The constant change associated with employment and labour law in Canada poses a significant challenge for employers doing business here. That challenge is compounded by the fact that employers with operations across Canada may be subject to differing employment laws in each province.

Both the federal and provincial levels of government have jurisdiction over employment and labour matters for certain types of employers. The level of government that has jurisdiction is determined by the industry in which an employer operates. Industries that are inter-provincial by nature – such as airlines, telecommunications and railways – are regulated by the federal government. Most other industries – which account for the majority of employers in Canada – fall under provincial jurisdiction.

Employment Standards

The employment standards legislation in each jurisdiction sets out mandatory minimum conditions of employment, governing areas such as hours of work, overtime pay, minimum wages, holidays, vacations, equal pay for male and female employees, employee benefit plans, pregnancy, parental leave and other leaves of absence, notice of termination of employment, and severance and termination pay. Certain categories of employees may be exempt from certain standards, depending on the jurisdiction.

Human Rights

All jurisdictions in Canada have administrative agencies who deal with human rights complaints and legislation designed to address discriminatory practices in the workplace on the basis of, for example, race, creed, colour, ethnic origin, age, sex, sexual orientation, marital status, citizenship, ancestry, place of origin, family status, record of offences and disability. Ontario employees may either add such a complaint to a wrongful dismissal lawsuit or file a complaint with a human rights tribunal. The tribunal may award monetary compensation; order reinstatement of a terminated employee; and require an employer to prevent discrimination and harassment.

Age Discrimination

Most provinces in Canada have eliminated mandatory retirement in recent years and have expanded the definition of “age” to protect those 65 years of age or over from discrimination. Employers can expect to face significant challenges in complying with their legal duty to accommodate older workers. Certain exceptions continue to exist (i.e., differentiation among Ontario employees on the basis of age for pension and group insurance plans, discriminatory workplace rules that are a “bona fide occupational requirement” under the Ontario Human Rights Code and government-provided benefits which assume retirement at age 65.)

Duty to Accommodate

Employers have a duty to accommodate disabled employees to the point of “undue hardship.” Courts, tribunals and human rights commissions have become increasingly activist in promoting the protection of disabled employees under human rights legislation. Employees who are addicted to drugs and alcohol are considered to be disabled. Employers usually are expected to go to considerable lengths to provide time off, modified duties and access to assistance to accommodate such employees.

Drug and Alcohol Testing

Appellate courts in different provinces have issued seemingly contradictory decisions about an employer’s ability to conduct pre-employment drug testing. Random drug and alcohol testing has been found to violate human rights legislation, unless the employer can demonstrate that testing is required for safety reasons.

Workers’ Compensation

Canada’s provinces and territories have no-fault insurance systems to compensate employees for workplace injuries and most (but not all) employers must participate in these systems. Where permitted, an employee may sue an employer for personal injury or an accident arising out of and in the course of employment, and claim compensation from the no-fault insurance accident fund. The workers’ compensation board in each province is responsible for the applicable legislation and has broad powers of enforcement.

Employment Equity

Whereas some provinces, like Ontario, have abandoned employment equity legislation, mandatory federal employment equity laws apply to provincially-regulated employers who bid on federal government contracts. Under the Canadian Employment Equity Act, a federally-regulated employer must prepare and submit annual reports about its workplace, such as occupational groups, salary ranges, hiring and terminations. Failure to submit complete and accurate reports is a violation of the Act. These same requirements are applied by the federal government to any employer who has a contract with the federal government valued at $200,000 or more.

Pay Equity

In Canada, “pay equity” refers to wage parity between male and female workers to redress systemic discrimination. Ontario’s Pay Equity Act, the most far-reaching legislation of its kind in any Canadian jurisdiction, requires existing employers to make upward adjustments in compensation to an annual maximum of 1% of the employer’s annual payroll, whereas new employers are required to achieve pay equity immediately. For employers who have not maintained their pay equity arrangements, an employee complaint may result in a significant potential liability in retroactive wage adjustments.

The Act provides for a proactive enforcement mechanism under which employers can be found liable for non-compliance, even if no employee lodges a complaint. The Pay Equity Commission ensures legislative compliance through random audits and by investigating complaints. Legislation in most other provinces provides for a complaint-driven process under which an employer may be held accountable only if an employee or union files a complaint.

Executive Compensation

Designing, implementing and administrating compensation and benefits arrangements for foreign businesses operating in Canada must take into account Canadian tax and employment laws, securities disclosure and compliance requirements, and heightened scrutiny by shareholders and other stakeholders, regulators and the courts.

Occupational Health and Safety

Occupational health and safety legislation across Canada requires employers to provide workers with a safe workplace. Most provinces also impose a number of specific duties (i.e., preparation of a written occupational health and safety plan and establishment of a joint health and safety committee certified members of which may order a work stoppage where dangerous circumstances exist). In most jurisdictions, a worker has the right to refuse unsafe work. Fines for violations of health and safety legislation can be significant and are rising. Recent changes to Canada’s Criminal Code provide for the prospect of criminal charges for senior managers, officers and directors of corporations for health and safety violations. A criminal conviction may result in a jail sentence.

Health Tax

Some jurisdictions pay for health care out of general tax revenues. The “Ontario Health Insurance Plan” (OHIP) is available to all Ontario residents and is funded by a graduated payroll tax paid by employers. The Ontario “health premium” is paid by employees according to their income level.

Termination of Employment

Minimum Notice of Termination. Employment standards legislation in each jurisdiction sets out varying minimum notice of termination requirements – and, in some cases, statutory severance pay – or pay in lieu of notice. Unless the employee is terminated “for cause,” statutory notice typically ranges from one to eight weeks’ written notice, based on an employee’s length of service. Most jurisdictions require enhanced notice when an employer terminates or indefinitely lays off a certain number of employees within a specified period.

Common Law or Civil Law Requirements. In addition to these legislative requirements, non-union employees are entitled to reasonable notice of termination under the common law. Such notice is often substantially more onerous and depends on such factors as the employee’s position, length of service, re-employment prospects and age.

An employee who has been terminated with notice in accordance with the applicable employment standards legislation may still sue the employer for more pay in lieu of notice. Court awards of a year or more are not unusual for senior management employees, with awards of up to 24 months for long-service, senior employees.

Employers and employees may enter into an enforceable contract for a defined entitlement on termination of employment that replaces the common-law default of reasonable notice, provided that such a contract provides for at least the minimum statutory entitlement

Union Certification and Labour Relations

Approximately one-third of the Canadian labour force is unionized. By law, employees are free to join a union of their own choice and to participate in its lawful activities.

The rules for certifying unions vary between jurisdictions. For example, Ontario requires the union to win a vote which is only held after at least 40% of the employees have signed union cards. Other jurisdictions provide for unionization without a vote when a certain percentage of employees (usually a majority) have signed union membership cards.

An employer faced with a union organizing campaign may not make threats or promises intended to influence the employees’ decision; otherwise, the labour relations tribunal charged with adjudicating the dispute may, for example, automatically certify of the union.

Following certification, the parties must bargain in good faith in an attempt to reach a collective agreement. Strikes and lockouts are not permitted during the term of a collective agreement.

Sale of a Business

The purchaser of a business can inherit a wide variety of employment-related liabilities and obligations from the vendor. These can include termination costs, employment standards violations, workers’ compensation costs, pay equity adjustments, collective agreements and union bargaining rights. Accordingly, only careful due diligence can bring to light the liabilities being acquired along with a business. To reduce such liabilities, transactions can be structured in various ways and vendors may provide appropriate indemnities.

Employee Privacy

A number of jurisdictions, including the federal government, British Columbia, Alberta and Québec, have introduced privacy legislation covering the employment relationship. Previously, few rules governed how employers gathered and managed personal information respecting employees. Employers operating in jurisdictions with privacy legislation are now expected to establish policies for the collection, storage and disclosure of employee information.

This new legislation also further limits the circumstances in which employers may conduct surveillance for the purpose of discovering employee wrongdoing or poor performance. Employers must also be aware that, under privacy legislation, they are accountable for any personal information transferred to suppliers; therefore, precautions should be taken to ensure the confidentiality and security of such information.