Setting up Shop in Canada? What U.S. Employers Need to Know About Canadian Employment Law
Date: June 5, 2018
In this video, John Kloosterman outlines five key differences between Canadian and U.S. employment law including: at will employment, employment contracts, minimum standards legislation (including leaves of absence) and harassment legislation.
Hi. I’m John Kloosterman, a partner in Hicks Morley’s Toronto office. I practiced employment law in California for over 20 years before relocating to Toronto and I work with a lot of U.S.-based companies who have Canadian operations.
Let’s talk about five key things that U.S. employers need to know about Canadian employment law.
What law applies to you?
In the United States, employers have to deal with overlapping layers of federal, state and local laws, and have to make sure they comply with all of them. For example, if an employer in San Francisco, where I used to practice, needs to figure out how to properly pay an employee’s wages, they would have to look at U.S. federal law, California law and local San Francisco ordinances.
In contrast, Canada makes it really simple – employers are either federally regulated or provincially regulated – but not both. And municipalities can’t enact employment laws. About 10% of employers are federally regulated – if your business is banking or telecommunications, or you’re a common carrier, like an airline, then you may be federally regulated. But the other 90% of employers are provincially regulated and only have to follow provincial law.
At-will employment allows an employer to dismiss an employee at any time for any reason without notice. For example, if my managing partner doesn’t like my necktie, he could dismiss me immediately and throw me out the door.
In most Canadian jurisdictions, employees may also be dismissed at any time for any reason. We call that a dismissal without cause. But the employees have to receive reasonable notice or payment in lieu of notice. What’s reasonable depends on a variety of factors. If the parties have an employment agreement with an enforceable termination clause, then the amount called for in that clause is probably reasonable. If there is no enforceable agreement, then it depends on a variety of factors: the employee’s length of service, age, job and the likelihood of finding comparable employment. Reasonable notice may be as much as two years for some employees.
Employers in Canada may also dismiss summarily without notice if good cause exists. Good cause generally requires repeated gross misconduct. Poor performance rarely rises to that level, and in a few jurisdictions – the federal jurisdiction, Quebec and Nova Scotia – employers can’t dismiss without cause if the employee has a certain amount of seniority.
The reason why there’s no at-will employment in Canada is that all employees here have an employment contract. It’s basic contract law that parties to a contract generally need to provide notice that one of them is terminating the contract.
In the U.S., most employees do not have an employment contract. U.S. employers tend to think of an employment contract as a lengthy, detailed agreement that someone like a six figure executive might have.
Canadian executives probably have a similarly detailed agreement. Most employees, however, don’t have detailed agreements. Contracts here are a combination of things – an offer letter, some written policies, like a handbook, and some implied policies and terms – that all together make up their employment contract.
Employers also can’t unilaterally change material terms of the employee’s contract without potentially being liable for constructive dismissal. To avoid constructive dismissal, the employer has to provide the same reasonable notice that they would provide if dismissing the employee without cause.
Minimum standards legislation
In the U.S., many employers offer things like paid vacations and paid public holidays but no law requires them to do so. The laws in the U.S. require things like overtime, meal breaks, rest breaks but not much more.
In Canada however, each jurisdiction has minimum standards legislation that also covers things like overtime and breaks. But that legislation also mandates paid vacations, paid public holidays and a variety of other minimum standards. Employers can offer benefits greater than the minimum standard but cannot go below the minimums.
Minimum standards legislation also provides for a variety of leaves of absence, including maternity and parental leave. Taken together, those two leaves may provide a new mother with up to 18 months of leave. Non-birth parents may take up to 63 weeks of leave. Now in contrast, the U.S. allows new mothers up to 12 weeks of leave under the law called Family and Medical Leave Act.
In the U.S., workplace harassment is a subset of discrimination laws – it’s based on an employee’s membership in a protected category. For example, sexual harassment is harassment based on an employee’s sex or gender.
In contrast, Canadian jurisdictions increasingly include bullying and other forms of psychological harassment in their anti-harassment legislation., and workplace harassment is increasingly considered an occupational health and safety issue – because when a workplace or harassment occurs is unhealthy and not safe.
I hope this has helped you understand some of the key differences between employment laws in Canada and the United States. Please reach out if you have any questions or comments whatsoever about this. Thanks for listening.