From immigration purpose .. yeah.. it has nothing to do with that.. even if you are a US citizen and want to alter your work relationship by moving to a different country.. same rules apply..Well, the H1b relationship matters only if you are physically present in US. There is no need to end the payroll if he moves outside US. Outside US, it's immigration laws have no effect. So it's fine for him to work from India getting paid in USD.
Even if we consider your case, your H1b is tied to your US location, but they are letting you work from Canada because there is no implication of H1B outside US, like you are not in H1B status when you are not in US.
I think we are saying the same thing..
Point being, moving out of US normally doesn't impact h1b