Employment Relationships and Remote Work Arrangements in Search Minerals Inc. v Burlingame, 2024 NSLB 134

© Dan Wilband, 2024-12-08

A recent decision of the Nova Scotia Labour Board addresses common questions that employers should keep in mind. (Some related questions were recently addressed in the different context of a civil lawsuit for wrongful dismissal in the Nova Scotia court.) The issues in this case include:

1.      What employment standards statutes apply to an employee who is working remotely, in a different province from where the employer is located?

2.      Can someone become my employee even if I didn’t sign their employment contract?

The case, Search Minerals Inc. v Burlingame, 2024 NSLB 134, was an appeal of a Labour Standards Order in Nova Scotia. The Labour Standards Officer had ordered the employer, Search Minerals, to pay $174,000 to the Director of Labour Standards in trust. The employer appealed.

Search Minerals sought to have the Board rule on a summary basis that the Labour Standards Officer lacked jurisdiction to entertain the Claim because: (1) the complainant was not in fact its employee; and (2) the complainant had brought his complaint in the wrong province. In this preliminary decision, the employer was unsuccessful on both fronts.

Facts

The employee (“Mr. B”) is an experienced manager of mining and natural resource projects across Canada. He lives outside Halifax, Nova Scotia.

Search Minerals is a mineral exploration and development company incorporated in British Columbia, whose active mining rights and operations are in Newfoundland and Labrador.  Search Minerals has no connection to Nova Scotia at all, other than the fact that Mr. B lives there and performed most of his work from within that province.

Search Minerals first hired Mr. B in 2022 as an Independent Consultant, in the position of COO. Mr. B alleged that he was not being paid for some of his COO work, and he gave notice of his resignation as COO effective May 4, 2023.

Despite his allegations of non-payment, Search Minerals convinced Mr. B to consider direct employment with the company as its CEO. Its Board of Directors held meetings in London, England, where it decided that Mr. B would be offered the CEO position.

On May 5, 2023, the Board of Directors passed a resolution to appoint Mr. B as CEO. He was offered the role and given a draft employment agreement. At that time, he was also told that a significant shareholder would provide $500,000 of new operating capital to assist in his management of the company, including funding his own compensation. The next day, on May 6, 2023, Mr. B signed the employment agreement, although no one from Search Minerals ever signed it. The company quickly issued a press release announcing its new CEO and Mr. B began performing the duties of the job, mostly from his home in Nova Scotia.

Unfortunately, the shareholder funding didn’t come through. As a result, Mr. B did not receive any of his promised salary or signing bonus. Seven weeks after he started, he gave notice of resignation and alleged he was constructively dismissed. Under his employment agreement, Mr. B was owed 3 months' pay in lieu of notice. This, in addition to his unpaid signing bonus and his wages from the time he started as CEO, amounted to a total claim for $174,000, which the Labour Standards Officer awarded him.

The Issues on Appeal

Search Minerals’ appeal raises a few important issues for employers to keep in mind. Below are the key points.

1.      Was Mr. B an employee?

On appeal, Search Minerals argued that Mr. B had no protection under the Nova Scotia Labour Standards Code because he was not its employee. It said that Mr. B’s employment was at all times contingent upon new shareholder funding that simply did not materialize. Further, it said his appointment as CEO was not properly authorized, and no one at the company signed the employment agreement.

The Labour Board rejected these arguments.

First, the employment agreement said nothing about Mr. B’s employment being contingent upon its receipt of new shareholder funding. In fact, the agreement contained a clause expressly stating that the contract was the ‘entire agreement’ between the parties. Certainly, Mr. B had understood that without the shareholder funding he risked not being paid, but this did not mean that an employment relationship did not exist as agreed to in the contract.

Second, the Labour Board held it was not relevant that no one from Search Minerals had signed the contract. The Company had affirmed Mr. B’s appointment in other ways, including in public announcements and by allowing him to do the CEO work for seven weeks.

The Board also held Mr. B was entitled to rely on the “indoor management rule”, which means that parties dealing with a corporation are entitled to assume that corporation's internal policies have been followed. If the Board of Directors of Search Minerals had failed to follow some internal technical procedure, that didn’t matter for the purpose of Mr. B’s complaint.

Therefore, the Board was satisfied that a relationship of employment was formed, and that Mr. B performed work in that capacity. 

2.      Where was Mr. B employed?

Another question Search Minerals raised on appeal was where Mr. B was employed. It argued that its business had no connection to Nova Scotia whatsoever and that the Nova Scotia Labour Standards Code did not apply to Mr. B. (In fact, the employment agreement expressly stated that only the laws of British Columbia would apply to any dispute.)

On this point, the Labour Board applied a basic principle that dates back to the 1960s. This principle is that employees fall within the scope of a province’s labour and employment laws when they live and work in that province (in the absence of statutory language to the contrary).

For example, in Labour Relations Board of New Brunswick v. Eastern Bakeries Limited, [1961] SCR 72, the Supreme Court of Canada concluded that employees who were hired by a company in Moncton, New Brunswick, but who lived and worked in Nova Scotia or PEI, fell outside the scope of New Brunswick’s labour laws.

Similarly in this case, the Labour Board relied on its own decision in Brushett v. Sun Life Assurance Company of Canada, 2017 NSLB 154, where it concluded that the Nova Scotia Labour Standards Code applied to an employee who had been hired in Ontario for an Ontario employer, but who teleworked from Nova Scotia for the last two years of her employment. Other provincial labour boards have often come to similar conclusions.[1]

The Labour Board held that parties cannot contract out of the Labour Standards Code.  So long as there is a “sufficient connection” to Nova Scotia, the Director has a duty to consider a claim, even if the contract says another province’s laws will apply and if the company’s operations elsewhere.

Here, Search Minerals knew that Mr. B lived and worked from Nova Scotia. He made calls and presentations and attending meetings with people all over the world, all from his home outside Halifax. The Labour Board rejected the argument that the Nova Scotia Labour Standards Code does not apply to an employer simply because it is not located or otherwise operating in Nova Scotia.

Therefore, Search Minerals’ preliminary arguments failed. The Labour Board will now hear the matter the merits.

Key Takeaways

First, this case shows that employers must be sure to use clear, transparent and accountable decision-making processes when presenting offers of employment. Any contingencies must be clearly expressed in the employment agreement itself. Once a person starts performing work for a company, it is very likely that rights and obligations will arise for both parties, and so those should all be spelled out fully and unambiguously before the employee begins doing the work.

Second, employers should carefully consider the rights and responsibilities of remote workers who perform their duties outside the province where its business is located. So long as a ‘sufficient connection’ to a province exists, that province’s laws will probably apply. This means that if an employee lives and performs his or her work in a particular province, the employer is likely bound by that province’s labour and employment laws in relation to that employee. This is true even if the employer’s business and operations are entirely located somewhere else.

Given today’s largely mobile and remote-working professional workforce, employers should seek advice upon hiring remote workers who are located in a different province. They should also seek advice if an employee seeks to physically relocate to another jurisdiction during their employment.

[1] For example, see the Ontario cases of Shu Zhang v. IBM Canada Limited, 2019 CanLII 79641, where an employee who teleworked from British Columbia was not employed in Ontario, and John Karpowicz v. Valor Inc., 2016 CanLII 49203, where an employee who lived and worked from home in Michigan for an Ontario company was not employed in Ontario. See also the recent federal case of Mousseau Bailey v. Deputy Head (Department of Indigenous Services), 2024 FPSLREB 52, paras. 105-110.