Case In Point

Ontario Court Declines to Consider Wrongful Dismissal Action Where Ontario Resident Worked in Michigan

Case In Point

Ontario Court Declines to Consider Wrongful Dismissal Action Where Ontario Resident Worked in Michigan

Date: September 7, 2017

In its recent decision in Koutros v Persico USA Inc., the Ontario Superior Court of Justice set aside the service of a Statement of Claim and stayed an action on the basis that Michigan (not Ontario) was the appropriate jurisdiction in which to dispute the termination of an employment contract.

The plaintiff lived near Windsor and worked for Toolplas, a company in Windsor. The owner of Toolplas had a related company, Auto-Plas, which operated out of Michigan.

In April 2013, the plaintiff signed an employment contract with Auto-Plas and began commuting daily to Michigan. In September of 2013 Auto-Plas was bought out by the defendant, which had no facilities in Canada. That same month, the plaintiff entered into an employment contract with the defendant. All of the negotiations regarding the employment contract were conducted in Michigan. The employment contract contained an “at will” termination clause, providing that the plaintiff’s employment could be terminated at any time, with or without notice. In September of 2014 the plaintiff received a call advising him that his employment was terminated.

The plaintiff commenced an action in Ontario in March of 2015. The plaintiff also served the Ontario Statement of Claim in Michigan, without leave. The defendant brought a motion to dismiss and/or stay the action, or, in the alternative, to have the Court set aside the service of the Statement of Claim, both on the basis that pursuant to Rule 17.06 of the Ontario Rules of Civil Procedure the Court should decline jurisdiction over the matter as there was no “real and substantial connection” with Ontario.

The Court agreed and set aside the service of the Statement of Claim and stayed the action.

In doing so, the Court considered the factors for determining whether a “real and substantial connection” exists as set out in the Supreme Court of Canada’s decision in Club Resorts Ltd. v. Van Breda. In that case, the Supreme Court set out the following factors which presumptively connect a matter to a jurisdiction and that, prima facie, entitle a court to assume jurisdiction over a dispute:

  • the defendant is domiciled or resident in the province;
  • the defendant carries on business in the province;
  • the tort was committed in the province; and
  • a contract connected with the dispute was made in the province.

Applying the presumptive factors to the case at hand the Court concluded there was a failure of a real and substantial connection between the action and Ontario. The Court specifically noted that the employment contract was made in Michigan and it contained no provision as to the applicable law. The Court held that if the employment contract was breached, it was simply breached outside Ontario when the defendant determined the plaintiff was to be terminated and communicated that message. Importantly, the Court also noted that the fact the plaintiff worked from home or on weekends/holidays and travelled to plants in Ontario did not mean that his employer was carrying on business in Ontario.

Notwithstanding its finding with regard to the real and substantial connection, the Court went on to consider whether Ontario or Michigan was the most convenient forum for the litigation (in the event it should be found in error in declining jurisdiction over the action). The Court noted that the essence of the analysis of whether Ontario or Michigan is the most convenient forum (the forum non conveniens analysis) is contextual and is aimed at achieving fairness and efficiency in the litigation. The Court held that in the case at hand the “factors overwhelmingly dictate that the State of Michigan was the most convenient forum” and that the plaintiff, who lived close to the border, would not be inconvenienced by attending trial in Michigan.

The Court’s ruling is a welcome decision for employers who do not operate in Ontario, but are nonetheless faced with an action brought in Ontario from a former employee. While a court’s analysis in any given case will be highly fact dependent, the Court’s decision in this case shows that when there is little-to-no connection between an action and Ontario, Ontario courts are willing to decline jurisdiction. To minimize the risk that an Ontario court will assume jurisdiction over a matter, employers who do not operate in Ontario, but who are (for whatever reason) hiring employees who live Ontario, should ensure that any employment contract is negotiated and entered into in the jurisdiction where they operate and that the contract specifies the law of that jurisdiction as the governing law and not the law of Ontario.