Q&A is a recurring series on the Vey Willetts LLP blog. The aim is to provide quick answers to questions we commonly encounter in our day-to-day practice of employment law. In this edition, we focus on how employment law applies to foreign embassies and consulates that engage Canadian citizens and permanent residents to work at their diplomatic missions in Canada (“locally-engaged staff”).
Q. Does Canadian employment law apply to locally-engaged staff?
A. Embassies and consulates operating in Canada are extensions of their respective countries. In accordance with the State Immunity Act (“SIA”), foreign states are considered sovereign and are for most purposes exempt from Canadian law. There are, however, limited exceptions to this general rule. The SIA allows for the application of Canadian law to the “commercial activity” that foreign states (or their diplomatic missions) undertake in Canada.
Matters of employment for locally-engaged staff may fall within the commercial activity exemption of the SIA, depending on the circumstances. For instance, in 1992, the Supreme Court of Canada ruled that “…a bare contract for employment services at the base is, in and of itself, generally a commercial activity…[g]enerally speaking, Canadian employees of foreign sovereign states are entitled to turn to our courts for enforcement of their employment contracts.”
Q. In what situations will Canadian employment law apply?
A. The commercial activity exemption has been narrowly applied. The more transactional and business-related a situation is, the more likely Canadian courts will be to apply domestic law. Thus, if an employee of a diplomatic mission is simply not paid agreed wages, or an embassy fails to provide any severance post-termination of employment (provided there are no allegations of serious misconduct), Canadian employment law may apply.
By contrast, if a case requires Canadian courts to investigate (or cast judgment upon) a sovereign state’s operational decisions, state immunity is likely to govern. It is for this reason that Canadian adjudicators have generally refused to take jurisdiction, and apply Canadian law, to situations involving allegations of workplace discrimination or the validity of a dismissal for cause.
Q. Should embassies in Canada follow local employment laws (even if they don’t have to)?
A. Subject to the exemptions of the SIA, foreign states are free to decide whether to apply Canadian employment law to their locally-engaged staff. However, it has been our experience that most sovereign states with diplomatic missions in Ottawa try to follow local employment rules for Canadian citizens and permanent residents in their employ.
It is also worth noting the position taken by the Government of Canada on this question. Global Affairs Canada states that it “expects that all employer/employee relationships entered into between a Mission and its locally engaged employees should be entered into under applicable Canadian Federal and Provincial labour laws”.
Q. Are locally-engaged staff required to pay Canadian taxes on their employment income?
A. Locally-engaged staff are required to pay income tax on their employment earnings. Some foreign governments voluntarily make Canadian tax deductions and remittances on behalf of their locally-engaged workers but there is no legal requirement for them to do so. At the end of the day, the onus is on locally-engaged employees to ensure they properly report and pay applicable taxes.
Q. Can embassies register to provide Canada Pension Plan (“CPP”) and Employment Insurance (“EI”) benefits for locally-engaged staff?
A. By default, locally-engaged staff are ineligible to participate in CPP or EI. However, it is possible for diplomatic missions to enter into an agreement with the Government of Canada to allow worker participation in CPP and EI benefit programs. To learn more about how to register for such benefits, see Circular Note No. XDC-0605 (published by Global Affairs Canada).
Vey Willetts LLP is an Ottawa-based employment and labour law boutique that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in the Ottawa area and across Ontario. To speak with an employment lawyer or labour lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca.