1. Legal Disputes with Candidates

THE RISK:

When it comes to legal disputes, it’s all about location. Where you’re sued is critical to determine which rules apply, especially when the employee is working in a different province or country than their employer. If your candidate contract doesn’t specify an appropriate jurisdiction, it’s up to the courts to decide which laws govern the employment relationship and where disputes should be settled. A variety of factors might be considered, including where the contract was signed, the location of key witnesses, where the bulk of the evidence will come from, and more; this can get complicated in remote work cases. For example, in Ontario, “contracts signed virtually and sent via email will be considered to have been signed in the jurisdiction where the email was received.”

Without clear parameters, you may find yourself litigating in unexpected jurisdictions with unfamiliar regulations, leading to an unpredictable legal environment, inconsistencies in rulings, and difficulties in enforcement. Plus, your insurance coverage won’t always cover the costs (but more on that later). Even worse? A protracted and complex court case won’t just drain your resources, it’ll tarnish your reputation for effective dispute resolution and drive any potential clients away.

THE SOLUTION:

It might not always be possible for you to determine the litigation jurisdiction, but try to stay tied to the legal system of your own domicile where possible. Consider adding a jurisdiction clause into your contracts with clients and candidates to specify where disputes will be resolved. Ideally, this should be the province where your business is based.

A jurisdiction clause won’t prevent lawsuits altogether, but it will deter them, since candidates can only sue you from the designated jurisdiction. That’s why it’s crucial to include the province. Opting for a broader jurisdiction, like Canada, opens the door to lawsuits from across the country, which will require your physical presence for resolution. Plus, employment standards vary by province. Handling matters on your home turf ensures familiarity with the legal landscape and allows you to tap into established networks to handle your case.

Enlist a lawyer to draft the contract language; a well-drafted clause will eliminate any ambiguity, ensure a smooth resolution process, and avoid costly defence fees. However, if you’re unable to secure jurisdiction in your home province, look into the local representation where litigation may occur and set up contacts there. To learn more about basic considerations for jurisdiction clauses, click here.

RELATED: 3 Management Risks Faced By Staffing Firms

2. Foreign Employment Laws

THE RISK:

Navigating different regulatory environments in Canada is tricky enough, but working globally adds a whole new layer of complexity. Every country has its own unique set of labour, tax, and employment laws, which can vary significantly across jurisdictions. Regional labour standards, like European labour law or provincial or state regulations, may also be taken into consideration. Plus, regulatory landscapes are constantly evolving, which can make it hard to stay compliant.

Overlooking or neglecting the nuances in potential candidate locations poses risks to employee relations and your reputation. Firstly, your employment contract might inadvertently infringe upon employment rights. Additionally, contracts that don’t align with local laws may be unenforceable or subject to dispute. Some countries are also more favourable to partner with than others; without proper due diligence, your company could enter a territory that has legal repercussions or government sanctions that impact payrolling and engagement.

Ultimately, failure to adhere to these crucial frameworks can strain employee relations, trigger lawsuits, and incur compliance penalties. Legal issues could also keep you from meeting contractual obligations with key partners, leading to client dissatisfaction and negatively affecting your brand appeal to both clients and potential employees.

THE SOLUTION:

It’s critical for you to understand the employment laws of the domicile where the candidate is located before you engage with them. Focus on:

• Compliance: What are your obligations as an employer? Are there legal implications that that could affect you as the staffing agency? Could the laws of the candidate’s jurisdiction be enforced in Canada? Familiarize yourself with the employment landscape, including basic employee rights, minimum wage, working hours, leave policies, benefits, payroll, termination procedures, visa requirements, work permits, employee classification, and more. Stay informed about updates and changes to regulations as they arise.
• Transparency: Ensure your client knows where the candidate is located. Tailor contracts according to the requirements of each jurisdiction and confirm that all involved parties have a thorough understanding of the terms.
• Expertise: Engage employment consultants or lawyers who specialize in that particular jurisdiction to advise you. Alternatively, you can consult with local experts, like umbrella companies, to act as an intermediary between you and the Independent Contractor. Umbrella companies can offer valuable insights on legal requirements or essential administrative tasks, like payroll, taxes, and employment contracts. But they can also come with added risk or extra costs, so be sure to do your research before beginning a partnership.

For more guidance, here are some resources on international employment laws:

• Clyde & Co’s International Guide to Employment Law Across 28 Countries, including key jurisdictions in Asia, Europe, the Middle East, North Africa, North America, and South America.
• Deloitte’s International Employment Law Guide, which outlines employment rules on hiring and dismissal in 64 countries, including laws regarding remote work, on-, and offboarding. This guide does not have a specific industry focus or include regional, state, or provincial legislations.

RELATED: Navigating the Global Talent Pool: Key Risks for Canadian Staffing Firms

3. Coverage Limitations

THE RISK:

Cross-border hiring could also cause complications for both you and your candidate’s insurance coverage:

• Coverage Territory: Many business owners assume that their insurance will respond uniformly to lawsuits across the world. But certain policies, like Employment Practices Liability (EPL) Insurance, may have a territory clause that restricts coverage to lawsuits filed in specific countries, most commonly to Canada or the U.S. If you’re sued anywhere else, your policy won’t respond—and you’ll have to cover the costs out-of-pocket.
• Validity: Keep in mind: even if your insurance from your home country covers you in a foreign jurisdiction, it may not be officially recognized where the candidate is based. Some countries may even require your staffing agency to secure local insurance coverage to comply with regulatory standards or validate the policy.
• Crossover: Similarly, your IC might need their own professional insurance to work for your client, but coverage obtained in a foreign jurisdiction may not align with your agency’s requirements or local industry standards. Policies issued in a foreign country are also often in a local currency, so your IC might not have enough coverage to account for fluctuations in exchange rates.

THE SOLUTION:

• Review all of your insurance policies and confirm your coverage territory. Check if the policies provide worldwide coverage (i.e. if the policy will defend you in the foreign jurisdiction where a legal action is brought against you) and make sure it extends to contractor or foreign worker-related activities.
• Not all policies with “worldwide coverage” are created equal; clarify whether your coverage is jurisdiction-specific or “true worldwide.” “Worldwide coverage” may defend you globally, but typically requires the investigation to take place in Canada. In contrast, “true worldwide coverage” costs more, but offers protection anywhere in the world, giving you greater flexibility in terms of hiring and international expansion.
• If you don’t have it already, consider Employment Practices Liability Insurance to protect your business from claims made against you by employees, such as wrongful termination, discrimination, harassment, and more. Typically, EPL Insurance only applies to your own internal employees, not Independent Contractors or freelancers; however, PROLINK has a unique advantage for Staffing Firms, which offers up to $250,000 in true worldwide EPL coverage for temporary employees or anyone working on assignment—including those sourced from a foreign jurisdiction.
• To mitigate the risk of EPL claims, candidate contracts should limit liability for workplace injuries and employment-related practices; consult legal counsel for expert guidance on this.
• Ensure compliance with local insurance requirements before engaging with a candidate and obtain coverage for that specific country through the appropriate channels if needed.
• Both you and your client should take into account any applicable exchange rates when converting the limits of liability. For example, if your client’s contract requires a foreign worker to maintain Professional Liability Insurance with a limit of $2 million CAD, make sure that the coverage meets or exceeds this amount in the contractor’s local currency. Additionally, confirm that the IC’s insurance will respond to a claim or legal action brought against them in Canada.
• Work with a licensed insurance broker to get a sense of your insurance needs, read between the lines, and uncover any hidden gaps in your policy.

RELATED: Employment Practices Liability Insurance: What is it, What’s Covered, and What’s Not?

Need guidance?

Navigating jurisdictions, legal intricacies, and insurance coverages isn’t just about ensuring compliance. It’s about mitigating disputes and safeguarding your reputation and financial health. It’s about demonstrating your commitment to ethical business practices. And it’s a strategic necessity for anyone looking to thrive in international markets.

Whether you’re going global or just dabbling here and there, you’ll need a nuanced understanding of the employment landscape in every jurisdiction where you operate. For more guidance, seek out legal counsel. A lawyer can help you make sense of foreign labour laws, tailor contracts to your needs, and make sure your practices are compliant with any overarching regulations.

To manage your risks, connect with PROLINK. With over 40 years of experience and over a decade of serving Staffing & Recruitment Firms, we’ve seen it all—and we won’t miss these details. Our dedicated team will share what steps others in your industry are taking and help you:

• Identify exposures and build a robust insurance framework for international operations;
• Stay on top of emerging threats and trends that could affect your firm;
• Adopt a proactive approach to risk management to control your costs long-term;
• Conduct a full analysis of your existing policies to detect any coverage gaps; and
• Secure specialized solutions that align with your strategic objectives and budget.

To learn more about your exposures and how you can protect yourself, connect with PROLINK today!