In order to avoid exposure to unnecessary and expensive litigation and unforeseen liabilities, it’s important for employers to determine which jurisdiction’s rules apply when terminating an employee in a remote-working arrangement, according to several employment lawyers.
“Most employment relationships in Canada are governed by local provincial or territorial law, with the remaining governed by federal law,” says Lisa Stam, managing partner at SpringLaw Professional Corp. “That means the employment standards legislation that applies usually depends on where the worker lives, not necessarily where your business is based.”
There may also be significant exceptions based on how the employee is working in the remote jurisdiction and the exact nature of the employer’s presence there.
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“If the employer has no activity in the remote jurisdiction apart from the worker’s presence, the employment standards legislation of that jurisdiction may not apply,” says Vincent Hoss-Demarais, an employment lawyer at SpringLaw who advises on Quebec legal matters.
But “no activity” means precisely that. “Even as little activity as supplying a company computer and a cellphone to the remote employee may attract the laws of the jurisdiction where that employee resides,” he adds. “Other activities that could attract jurisdiction, even if the company has no other physical presence where the remote employee lives, include servicing clients in the remote jurisdiction or even doing something to develop clients or a presence there.”
He cites a case involving a Quebec woman who worked remotely for a U.S. company that had no physical presence in the province. When the employer terminated her, it refused to grant her the statutory benefits available under Quebec’s labour standards legislation, arguing the company had no ‘establishment’ in Quebec.
The employer succeeded, as both the Tribunal administratif du travail — a specialized tribunal that deals with labour and employment matters — and the Superior Court decided the employee’s home wasn’t an establishment.
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Assuming jurisdiction over a company with no physical presence in Quebec would inappropriately give extra-territorial effect to provincial labour standards legislation, the Superior Court reasoned.
“The court emphasized that, apart from the presence of the employee working in Quebec, the employer had no activities there,” notes Hoss-Demarais. “The employee used her own phone and computer, she was servicing only American clients and, although the company had hired her intending to develop business in Quebec and Canada, neither she nor the company had done anything to advance that goal.”
When the remote employee resides outside Canada, termination becomes even more complicated and a thorough review of the rules that attract jurisdiction in the remote location is required.
Stam advises employers to understand the jurisdiction in which the employee resides. While it’s helpful to have the remote employee’s contract state which laws apply, a court in the remote jurisdiction may still apply its local rules.
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It’s also important for employers to understand whether they owe termination benefits based on minimum standards legislation or common law reasonable notice.
When carrying out the termination, it should be done as if it was in person — in a clear and deliberate manner and without debate or justification of the decision. “Have a written termination letter and release ready for the termination meeting, confirm final pay and any accrued vacation benefits and issue the record of employment quickly.”
She also advises employers to immediately revoke access to company data and take back any company hardware.
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