Employees working remotely from out of province? Beware, the ESA may not apply

Following Brian Gottheil’s post of March 19, 2020, Ontario employers must take into account many considerations when laying off or terminating employees. One such consideration relates to employees that work remotely, and particularly, from outside the province. As the COVID-19 crisis continues to unfold, many workplaces are asking employees to work from home. What happens, though, if an employee works remotely from outside of Ontario? Would Ontario legislation apply to that employee?

Section 3 of Ontario’s Employment Standards Act (“ESA”), states that the ESA applies to an employee and his or her employer if:

(a) the employee’s work is to be performed in Ontario; or

(b) the employee’s work is to be performed in Ontario and outside Ontario but the work performed outside Ontario is a continuation of work performed in Ontario.

When working remotely and over the internet, this of course leaves many questions. Where is the work “performed” for an out of province employee with an Ontario employer? Is the work performed at the worker’s desk or on the servers in Ontario? What happens if the employee is engaged in meetings, again remotely, with fellow employees across the country and in Ontario? Where does the work take place then?

Given that the trend to work remotely, and particularly from out of province, is a relatively recent development, it makes sense that there are not many decisions on the issue. However, a 2019 Ontario Labour Relations Board (“Board”) decision does provide some insight.

In Shu Zhang v IBM Canada Limited, 2019 CanLII 79641 (ON LRB), the employee had been hired to work out of the employer’s Ontario office in Markham, Ontario, in July of 2009. By 2010, he had entered a work from home arrangement with his employer, and subsequently moved to British Columbia in 2015. While in British Columbia he reported to a manager in the United States, but worked with a team of colleagues in both the United States and Ontario. The software project that he worked on was headquartered in the employer’s Ottawa offices and laboratory. In 2017, he was requested by his employer to return to Ontario, but after refusing to do so, the employee was deemed to have resigned from his position. The employee then sought severance pay under the ESA.

The Board decided against the employee, and found that the ESA did not apply to him. In making that decision, the Board reviewed previous cases where there was a question of the ESA applying under Section 3. It noted that in those cases the employee did some work in Ontario, and the question was whether the employee’s work outside of Ontario was a continuation of the employee’s work in Ontario, pursuant to Section 3 (b) of the ESA. However, in Shu, the Board noted that the employee had worked from his home in British Columbia for the last two years of his employment and during that time did not physically attend workplaces in Ontario.

So despite the employee having served most of his employment in Ontario, the Board found that the ESA did not apply. The Board suggested that had the employee accepted the transfer back to Ontario, the decision may have been different. This line of reasoning suggests that the determination largely revolves around where the employee last performed work – inside or outside of Ontario.

Would the results have been different if the employee visited Ontario from time to time and then stopped? From a layoff or termination perspective, would it matter that an employee had agreed in his employment contract to accept notice period amounts pursuant to the ESA upon the termination of the employment contract? These questions remain to be discussed by future boards and courts.

As the effects of the COVID-19 pandemic spread and terminations and layoffs continue to grow, suffice to say that employers should be careful in assuming that the ESA’s termination and layoff provisions apply to employees who work from out of the province.

TAKE AWAYS

• Exercise caution in terminating or laying off employees who work remotely from out of the province.
• Keep in mind that the ESA may not apply to out of province employees when drafting employment agreements.