Where an employer hires an employee who resides in a different jurisdiction, the jurisdiction in which an employment dispute is litigated depends largely on where the employer carries on business.

In Koutros v. Persico USA, 2017 ONSC 3001, the employer, Persico USA Inc. (“Persico”) terminated the employment of Savvas Koutros, who was a General Manager of its Michigan, U.S. facility. Mr. Koutros resided in Windsor, Ontario and commuted to Michigan for work. Mr. Koutros filed a wrongful dismissal action in Ontario. Persico brought a motion to dismiss the claim on the basis that Michigan was the appropriate jurisdiction.

The test to determine whether an Ontario court ought to hear a case is two-fold:

  1. Is there a real and substantial connection between Ontario and the action such that the court has jurisdiction to hear the matter?
  2. If the court has jurisdiction, should it exercise its discretion not to hear the matter because there is a more convenient forum than Ontario?

In determining whether there is a real and substantial connection, an Ontario court may assume jurisdiction over the dispute if the employer carries on business in Ontario.

In this case, the Court held that there was no real and substantial connection to Ontario because Persico did not carry on business in Ontario.  Specifically, the Court found that:

  1. The employment contract contained an “employment at will” provision, which is a U.S. employment concept.
  2. The contract was signed at the Michigan facility.
  3. Koutros was paid in U.S. funds, with U.S. deductions
  4. Koutros received U.S. equipment including a U.S. company credit card and a U.S. cell phone.

The Court placed little weight on where Mr. Koutros was when he learned about his dismissal or the fact that he often worked at home. Neither are indicators that Persico carried on business in Ontario. Similarly, the Court held that Mr. Koutros’ visits of Ontario plants was not evidence that Persico had ever carried on business in Ontario. None of the visits resulted into the entering of a single joint venture agreement.

Given that the Court found that there was no real and substantial connection between Ontario and the action, it was not necessary for the Court to determine whether Ontario or Michigan was the most convenient forum for the litigation.

The Court’s ruling is a favourable decision for employers who do not carry on business in Ontario, but are forced to defend an action commenced in Ontario by a former employee. To minimize the risk that an Ontario court will assume jurisdiction over a matter, employers carrying on business outside of Ontario should take care not to take any steps which can be interpreted that it is carrying on a business in Ontario. This includes ensuring that the terms of the employment contract comply with the employer’s home jurisdiction. It is also recommended that the contract specifies the law of that jurisdiction (as opposed to Ontario) as the governing law.

It is also worth noting that in this case, Persico did not attorn to the jurisdiction of Ontario by filing a statement of defence. Where an employer believes that Ontario does not have jurisdiction to hear the dispute, it must bring a motion for dismissal before delivering a statement of defence.

Written in collaboration with Joseph Palmieri, articling student.