jurisdiction over the action and, in any event, that Michigan was the more convenient forum.
The motion's judge disagreed with the Company. The Court of Appeal also disagreed with the Company and in so doing provides a number of important lessons to employers when hiring employees, generally, but specifically where the reporting relationship is somewhat unusual.
The Court of Appeal considered the one-page written employment contract and noted that it did not express the governing law nor that the contract represented the entire agreement of the parties. As a result, which law governed the relationship was "a live issue" that would have to be decided by the trial judge.
The Court of Appeal also agreed with the motion's judge to the effect that there were many factors that point to a real and substantial connection to Ontario and that Mr. Hilton would lose a juridical advantage if the action was tried in Michigan instead of Ontario.
The point I want to make is that the opportunity to spell out, in writing, the terms of the employment relationship should not be taken lightly. I've seen some pretty interesting contracts over the years, including hieroglyphs scrawled on the back of a napkin, water mark from the bottom of a glass and all. At the time of hire, I'm sure it all made sense. Some employers are worried about "scaring the employee away" with a written agreement that sets out, clearly, the terms of the relationship including a termination clause. They believe that it starts the relationship off on a sour note and decide to err on the side of informality. I get it.
However, when the relationship sours or ends, that is another matter. Ambiguity in the contract will generally (not always) be decided in the employees' favour. Where the contract is silent, the court will imply certain terms into the contract. The best time for setting out the agreement is at the front-end when goodwill is at its highest.
It doesn't take much time to put one of these agreements or contracts together, but, when done properly, it is well worth the money. Don't assume that anything is forever. Spend a few dollars at the front-end and try to save yourself some aggravation at the back-end. Easy for me to say, I suppose, but this is one proactive way to not only bring clarity to the relationship (not a bad thing, in my view) but also address those things that are important to the parties.
