Move to Mexico gets work-at-home exec fired (Legal View)

Employee felt he could move wherever he wanted, didn’t initially tell employer he’d left
By Jeffrey R. Smith
|Canadian HR Reporter|Last Updated: 06/05/2012

A British Columbia company was entitled to dismiss a work-at-home employee when he moved from Alberta to Mexico without the company’s consent, the B.C. Supreme Court has ruled.

Dean Ernst was hired by Destiny Software Productions in March 2007 to be vice-president of operations. Destiny developed software that allowed for the secure digital distribution and delivery of recorded music on the Internet and Ernst was hired to market this to major recording labels.

Ernst also trained users on the system, developed product features, created advertising content and travelled to trade shows.

Worked from home in another province

Though Destiny was based in Vancouver, it allowed Ernst to work from his home in Chestermere, Alta., so he wouldn’t have to uproot his family. Ernst said he “might be willing” to move to Vancouver eventually.

When the employment agreement was settled, Destiny agreed Ernst could work from home on a temporary basis but it would have the right to demand he move to Vancouver at some point. Ernst interpreted this to mean he could work from home, wherever that may be.

In December 2007, Ernst and his family went to Cabo San Lucas, Mexico, to take possession of a house they had bought one year earlier for their retirement. Destiny’s CEO wasn’t happy with the timing of Ernst’s vacation and some sick days he had taken, but approved them.

In March 2008, Ernst said he was taking a vacation to visit his sick father in Utah, but then continued to Mexico without Destiny’s knowledge. He also went to Mexico with his family on Victoria Day weekend and called in sick on the following Tuesday while he was still in Mexico. Destiny was unaware he wasn’t in Canada.

In July 2008, Ernst and his family planned on moving into his mother’s house so they could care for her. However, after they put their own house up for sale, family problems changed their plans. They eventually decided to move to their house in Mexico.

Ernst went to Mexico to see if he could work from there. He hooked up the Internet, redirected his phone so it appeared as an Alberta number and consulted an accountant about income tax issues.

Employer not happy with move

On Aug. 8, 2008, Ernst called Destiny’s CEO to inform him of the move to Mexico. He told the CEO there would be no difference in how he operated and it would be business as usual. The CEO was angry and felt betrayed Ernst had not given him advance warning of the decision.

He told Ernst he was concerned about the impact on customers, the perception of having the software system run out of a “third-world country” and the payroll issues involved for an employee in another country.

Ernst was asked to provide a written proposal of his move that could be discussed by Destiny’s directors.

Before responding, Ernst went around the CEO and asked another vice-president for approval of two vacation days. The vice-president was not aware of Ernst’s move.

Two weeks later, Ernst had not yet provided a proposal and the CEO asked again. Ernst replied the house in Mexico was his dream and once he confirmed he could work from home there, it became a reality. He didn’t mention it earlier because, he said, “We felt it may not become real.”

Ernst also said his employment agreement stated he could work from home and said nothing about country restrictions. By early September, he lived full time in Mexico.

The relationship between Ernst and the CEO deteriorated while Destiny, unsure of Ernst’s tax situation, sent his September and October pay to his Alberta bank account. The company waited until Ernst signed a major contract on Nov. 25, 2008, and terminated his employment three days later.

The termination letter indicated when Ernst was hired, it was expected he would eventually move to Vancouver and he never approached the company for permission to move out of the country. Destiny also indicated it didn’t want to be exposed to tax and work visa liabilities. Ernst was paid two months’ severance.

Company could determine employee’s place of work

The court found the employment contract specifically indicated Ernst could initially work from home but Destiny retained the power to determine the location of his work and he might have to move to Vancouver eventually.

The contract also referred to salary adjustments based on “province of residence,” which showed he was expected to be in Canada.

Ernst had breached the employment contract when he moved to Mexico and compounded the situation by refusing to submit a proper proposal, as requested by the CEO.

In concealing his intention to move and circumventing the proper channels for vacation requests, Ernst’s actions also shook Destiny’s trust in him, which was particularly important for an executive who worked remotely, said the court.

The court upheld the termination for just cause. However, it also found Destiny didn’t pay Ernst his salary for November and ordered the company to do so. See Ernst v. Destiny Software Productions Inc., 2012 CarswellBC 1058 (B.C. S.C.).

Jeffrey R. Smith is editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. For more information, visit www.employmentlawtoday.com.

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