Share agreement stated BC law applies, but overall agreement required local arbitration
The British Columbia Supreme Court has ordered a stay of proceedings brought by a US-based worker against a BC employer, deferring the dispute to arbitration in the US in accordance with the worker’s employment agreement.
The worker is a US citizen living in the state of Virginia who stated that working for TELUS International AI – a telecommunications company based in the state of Delaware that is part of the global TELUS group of companies - as an account manager in July 2021.
The worker’s employment agreement included a clause stating that the laws of Virginia would govern the agreement. It also had a confidentiality agreement that was to be “governed and interpreted in accordance with the laws of the state” in which the worker was last employed.
In addition, the agreement had a schedule stipulating that the worker or the company would submit any dispute to binding arbitration for “all claims or causes of action… under any federal, state and local law...” The only exceptions indicated were “issues to the attention of federal, state or local government agencies which, if the law allows, can seek relief against the company on my behalf.”
Any arbitration was to take place in the county where the worker last worked and be “conducted under the rules of the Judicial Arbitration and Mediation Services, Inc. [JAMS]” with the arbitrator having broad authority to decide disputes about the scope of the agreement.
Restricted share agreement subject to BC law
In 2023, TELUS offered the worker restricted share units (RSUs) as part of her compensation. The RSU award agreement – which was with Vancouver-based TELUS International Canada - was subject to broad non-competition and non-solicitation clauses applicable for six months following termination of employment and included a clause stating that “the interpretation, performance and enforcement of the RSUs and this agreement shall be governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.”
According to the worker, she was unaware of the restrictive covenants when she signed the RSU award agreement.
The worker resigned from TELUS AI on Jan. 5, 2024, effective Jan. 18. A short time later, the worker started employment with a competitor, Welocalize. In May, Welocalize announced a new business with the worker as vice-president, performing substantially the same work that she did for TELUS AI.
In June, TELUS AI sued Welocalize in Delaware and, in July, initiated arbitration proceedings in Virginia against the worker alleging breach of contractual obligations, including non-competition and non-solicitation clauses found in the RSU award agreement.
US arbitration, BC court action
The worker filed a civil claim in BC seeking a declaration that the restrictive covenants were unenforceable under BC law because they didn’t protect legitimate proprietary interests, they were ambiguous, and they were excessive in scope relating to time and geography.
TELUS then sought to stay the proceedings under the BC Arbitration Act and the Court Jurisdiction and Proceedings Transfer Act (CJPTA), on the basis that the matter was already under arbitration in Virginia, where the employment agreement mandated disputes be resolved.
In November, an arbitrator in Virginia determined that the arbitration agreement gave him the express jurisdiction to assess TELUS AI’s claims, which were under the scope of the arbitration agreement. The arbitrator also found that the RSU award agreements governance clause didn’t override the selection of the forum for disputes and wasn’t inconsistent with the arbitration agreement’s delegation of authority to arbitration.
The arbitrator noted that there was ambiguity in the agreement, but the reference to “federal, state or local law” and the presumption in US law in favour of arbitrability favoured the forum of arbitration in Virginia, he said.
Arbitration agreement
The BC Supreme Court noted that the Arbitration Act requires a stay of proceedings “if a matter has been agreed to be arbitrated, unless the arbitration agreement is void, inoperative, or incapable of being performed.” In addition, there was a “competence-competence principle” that an arbitrator or tribunal has the authority to determine its own jurisdiction and should generally be the one to do so initially.
As for the CJPTA, it allows courts to decline exercising “territorial competence” if the court of another state is a more appropriate forum to hear a proceeding, the court said.
Although the RSU agreement referred to BC law and courts of competent jurisdiction, the court found no inconsistency between these provisions and the arbitration clause. The arbitrator, appointed under the JAMS rules, already ruled that the arbitration agreement encompassed the dispute, including issues governed by foreign law, the court said.
“The arbitration agreement is susceptible to an interpretation that includes disputes governed by foreign law... there is a construction of the arbitration agreement that brings the parties’ dispute within the agreement to arbitrate,” said the court.
Deference to arbitrator
The court noted that the principle of “competence-competence” required deference to the arbitrator’s decision unless it was shown that the arbitration agreement was “void, inoperative or incapable of being performed,” which was not established in this case.
The court also declined jurisdiction under s. 11(1) of the CJPTA, determining that Virginia was a clearly more appropriate forum, given the location of the parties and witnesses, the nature of the dispute, and the ongoing arbitration proceedings in the US.
The court determined that a stay of proceedings would avoid a multiplicity of proceedings and potential conflicting decisions, as the same factual and legal issues were already under consideration in the Virginia arbitration.
“This is fundamentally a US dispute involving US parties and US conduct,” said the court, noting that the worker worked exclusively from Virginia, was supervised by US managers, and had no apparent connection to BC beyond the RSU agreement’s choice-of-law clause.
