Office Worker Employed by Canadian Consulate May Proceed in Tort Against Employer for Work-Related Injuries

In an unusual case testing the limits of the sovereign immunity enjoyed by our neighbor to the north, a divided First Circuit Court of Appeals reversed a decision by a federal district court that had dismissed a Boston office worker’s civil action filed against her employer—Canada [Merlini v. Canada, 2019 U.S. App. LEXIS 17313 (1st Cir., June 10, 2019)]. The majority disagreed with the district court’s determination that Canada was immune from suit under the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C.A. § 1602, et seq, finding instead that the “commercial activity” exception to sovereign immunity applied under the facts of the case.

Moreover, the majority of the First Circuit also held that, under the facts of the case, Canada was an “uninsured employer” as that term is defined in the Massachusetts Workers’ Compensation Act (“MWCA”) in spite of the fact that it had paid the office worker substantial workers’ compensation benefits under the Canadian Act. As an uninsured employer, Canada was deprived of asserting a host of important defenses that would ordinarily be available at common law, which effectively rendered the employee’s claim against Canada a strict liability claim.

Background

Merlini, a U.S. citizen, was employed as an administrative assistant to the Consul General of Canada in Boston. Merlini alleged that, while setting up for a January 22, 2009 meeting, she tripped over an unsecured speakerphone cord, fell, struck a credenza, and thereby sustained a serious injury that left her unable to work. It was undisputed that, per Canada’s own national workers’ compensation system, the consulate paid Merlini what amounted to her full salary from shortly after the accident until October 2009.

Claim Against Massachusetts Workers’ Compensation Trust Fund (“WCTF”)

When Canada stopped paying her Canadian benefits, Merlini sought recovery from the Massachusetts WCTF, which provides benefits to employees who sustain injury while working for an uninsured employer. After an evidentiary hearing, an administrative judge found that Merlini was entitled to ongoing incapacity benefits from the fund, but the Reviewing Board reversed, finding Canada was not subject to the personal jurisdiction of the Commonwealth and that Canada was not “uninsured” because it had sovereign immunity. The Board also found that since Merlini had received Canadian benefits, the WCTF was not liable.

Merlini sought review of the Board’s ruling from the Massachusetts Appeals Court, which upheld the Board’s ruling. The MAC did so, however, only on the ground that, in consequence of the injury that Merlini suffered at the consulate, she had been entitled to benefits in another jurisdiction—Canada. The MAC did not address whether the Canadian government was subject to the jurisdiction of the Commonwealth or whether the Consulate was an uninsured employer in violation of the MWCA.

Switched Gears: Sued Canada in Federal District Court

Instead of appealing the MAC’s decision, Merlini sued Canada for damages in federal district court pursuant to chapter 152 (which allows such suits against uninsured employers). Canada moved to dismiss on sovereign immunity grounds. Canada also sought dismissal on the ground that the Board’s earlier ruling that Canada was not “uninsured” was preclusive of Merlini’s claim. The district court dismissed the complaint on the immunity grounds, but did not reach the issue of whether Canada was an uninsured employer.

First Circuit’s Decision

The majority of the First Circuit acknowledged that under the FSIA, foreign governments enjoyed broad immunity from suit. It observed, however, that there were exceptions to such immunity. One, the “commercial activity” exception provides that a foreign state is subject to jurisdiction in any case in which the cause of action is based upon a commercial activity. The majority stressed that issue was not whether the foreign government had a profit motive, but rather whether the activity was the type of action by which a private party engaged in trade and traffic or commerce.

The majority continued that if Merlini’s complaint was based on Canada’s employment of her as a clerical worker doing routine clerical work at the consulate in Boston, then the commercial activity exception would appear to apply. The commercial activity exception applied, said the majority, because the conduct on which Merlini’s claim was based could not be divorced from her “employment relationship” with Canada.

As to the non-insurance issue, the majority said the whole of chapter 152 considered irrelevant how an employer might choose to compensate an injured employee outside the normal course of securing insurance coverage (or self-insurance). All that was required was a showing that Canada had failed to insure under chapter 152. Moreover, said the majority, the characterization of conduct as “commercial activity” turned on its nature, not on its purpose. The majority, therefore, concluded that that Canada’s employment of Merlini, without obtaining the requisite insurance, was properly deemed to be “commercial activity,” at least given that Merlini was a United States citizen whom Canada employed in Boston as clerical staff and that she sought recovery for the injury she suffered while performing her clerical duties.

Board’s Decision Was Not Preclusive

The majority continued that the Board’s earlier decision that Canada was not uninsured had no preclusive effect since the MAC’s decision affirming the Board’s determination was based only on one ground—that Merlini was not entitled to recover because she was eligible for benefits in another jurisdiction. The MAC expressly ruled that it was not passing upon whether Canada was subject to personal jurisdiction nor on the issue of Canada was an uninsured employer.

Dissent

Judge Lynch dissented, arguing that Merlini’s suit was based on Canada’s decision to provide her with benefits under its own workers’ compensation system, which was a protected act under the FSIA. The burden was upon Merlini to show that an exception existed and she had not done so. In order to enforce Canada’s uniform compensation scheme, the consulate had to forgo Massachusetts workers’ compensation insurance. The acts of enforcing the Canadian scheme and forgoing the Massachusetts scheme were the same. In the well-reasoned dissent, the judge indicated the majority’s view was in conflict with a decisions in the Second, Ninth, and D.C. Circuits. The purpose of sovereign immunity was to leave sovereign issues to the sovereigns, not to the courts, concluded Judge Lynch.