Doing Business in Canada: Employment & Labour

by Bennett Jones LLP
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The relationship between an employer and an employee in Canada is heavily regulated. All jurisdictions in Canada – both federal and provincial - have enacted legislation (statutes and regulations) governing various aspects of the employer-employee relationship. Additionally, employers in the common law provinces are bound by the applicable common law principles (e.g., judge-made law) and, in Québec, because it is a civil law jurisdiction, by the Civil Code. If employers ignore these differing options, they do so at their peril.

In this chapter, we highlight certain statutes that will apply to all employers in Canada and then discuss certain issues that most employers grapple with which arise out of the common law.

More than 90 percent of employers in Canada are provincially regulated. Employers carrying on business activities such as inter-provincial transportation, telecommunications, broadcasting, airlines and inter-provincial shipping are federally regulated. In all jurisdictions, employers are subject to the following types of statutory requirements.

Employment Standards

All jurisdictions in Canada have legislation setting out mandatory minimum terms of employment for issues such as minimum wages, hours of work, overtime, statutory holidays, vacation pay, termination pay and leaves of absence. With limited exceptions, the parties cannot contract out of or below such minimum standards.

The applicable threshold for each standard varies amongst the jurisdictions across Canada. For example, the threshold for hours of work before overtime is payable is 40 hours per week in British Columbia and 44 hours per week in Ontario.

Labour Relations

Approximately 30 percent of the Canadian workforce is unionized. Each jurisdiction has legislation setting out the process by which a union can acquire bargaining rights (i.e., through a card check process and without a vote or through a sign-up of union cards as a precondition to a secret ballot vote).

All jurisdictions prohibit certain unfair labour practices. These restrictions affect what an employer is lawfully permitted to do during a union organizing campaign and impose a duty of good faith in the collective bargaining process. The applicable labour relations board, not a court, has jurisdiction over claims of unfair labour practices or unlawful strikes or lockouts.

Human Rights

All jurisdictions have legislation prohibiting discrimination and harassment on certain specified grounds. Such grounds vary by jurisdiction but generally include age, gender, race, disability, religion, sexual orientation, ethnic origin, nationality and family status.

Depending on whether an employee is union or non-union and the jurisdiction in which the employee is employed, a discrimination or harassment complaint could end up before a human rights tribunal (quasi-judicial), a court or an arbitrator appointed pursuant to a collective agreement.

Duty to Accommodate

Each jurisdiction prohibits employers from discriminating on the basis of disability and requires employers to accommodate a disabled employee up to the point of undue hardship. Employers must take significant steps, such as modifying the injured employee’s duties, permitting time off and modifying schedules of work.

Drug and Alcohol Testing

The term disability has been broadly interpreted to include addictions to drug and alcohol. There are limitations on pre-employment and random alcohol and drug testing and whether such testing will be permissible will vary by jurisdiction.

Occupational Health and Safety

Each jurisdiction has occupational health and safety (OHS) legislation that provides duties and obligations to which all workplace parties are subject. Employers have a general duty (as well as specific duties) to ensure the health and safety of workers and to take all reasonable precautions to ensure worker safety. The definition of worker under OHS legislation is very broad and generally applies to all persons working at a workplace, including contractors and subcontractors. Supervisors and employees are also personally obliged to comply with their duties under OHS legislation.

The legislation requires the creation of a health and safety committee to take steps such as monitoring health and safety issues in the facility and to receive and deal with OHS-related concerns in the workplace.

Failure to comply with applicable OHS legislation can result in significant fines and possibly incarceration for individuals and, in the most serious cases, possible prosecution of members of management and/or directors under the Criminal Code.

Workers’ Compensation

All provinces have workers’ compensation legislation. This employer-funded accident insurance system is administered by a government administrative body. Employers who participate in a workers’ compensation scheme may not be sued by an injured worker for injuries or illnesses suffered during the course of employment.

Whether an employer is required to register with the applicable workers’ compensation board and to participate in the workers’ compensation system depends on the province and, in some cases, the nature of the employer’s activities.

Generally, the rate as a percentage of payroll that employers will be required to contribute to the workers’ compensation system varies by industry type or business activity.

Privacy in the Workplace

The federal jurisdiction and certain provinces (i.e., British Columbia, Alberta and Québec) have adopted privacy legislation regulating the collection, use and disclosure of personal information in the course of a commercial activity and in the administration of the employment relationship. An employer’s obligations vary depending on whether the employer is federally or provincially regulated and depending on the provinces in which the company is doing business. (A more detailed review of applicable privacy legislation is contained in the Privacy chapter of this publication.)

Some Canadian court decisions have suggested that employees have an expectation of privacy when using company technology. As a result, employers need to draft clear technology use policies to rebut that expectation of privacy.

Termination of Employment

In the absence of just cause (e.g., willful misconduct, gross insubordination or neglect of duty), a termination will be considered without cause and the employee is entitled to notice of termination. Each jurisdiction has minimum employment standards legislation requiring a minimum amount of notice of termination or pay in lieu of notice. There is no such thing as at will employment in Canada; a contract for employment at will is unenforceable as it is an attempt to contract out of minimum standards legislation.

In addition to statutory notice of termination, under the common law, an employee is entitled to reasonable notice of termination. Such notice depends on factors such as length of service, age of the employee, character of the position and availability of reasonable alternate employment; it generally varies from zero to 24 months.

A written employment contract entered into at the start of the employment relationship commonly specifies the parties’ agreement concerning the amount of notice (or pay in lieu of notice) the employer will provide the employee on termination without cause. A valid and binding contract can rebut the presumption of reasonable notice at common law.

Confidentiality and Restrictive Covenants

Employees generally have an implied duty of confidentiality. However, many employers who wish to expressly define what constitutes confidential information or trade secrets have employees execute a confidentiality or non-disclosure agreement.

In contrast to the duty of confidentiality, with the exception of a very limited class of fiduciary employees, Canadian courts will not imply a duty not to solicit or compete with an employer following termination of employment.

As courts in Canada are reluctant to enforce non-competition clauses, an employer must prove that the non-competition clause is truly necessary to protect the employer’s legitimate proprietary interest and that the clause is reasonable in the circumstances (i.e., in terms of the definition of the prohibited activity and the temporal and geographic scope). Prohibitions against solicitation of the employer’s employees and customers are more likely to be enforced but must be drafted narrowly to protect the employer’s legitimate proprietary interests.

Conclusion

Canada has a complex myriad of federal and provincial employment and labour legislation, common law principles and contracts that may govern the employment relationship. Companies hiring employees in Canada will want to adopt certain best practices (e.g., use of written employment contracts) at the outset of the employment relationship to maximize flexibility and limit potential liability.

Bennett Jones’ Employment Services Group

The Bennett Jones Employment Services Group is a multidisciplinary team of lawyers who practice in all our offices and represent a wide variety of private and public sector employers. Whether the situation calls for preventive measures or decisive action, we work with employers to: manage employees and independent contractor; mitigate employment risks; enforce legal rights; and resolve disputes. As legal counsel, we view our role as a combination of advisor (assisting clients to avoid or minimize labour and employment problems and disputes) and advocate (where disputes cannot be avoided).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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