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Wrongful dismissal lawsuit in Ontario stayed; arbitration clause required dispute to be dealt with in Ohio

Jurisdiction: - Ontario - United States

In Ross v. Christian & Timbers Inc., 2002 CanLII 49619, the Ontario Superior Court of Justice ruled that a wrongful dismissal lawsuit in Ontario should be stayed in light of an arbitration clause in the former employee's employment contract that required disputes to be dealt with by an arbitration in Ohio and in accordance with Ohio law.

In reaching this decision, the court stated as follows: 

25 Parties often specify the law that will govern their contract. There is nothing contrary to Ontario law in allowing parties to do so in an employment contract such as this, just as they do in commercial settings. See, for example, Ruggeberg v. Bancomer S.A., [1998] O.J. No. 538 (Ont. Gen. Div.), aff'd (1999), 1999 CanLII 18677 (ON CA), 122 O.A.C. 310 (Ont. C.A.). In my view, this is not a case where a vulnerable employee is being unfairly treated by the inclusion of an arbitration clause with a choice of foreign law in order to undermine his rights. Mr. Ross is trained as a lawyer, and he had independent legal advice when he signed the offer letter, and he bargained over its terms. Therefore, I leave for another day whether such clauses may sometimes be unenforceable.

26 It appears to me that the plaintiff wishes to give Machtinger a wider application than it is meant to have. In that case, the Supreme Court of Canada held only that the termination provision of the employment contract was null and void, but not the entire contract (at 506). The reason was s. 3 of the Act, which prohibits any contracting out of the employment standards in the Act. However, the Court also held that parties can contract out of the common law rule of termination on reasonable notice if the contract clearly specifies some other period of notice, expressly or by implication (at 503). Here, the January agreement contains termination provisions that must be interpreted.

27 The plaintiff fears that the arbitrator will give effect to the Ohio law of employment at will, and will not give consideration to the illegality of such termination with respect to employment in Ontario. I have no evidence about Ohio conflicts rules with respect to public policy, so I do not know how Ontario law will be treated. However, the parties have agreed that the arbitrator shall determine their disputes in this employment relationship in accordance with Ohio law. In doing so, he or she will also have to interpret their agreement. Thus, it is for the arbitrator to determine the effect of the Ontario law under Ohio law, as well as the appropriate remedy between these parties in light of their agreement.

28 The Arbitration Act makes it clear that the courts are to defer to arbitration where the parties have chosen to arbitrate their disputes, except in very limited circumstances. In my view, the arbitration agreement is not invalid because it chooses Ohio law to govern an employment dispute, and, therefore, a stay of this action must be ordered. However, if Mr. Ross's rights under the Ontario legislation are not respected in the arbitration proceedings, he may have further remedies to pursue in Ontario in order to enforce the minimum standards to which he is entitled.

29 Therefore, I order that this action be stayed until the disposition of the arbitration in Ohio. If the parties can not agree with respect to costs, they may make written submissions within 21 days of the release of this decision.