Forum Shopping Within Canada: What Province Can I Sue You In?
Employers with operations across Canada are often confronted with questions about which provincial laws will apply to claims by or against former employees. In many cases, the employer will have operations in one province, with the employee working in one more or locations in other parts of Canada. A recent decision from the Supreme Court of British Columbia clarifies the jurisdictional issues arising in these situations, and the ruling highlights the complexities which can arise even when there is a document or contract clause which appears to have addressed the point.
The decision in Krahn Engineering Ltd. v Bit, 2024 BCSC 1069, involved a lawsuit filed by Krahn Engineering against its former president and CEO, Gino Bit, following his dismissal in late 2023. The alleged that Bit violated his fiduciary and contractual duties to the company during the course of his employment. A significant point of contention was whether the British Columbia court had jurisdiction over Bit and the claim against him.
Bit’s position was that the British Columbia courts did not have jurisdiction. This was despite the fact that the company was headquartered in Abbotsford, B.C. In support of his position, Bit relied upon a forum selection clause in his employment agreement. In particular, he referred to a “Letter of Intent” which he signed in 2014 when his employment began. This clause specified that the agreement would be governed by Alberta law and that disputes could be brought in Alberta courts.
The clause which the company and Bit has provided as follows: "This Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable in that Province and shall be treated, in all respects, as an Albertan contract. Each of the Parties agrees that any action or proceeding related to this Agreement or the transactions contemplated herein may (but need not) be brought in any court of competent jurisdiction in the Province of Alberta, and for that purpose hereby attorns and submits to the jurisdiction of such Alberta court."
Despite the contract wording and Bit’s related argument, the Court found significant corporate and operational ties to British Columbia, which justified the B.C. Court’s jurisdiction over the case. The decision and the related analysis focused on the substantial connection between the Province of B.C. and the facts of the case, notably that significant company activities and decision-making processes occurred within British Columbia.
The core issue revolved around the forum selection clause. The Court interpreted this clause as non-exclusive, meaning it did not obligate the parties to resolve disputes solely in Alberta. This interpretation allowed the British Columbia court to retain jurisdiction. The Court’s decision was based on these key factors:
1. Substantial Connection: The Court emphasized the “real and substantial connection” between British Columbia and the facts of the case. The significant operational activities within the province supported the Court’s jurisdiction. This included a review of where the work was performed, where the relevant business is located, and the place where the disputed conduct was alleged to have occurred.
2. Non-Exclusive Clause: The forum selection clause was determined to be non-exclusive, allowing for jurisdiction in British Columbia despite the mention of Alberta in the employment agreement. In this regard, note the wording which says that proceeding “may (but need not be)” brought in Alberta.” This is consistent with a permissive clause (meaning that it would allow an Alberta case, but did not mandate that jurisdiction to the exclusion of all others.)
3. Insufficient Grounds for Transfer: Bit’s arguments for transferring the case to Alberta, based on convenience and legal tradition, did not meet the threshold required to override the presumed jurisdiction of British Columbia.
Implications for Employers
This ruling carries important implications for employers, particularly regarding the drafting and enforcement of employment agreements and forum selection clauses. Clarity in contract terms is essential - employers should ensure that forum selection clauses in employment agreements are clear and explicit. If exclusivity is intended, this should be unambiguously stated to avoid jurisdictional disputes. Understanding the implications of jurisdictional clauses and the real and substantial connection test is also crucial. Employers should consider the operational and decision-making locations of their business when drafting such clauses. Consulting with legal professionals to draft and review employment agreements can help prevent future jurisdictional challenges and ensure that the agreements align with the company's strategic and operational realities.