Embassy Gets Second Chance to Plead Sovereign Immunity in Wrongful Dismissal Case

As we reported in the Winter 2012 edition of EMPlawyers’ Update, Sandra McDonald, a long service employee of the Embassy of the United States of America in Ottawa, brought a claim of wrongful dismissal against her employer, in which she alleged that she had been terminated without cause while on long term disability leave.

Despite having been served with the claim, American officials failed to file a Statement of Defence. Accordingly, the Ontario Superior Court of Justice issued a default judgment finding that the Embassy had wrongfully dismissed Ms. McDonald and had violated Ontario’s Human Rights Code. The Court awarded Ms. McDonald all of the compensation she had requested, which amounted to $240,000.

By not filing a Statement of Defence, the U.S. Embassy missed the opportunity to claim that sovereign immunity was applicable. Foreign embassies enjoy substantial immunity from Canadian law, as detailed in the State Immunity Act. This legislation provides that foreign state departments and agencies, including embassies and consulates, are immune from the jurisdiction of Canadian courts, including their authority to order common law reasonable notice and human rights damages. Invocation of the State Immunity Act thus could have eliminated most if not all of the damages awarded against the Embassy in this case.

However, the American Embassy has now successfully overturned the default judgment by convincing the Court that it had unintentionally failed to respond to the claim. As a result, it will now have another opportunity to present arguments in its defence, which could include the defence of sovereign immunity.

Thus, although the Embassy was granted a second chance to rely on the State Immunity Act, this case is a cautionary tale for embassies – and all employers – regarding the risks of failing to defend a claim at the earliest opportunity. Had the American Embassy plead sovereign immunity in the first instance, it is likely that no award would have been made. It also would have saved the legal costs associated with having the default judgment overturned, which included paying Ms. McDonald’s legal costs and paying the $240,000 into a court trust.
While embassies have the protection of legislation to allow them to avoid some of the lengthy court hearings and costly awards associated with the dismissal of their locally engaged staff, they must be aware of their rights, and make the court aware as well.