An injured former employee of a Canadian consulate may proceed with her lawsuit against Canada to recover for her injuries.

In Merlini v. Canada, the 1st U.S. Circuit Court of Appeals reversed and remanded a District Court decision Monday in a 2-1 decision, holding that the worker could proceed with her lawsuit against the country.

Cynthia Merlini, a resident of Massachusetts, worked as an administrative assistant at the Canadian consulate in Boston. On Jan. 22, 2009, while setting up tea service for a meeting, she tripped over a cord that was not secured to the floor and fell, sustaining “a serious injury” that left her unable to work. Canada paid Ms. Merlini her full salary via its own national workers compensation system from shortly after the accident until October 2009, when the consulate determined she was able to return to work.

Ms. Merlini requested Canada reconsider its determination to stop paying her. When that was declined, she sought relief via the Massachusetts Workers Compensation Trust Fund, which provides benefits to employees who are considered “uninsured” for the purposes of the Massachusetts Workers Compensation Act. An administrative judge found that Ms. Merlini was entitled to ongoing incapacity benefits from the fund, but the fund appealed, and it was held that Canada was not "uninsured" for purposes of the Massachusetts’ statutes because it had sovereign immunity and that the fund was not liable if an employee was entitled to workers' compensation benefits in any other jurisdiction.

Ms. Merlini then sued Canada for damages in the U.S. District Court for the District of Massachusetts in Boston, and the District Court dismissed her complaint for lack of jurisdiction after holding that Canada was immune from suit under the Foreign Sovereign Immunities Act.

She appealed, and the 1st U.S. Circuit Court of Appeals reversed and remanded the District Court’s decision. While workers comp in Massachusetts bars an employee from suing her employer for a work-related injury, if the employer is not insured within the meaning of the statute, the worker may bring a lawsuit to recover from the workplace injury. The court noted that Canada did not dispute that Ms. Merlini had been employed by the consulate, that she was injured, and that her duties lacked any indication of diplomatic or civil service, and found that her employment did not simply lead to her injury, but provided a “legal basis for the only cause of action that she has against her employer for the injury for which she seeks to recover.”

Although Canada argued that the circumstances of Ms. Merlini’s employment and whether Canada should have prevented the accident were incidental to her theory of the claim, the court found that when applying Massachusetts law, the court could conclude that Canada’s employment of Ms. Merlini without obtaining the requisite insurance was “not germane to the question” of whether she could file a lawsuit under the FSIA under the commercial activity exception.

Dissenting judge Sandra Lynch held that the appellate court’s decision effectively strips Canada of its sovereign immunity, and that “compelling Canada to abide by Massachusetts state law, at the expense of maintaining its own workers compensation scheme” could harm the U.S. government’s functions abroad.