A Q&A guide to employment and employee benefits law in Canada.
The Q&A gives a high level overview of the key practical issues including: permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; pensions; intellectual property; restraint of trade agreements and proposals for reform.
To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits Country Q&A tool.
The Q&A is part of the PLC multi-jurisdictional guide to employment and employee benefits. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-mjg.
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Canada is a federal state comprised of ten provinces and three territories. Jurisdiction over labour and employment law matters is typically exercised by the provincial and territorial governments in relation to employers that operate within their borders. However, the federal government has jurisdiction over employers that are engaged in activities that are interprovincial in nature, or operate in fields enumerated in the Canadian Constitution.
The provincial, territorial and federal laws and standards that regulate the employment relationship protect every worker in Canada, including foreign nationals. For example, most foreign nationals working in Canada are entitled to the minimum standards set in employment standards legislation, which include a minimum wage, maximum hours of work, and rights to certain types of leave. Foreign nationals can also file complaints with the employment or labour standards authority in the province or territory where they are working.
Even foreign nationals without valid work permits are protected by most Canadian labour and employment laws. For example, a foreign national without a valid work permit will be covered by applicable human rights legislation. However, an undocumented foreign national is not eligible to participate in Canada's Employment Insurance programme.
Canadian statutes are presumed not to have an extraterritorial effect unless the statute itself expresses an intention to control activities beyond Canada's borders. Therefore, Canadian nationals employed abroad will normally be subject only to the laws of the jurisdiction where they work.
A notable exception is the Canada Labour Code 1985 (Canada Labour Code), which applies to employees falling under federal jurisdiction. The Canada Industrial Relations Board, which is the administrative tribunal that administers the legislation, has held that it has jurisdiction to certify a union to represent a bargaining unit of employees that includes employees living and performing work outside of Canada. Consequently, the employment of individuals employed outside of Canada by a federally regulated enterprise can be governed by the Canada Labour Code.
Canadian employment laws can also extend extraterritorially if an employee is temporarily working abroad in the course of their official duties of employment, but typically works in Canada. For example, if an employee who is temporarily working abroad suffers an injury while performing duties in the course of their employment, the employee may be eligible for workers' compensation benefits in Canada. Canadian human rights legislation also has a broad reach, and a human rights tribunal may take jurisdiction over a discrimination complaint made by a Canadian employee who was temporarily out of the country, provided the discriminatory conduct in question occurred during the course of the employee's duties.
Each province and territory, as well as the federal sector, has enacted business corporations' statutes that set out restrictions applicable to company directors. There are no legal restrictions on who can be a manager.
The following restrictions apply to directors in Ontario and in the federal sector.
Persons who are less than 18 years of age are disqualified from being a director of a corporation.
At least 25% of the directors of a corporation must be resident Canadians and, where a corporation has fewer than four directors, at least one must be a resident Canadian. Additional restrictions apply in the federal sector for certain business sectors.
Individuals who have been determined to be of unsound mind by a court, who are not legally "individuals", or who are legally bankrupt are disqualified from being directors of a corporation.
A director is not required to have any particular training, expertise or knowledge. It remains open to the corporation to set additional qualifications that must be possessed by directors, for example, share ownership and training. The corporation can also specify grounds of exclusion, for example, criminal convictions.
The federal, provincial, and territorial governments offer a wide variety of incentives to employers to encourage increased employment. These incentives take many forms, and often include wage subsidies, tax credits and subsidised training programmes. Many of these grants are designed to encourage the hiring of members of designated groups, such as aboriginals, persons with disabilities and young people.
For example, the government of Canada, as part of its Youth Employment Strategy, offers qualifying employers a subsidy equal to 50% of the wages of a student hired for the summer. In Ontario, the Apprenticeship Job Creation Tax Credit offers employers a tax credit equal to 10% of salaries and wages payable to eligible apprentices.
An employer wishing to participate in the Canada Youth Employment Strategy or similar federal initiative should apply through Human Resources and Skills Development Canada (HRSDC). To claim tax credit under a programme such as the Ontario Apprenticeship Job Creation initiative, an employer must claim credit on the company’s income tax return.
Only Canadian citizens and individuals who have satisfied the immigration requirements for permanent residency are permitted to engage in employment as of right. Citizens of other countries must obtain a work permit to work in Canada.
Procedure for obtaining approval. A temporary resident visa may be required in addition to a work permit for foreign nationals working in Canada. The government of Canada provides a list of countries and territories that require a visa. Foreign nationals may also need to pass a medical examination, depending on their country of origin (see www.cic.gc.ca/english/visit/visas.asp).
Cost. The cost is Can$75 (single entry), Can$150 (multiple entry) and Can$400 (family rate) (as at 1 August 2012, Can$1 was about US$1).
Time frame. This varies greatly depending on the country of application and the visa office's caseload at the time of the application.
Procedure for obtaining approval. Securing a work permit is generally a two-step process. First, the applicant's job offer from a Canadian employer must be confirmed by HRSDC. HRSDC will then issue a Labour Market Opinion (LMO). The employer seeking to obtain an LMO must show that the job cannot be filled by a Canadian and that the presence of the foreign national will have a neutral or positive effect on the labour market in Canada.
Once an LMO is obtained, the foreign national can apply for a work permit from Citizenship and Immigration Canada, which will allow the applicant to work in Canada for a defined period.
Certain exemptions to these requirements are designed to facilitate the entry of defined categories of foreign nationals into Canada. Of particular significance are the business visitor and intra-company transferee categories. Business visitors are exempt from obtaining work permits. Intra-company transferees, as well as certain professionals, are exempt from the LMO process as a result of certain bilateral treaties. However, these workers may still be subject to visa and medical examination requirements.
Cost. The cost is Can$150.
Time frame. For applications submitted inside Canada, the time frame is 36 days for online applications, and 35 to 37 days for paper applications. The processing time frame is dependent on caseload.
Procedure for obtaining approval. Foreign nationals can also apply to be permanent residents of Canada. Certain provinces have provincial nominee programmes, which allow a provincial government to sponsor desirable applicants for permanent residency. Depending on the jurisdiction, individuals can obtain work permits pending residency. Permanent residency must be renewed every five years, and is subject to the required length of stay in Canada.
Cost. The cost is Can$550 in fees.
Time frame. This can take anything from 12 weeks to two years.
Employment is regulated by the civil law in the province of Québec and by the common law in all other provinces and the federal sector.
A written contract of employment is not required by law. Despite the absence of a legal requirement in this respect, many employers decide to enter into written employment contracts with employees to define the terms of the employment relationship. The primary restriction on the terms set out in an employment contract is that the minimum standards set out in employment standards must be respected.
Fixed-term employment contracts are permitted in Canada. However, courts and other adjudicators will conclude that a fixed-term employment contract is, or became, an indefinite term contract if, for example, the parties renewed the same fixed-term contract multiple times or if the employee continued working after the termination date specified in the contract.
As mentioned above, employment standards legislation in each jurisdiction sets out minimum standards in relation to wages, hours of work, and other subjects that are deemed to form part of the employment contract, whether written or not. Employment standards provisions are minimum standards only and do not prohibit employers and employees from agreeing to greater rights or benefits. It is an implied term of every employment contract that the employment relationship can only be terminated with reasonable notice of termination. This requirement can be varied through specific wording in a written employment contract.
Each jurisdiction in Canada has general labour relations legislation that establishes employees' rights to join a union, engage in a process of collective bargaining with an employer, and enter into a collective agreement defining the terms and conditions of employment in a unionised workplace.
However, employees in designated industries and jobs are not entitled to unionise or enter into a collective bargaining relationship with their employer through the general labour relations scheme. For example, individuals who exercise managerial functions or who are employed in a confidential capacity in matters relating to labour relations are generally excluded from the definition of "employee" in the labour relations legislation. Further, in many jurisdictions, employees who work in education, government and specialised industries (for example, agriculture) are governed by specific legislative schemes that establish different labour relations regimes than under the general legislation.
Under the general labour relations legislation in each Canadian jurisdiction, a union can apply to be certified to represent a bargaining unit of employees and will be certified as such if a simple majority of employees in the proposed bargaining unit wish to be represented by the union. An employer cannot negotiate directly with employees over terms and conditions of employment where a union has been certified to represent those employees. Rather, the employer has a duty to bargain in good faith with the union towards a collective agreement that sets the terms and conditions of those employees' employment relationship. Because the Canadian labour relations system is based on "majoritarian exclusivity", a collective agreement applies to employees in the bargaining unit who did not vote for, and, indeed, may oppose, the union.
The Canadian Charter of Rights and Freedoms 1982 also provides individuals in Canada with certain constitutional protections in relation to the right to join a union or other employee association, and engage in a process of dialogue with their employer.
In 2011, approximately 29.7% of Canadian employees were union members, which reflects a unionisation rate of approximately 71% in the public sector and 16% in the private sector. In total, approximately 31.2% of all Canadian employees were covered by a collective agreement in 2011.
A constructive dismissal occurs when an employer unilaterally changes the essential terms of employment to such an extent that a fundamental breach of the employment contract occurs. Typically, significant unilateral changes to an employee's compensation, position or work location have been found to constitute a constructive dismissal.
In this situation, all of the regular legal recourses applicable to a wrongful dismissal are available to the employee. However, an employee must object to the change and will typically have to resign from their employment in order to pursue legal action against the employer.
Notably, an employer can make a significant unilateral change to the terms of an employment contract without triggering a constructive dismissal by providing the employee with reasonable notice of the impending change. In the event that the employee objects to the change, the employer must provide the employee with reasonable notice of termination, dismiss the employee at the end of the notice period, and rehire the employee under the new terms of employment.
Employers cannot unilaterally change the terms and conditions of employment contained in a collective agreement without violating the collective agreement and labour relations legislation.
Employment standards legislation in each jurisdiction provides for a minimum wage for most full-time, part-time and casual employees. The specific wage is typically set by regulation on an annual basis. The minimum wage for employees in the federal jurisdiction is the general minimum wage rate established in each province and territory.
As of July 2012, the minimum wage was Can$10.25 per hour in Ontario and Can$9.65 per hour in Québec. In some jurisdictions, the minimum wage is different for employees who receive "tips". For example, the minimum wage rate in Québec for employees who receive tips is Can$8.35 per hour.
Employment standards legislation in each jurisdiction also sets restrictions on working hours. Most jurisdictions limit the number of hours that can be worked in a week. In Ontario, an employer cannot allow an employee to work more than 48 hours a week without obtaining prior approval from the Director of Employment Standards. Even where that permission is granted, an employee cannot work more than 60 hours.
Regulations in each jurisdiction provide for exceptions to the maximum hours that can be worked in certain industries.
Employees in all jurisdictions are also entitled to overtime pay for hours worked in excess of a specified amount. The numbers of hours an employee can work before becoming entitled to overtime pay differs across jurisdictions. In Ontario, the entitlement begins at 44 hours; in Québec, it is 40 hours. Overtime pay in most jurisdictions is equal to 1.5 times an employee's regular hourly rate of pay.
In most jurisdictions, an employee is entitled to a meal break of at least one half-hour after each period of five consecutive hours of work. Employers are generally not required to pay employees for time spent on a meal break except where employees are required to stay at their work station or to be available for work during their break. In most jurisdictions, employees are also entitled to take one or more shorter breaks during the working day after a certain number of consecutive hours are worked.
The general requirements with respect to working hours and rest breaks above also govern shift work (see above, Working hours).
Employees are entitled to vacation with pay under employment standards legislation in each jurisdiction. Typically, employees are entitled to a minimum of two weeks' paid vacation in each year of their employment. Most employers provide annual vacation benefits that exceed this two-week minimum: three to four weeks is very common.
Provincial, territorial and federal legislation all prescribe public holidays, many of which are observed nationally. While as a general rule, employees in both the public and private sectors are entitled to take public holidays off with regular pay, employees can agree to work on a public holiday. Generally, an employee who works on a public holiday must either:
Receive a day off in lieu of the holiday.
Be paid at a premium rate for that day.
While the date and number of public holidays vary across jurisdictions, most jurisdictions prescribe nine public holidays per year. In Ontario, these are:
New Year's Day.
Family Day.
Good Friday.
Victoria Day.
Canada Day.
Labour Day.
Thanksgiving Day.
Christmas Day.
Boxing Day.
Employees are entitled under employment standards legislation to unpaid sick leave in all jurisdictions, but the length of the entitlement varies by jurisdiction. In Québec, an employee can be absent from work for a period of not more than 26 weeks over a period of 12 months for illness. The duty to accommodate imposed by human rights legislation may require an employer to provide a longer period of leave than the employment standards rules provide.
Many employers also provide employees with sick pay for a certain number of days off due to illness. However, employers are generally not legally obligated to provide employees with sick pay for periods during which they do not work.
Compensation for employees who suffer a work-related illness or injury may be available under the statutory workers' compensation regimes administered by each province.
Employers are generally not entitled to recover sick pay from the state. However, employers who offer a short term disability plan may be eligible for government Employment Insurance premium reductions.
Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?
Carers (including those of disabled children and adult dependants)?
Employees' rights and benefits under employment standards legislation during leaves of absence differ by jurisdiction. The typical protections include the right to be reinstated to a comparable position, continuation of benefits coverage, and deemed continuous service during the leave.
Employees who take maternity, parental and compassionate care leave are entitled to benefits under the federal Employment Insurance programme, which is available to all Canadian employees. Benefits are in the amount of 55% of the employee's average earnings up to a maximum of Can$485 per week (as of 2012).
A pregnant employee is entitled to 17 weeks of unpaid leave (18 weeks under Québec and Saskatchewan employment standards legislation), provided that she meets the length of service requirement in the applicable employment standards legislation. Length of service requirements differ across jurisdictions.
In Québec, an employee is entitled to five uninterrupted weeks of paternity leave without pay. This five-week period is in addition to the 52 weeks of parental leave that both parents are entitled to.
In other jurisdictions, both parents are entitled to an unpaid leave of absence of between 35 to 52 weeks, depending on the jurisdiction, provided that the employee meets the length of service requirement in the applicable legislation.
The general maternity rights described above (see above, Maternity rights) also apply to surrogate pregnancies.
Adoptive parents (father and/or mother) are entitled to an unpaid leave of absence of between 35 to 52 weeks, depending on the jurisdiction, provided that the employee meets the length of service requirement in the applicable legislation.
Similarly, new parents (father and/or mother) are entitled to an unpaid leave of absence of between 35 to 52 weeks, depending on the jurisdiction, provided that the employee meets the length of service requirement in the applicable legislation.
An employee is entitled to eight weeks (12 weeks in Québec and Saskatchewan) of unpaid compassionate care leave if a specified family member is at significant risk of death. In some jurisdictions, the leave can be extended in specified circumstances.
In addition, many employment standards statutes provide shorter leaves of absence for employees to attend to personal or family emergencies or responsibilities. For instance:
Under the Québec Labour Standards Act 1979, an employee is entitled to an unpaid leave of absence of up to ten days per year to fulfil obligations related to the care, health or education of their child or the child of their spouse, or due to the state of health of their spouse, father or mother, their brother or sister, or one of their grandparents.
The British Columbia Employment Standards Act 1996 provides employees with unpaid Family Responsibility Leave of up to five days in a year.
Many entitlements provided by employment-related statutes have eligibility requirements that are based on length of employment. For instance:
Only employees who have worked for their employers for a certain period of time are entitled to maternity and parental leave (17 weeks in Ontario, six months for employees in the federal sector).
The amount of notice of termination to which an employee is entitled under employment standards legislation is based on the employee's length of service.
In some jurisdictions, such as British Columbia and Québec, employees with a greater length of service are entitled to greater number of vacation days with pay.
Furthermore, the length of employment is an important factor considered by the courts in determining an employee's entitlement to reasonable notice of termination under the common law.
In the event that ownership of a business changes hands through a share transaction, the employees' employment is uninterrupted. This applies to both unionised and non-unionised workplaces.
On the other hand, when a business's assets are sold and the purchaser employs the vendor's employees, at common law the employees' employment with the vendor ends and a new period of employment begins when the employees accept employment with the purchaser. The employment standards statutes of most Canadian jurisdictions, including British Columbia and Ontario, modify the common law position by deeming the service of such employees to be continuous for the purposes of determining the employees' statutory entitlements (such as paid vacation and notice of termination).
In unionised workplaces, labour relations legislation in each jurisdiction generally mandate that a union's bargaining rights and any collective agreements survive the sale of business and "flow through" to the purchaser.
Generally speaking, temporary workers have the same rights as permanent employees in relation to such standards as minimum wages, maximum hours of work, overtime pay, the right to refuse unsafe work and freedom from discrimination and harassment in employment. In practice, however, temporary employees may not be in a position to take advantage of entitlements that are contingent on length of service, due to the short duration of their employment. For example, some statutory benefits such as leaves of absence, statutory holidays and notice of termination are available only to employees who have completed a certain period of employment.
Agency workers face many of the same challenges as temporary workers in accessing certain statutory benefits. The client with which the workers are placed is often deemed to be the "true employer" of agency employees on the basis that the client is the one who exercises control over the employees' work. Because agency workers are normally placed with clients only for short periods of time, they often do not accumulate enough length of service with the client to qualify for statutory benefits (where eligibility is typically based on length of employment).
The Ontario Employment Standards Act 2000 (ESA) gives explicit protection to temporary help agency employees by deeming the agency, not the client, to be the employer of agency employees and imposing on the agency the obligation to comply with the minimum standards and benefits provided by the ESA.
The federal Personal Information Protection and Electronic Documents Act 2000 (PIPEDA) protects the personal information of employees in the federal jurisdiction. In particular, PIPEDA requires employers to adhere to ten basic principles regarding the collection, use or disclosure of employees' personal information:
Accountability.
Identifying purposes.
Consent.
Limiting collection and use.
Disclosure and retention.
Accuracy.
Safeguards.
Openness.
Individual access.
Challenging compliance.
Alberta, British Columbia and Québec have also enacted legislation that protects employees' personal information. For instance, the British Columbia Personal Information Protection Act 2003 requires that an employer's collection, use or disclosure of the information must be done solely and reasonably for the purposes of recruitment, management or dismissal. The employer is also required to provide current employees with notice of the purposes for which the information is being collected, used or disclosed. If notice is not given, consent is required.
In Ontario, no privacy legislation is applicable to employers in the private sector with respect to employee data other than employees' personal health information, which is regulated by the Personal Health Information Protection Act 2004 (PHIPA). PHIPA applies when an employer obtains information directly from a healthcare provider and contains detailed requirements regarding the collection, use and disclosure of that personal health information.
Human rights legislation in every jurisdiction prohibits discrimination in employment on the basis of a number of grounds, including:
Race.
Ancestry.
Place of origin.
Colour.
Ethnic origin.
Citizenship.
Creed.
Sex.
Sexual orientation.
Age.
Record of offences.
Marital status.
Family status.
Disability.
Limitation periods for claims differ by jurisdiction. For instance, in Ontario, a claim must be filed within one year after the incident or the last in a series of incidents giving rise to the claim, whereas in British Columbia the limitation period is six months.
Human rights legislation in each jurisdiction prohibits harassment by an employer or fellow employee on the basis of similar grounds, including:
Race.
Ancestry.
Place of origin.
Colour.
Ethnic origin.
Citizenship.
Creed.
Sex.
Sexual orientation.
Age.
Record of offences.
Marital status.
Family status.
Disability.
Furthermore, other employment related statutes provide protection for employees against harassment in the workplace. For instance:
The Ontario Occupational Health and Safety Act 1990 requires employers to protect employees from workplace harassment, which is broadly defined as "engaging in a course of vexatious comment or conduct against a worker in a workplace that is known, or ought reasonably to be known, to be unwelcome".
Québec's Labour Standards Act 1979 requires employers to provide a workplace free of psychological harassment, which is defined as "vexatious behaviour in the form of repeated conduct, verbal comments, actions or gestures that are hostile or unwanted; that affect the employee's dignity or psychological or physical integrity; or that make the work environment harmful".
Under both pieces of legislation, employers are required to develop policies and procedures or management practices to identify, prevent and address workplace harassment and provide appropriate information and training to employees.
A variety of federal and provincial statutes prohibit reprisals against employees for demanding that their employers comply with legal requirements, exercising their legal rights, making complaints or reporting unlawful conduct to law enforcement officials. For example, the Ontario Occupational Health and Safety Act 1990 prohibits an employer from dismissing, disciplining or otherwise penalising employees who, among other things, raise health and safety concerns, seek enforcement of safety regulations, and refuse unsafe work.
Most notably, it is a criminal offence under the Criminal Code 1985 to threaten an employee with disciplinary action, demotion or termination in order to force the employee to refrain from providing information to law enforcement officials about the commission of an offence by the employer, its officers, directors or other employees.
An employer is required to provide an employee with reasonable notice of dismissal or payment in lieu of notice. Employment standards legislation in each jurisdiction provides minimum notice periods that employers are required to provide, based on the employee's length of service. However, under the common law (as well as Québec civil law), employees are also entitled to a period of "reasonable" notice which usually exceeds the statutory minimum. In addition to length of service, "reasonable" notice is based on other factors, for example, the employee's age, position in the company, and other factors relevant to the employee's ability to secure new employment. Although employment contracts (or collective agreements) can specify notice requirements (or pay in lieu of notice) in cases of dismissal, the parties cannot contract for anything less than the prescribed statutory minimum.
In Ontario and the federal jurisdiction, employees dismissed without cause may be entitled to severance payments in addition to notice of termination (or pay in lieu of notice). The Canada Labour Code 1985 provides that employees with 12 months of continuous service receive the greater of two days' wages at their regular wage rate for each completed year of employment, or five days' wages at their regular wage rate. In Ontario, an employee with five or more years of service will be entitled to severance pay if the employer's payroll in the province is Can$2.5 million or more or if the employer permanently discontinues the employment of 50 or more employees within a six-month period due to a permanent discontinuance of all or part of its business. Severance pay is calculated by multiplying regular weekly wages by the number of years of employment (pro-rated for a partial year), to a maximum of 26 weeks.
Notice of dismissal must be given in writing, and must be delivered personally, by registered mail, facsimile or electronic mail. Terms of employment (including benefits) cannot be altered during the applicable statutory notice period. Employees in Nova Scotia, Québec and the federal jurisdiction who are non-unionised and are non-managerial can challenge their termination if they have acquired a certain level of service. Specific procedures apply in these cases, and reinstatement can be ordered.
Generally, failure to follow employment standards can lead to fines or orders to compensate employees for losses incurred as a result of the contravention. The employee could also commence a civil action for wrongful dismissal and claim damages for losses suffered during the notice period. In these cases, remedies are compensatory, and reinstatement is not possible.
Employers can dismiss their non-unionised employees without cause, subject to notice of dismissal as discussed above (see Question 17). Only Nova Scotia, Québec and the federal jurisdiction provide non-unionised employees with some protection from unjust dismissal. Collective agreements almost always provide protection against termination without cause. It is very difficult to establish cause, and this threshold will typically only be met where an employee committed an unlawful act in the course of their duties, exhibited wilful misconduct, or was consistently insubordinate.
Employment standards legislation in each jurisdiction protects certain employees from dismissal. These include employees who take pregnancy and parental leave, as well as other leave (which varies across jurisdictions). For instance, Ontario and British Columbia also provide protected leave for the compassionate care of a family member. Employment standards legislation precludes dismissal connected in whole or in part to these protected leaves. In addition, human rights legislation provides a broad protection from any dismissal motivated (in whole or in part) by a prohibited ground of discrimination, or in reprisal for the employee's attempt to enforce their rights under human rights legislation.
Layoffs are generally understood as a period during which an employer does not provide work to an employee but where the employee also retains certain reinstatement rights. Employers typically have responsibilities towards employees during a layoff period, for example, the continuation of benefits. The period of time during which an employee can be on a layoff varies from one jurisdiction to the next. For instance, in Ontario, Newfoundland, Yukon and British Columbia, a layoff of more than 13 weeks in a 20-week period will be considered a dismissal, triggering all of the obligations discussed above (see Question 17). However, at common law, a layoff can amount to constructive dismissal unless it is specifically permitted under the terms of the employment contract, in which case the employee on layoff could sue for damages for reasonable notice.
In a non-unionised workplace, the employer is under no obligation to consult employees regarding layoffs. The employer can simply provide written notice of layoff, as opposed to dismissal, which sets out the potential recall date. There are no procedural requirements for the recall: the employer is free to decide who will be recalled as work becomes available. Conversely, in a unionised workplace, the collective agreement will typically set out detailed procedures regarding layoff and recall of employees, as well as how employees are to be notified of the layoff and recall. Collective agreements typically dictate the order in which employees will be recalled, which is normally on the basis of seniority. Collective agreements also usually include "bumping" provisions, which provide laid-off employees the right to displace (bump) into a position held by an employee with less seniority. Any obligation to consult the union with regard to collective redundancies is also negotiated in the collective agreement.
Employees are entitled to statutory termination pay (and severance pay, as the case may be) in the event that they are not recalled for work. They can also sue their employer for reasonable notice at common law as in any case of wrongful dismissal.
Employees are not entitled to be represented within management, whether as part of a board of directors or otherwise.
Employers are not required to consult with employees regarding business decisions. In non-unionised workplaces, employers are free to conduct business in a manner that suits their goals as an organisation.
However, within the union context, employers can be required during collective bargaining to disclose major management initiatives likely to affect the bargaining unit. Collective agreements can also specify other circumstances in which the employer is obligated to consult with the union.
Aside from any specific contractual obligations to individual employees, employers are free to contemplate, negotiate and execute major transactions without consulting with employees who may or may not be affected by the results of decisions made (but also see above, Consultation).
A union can apply to an arbitrator or labour board in the event that a specific duty in a collective agreement or labour relations statute is breached. These decision makers can declare that a breach has occurred, award damages and make a variety of other awards directed towards remedying the breach.
As noted above, a union can apply to an arbitrator or labour board for a remedy in relation to an employer's failure to consult employees in relation to a business transaction in certain situations.
Where the ownership of a business changes hands through a share transaction, affected employees' employment is uninterrupted. This applies to both unionised and non-unionised workplaces.
However, in an asset transaction, the common law deems employees' employment to terminate at the point of sale even if they accept new employment with the purchaser. The employment standards statutes of most Canadian jurisdictions, including British Columbia and Ontario, modify the common law position by deeming the service of such employees to be continuous for the purposes of determining the employees' statutory entitlements (that is, paid vacation and notice of dismissal).
In unionised workplaces, successorship provisions in labour relations legislation generally mandates that a union's bargaining rights and any collective agreements survive the sale of business and flow through to the purchaser.
Employees are not specifically protected from dismissal either before or after a business transfer. However, as noted above (see above, Automatic transfer of employees), employment standards legislation ensures that a sale of a business does not interrupt an employee's length of service for the purpose of calculating their entitlement to statutory benefits.
Harmonisation of the terms of employment of a vendor's employees with the existing employees of the purchaser is not required. Instead, the terms of the employment contract will depend on the outcome of any negotiations that take place between employees and the purchaser. However, in practice many purchasers offer a vendor's employees substantially similar employment as a result of terms reached between the corporate parties in the transaction in an effort to minimise liability for dismissal pay and other employee entitlements.
An employer can be liable for the acts of its employees?
A parent company can be liable for the acts of a subsidiary company's employees?
Employers can be liable for the negligent or intentional conduct of their employees if the conduct is sufficiently related to the employee's duties or if it is sufficiently related to conduct authorised by the employer.
A parent company can be liable for the conduct of a subsidiary's employees in certain cases depending on the proximity of the relationship between the two corporate entities. Where the parent exercises significant control, a court can "pierce the corporate veil" between the two entities, making the parent company liable for wrongful acts of the subsidiary's employees.
Employers have a legal responsibility to provide and maintain a safe and healthy working environment for their employees. They are required to take all reasonable steps to ensure the health and safety of their employees. Therefore, employers have various obligations regarding the design, installation, operation, use or maintenance of protective devices, machinery, equipment, buildings and structures, among other things. Each jurisdiction prescribes its own detailed standards regarding workplace health and safety.
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Residents and non-residents are taxed on their employment income under the Income Tax Act (Canada) 1985 (Income Tax Act). Non-residents of Canada may be eligible for full or partial relief from Canadian taxation if they are resident in a country with which Canada has a double taxation treaty.
Canadian nationals who are considered residents for the purposes of the Income Tax Act will be taxed on any employment income earned while working abroad. For the purposes of the Income Tax Act, an individual may be considered resident if, among other things, they have certain ties to Canada including:
A home in Canada.
A spouse or common-law partner in Canada.
Personal property in Canada.
Social ties in Canada.
Canadian nationals may obtain relief from double taxation under applicable bilateral tax treaties. Foreign tax credits may also be available to a Canadian national to reduce the amount of tax owing.
Canada has a progressive taxation rate system. The top federal tax rate for individuals in 2012 is 29%. Provincial tax rates apply in addition to the federal rate and vary by province. In 2012, Ontario's top marginal rate is 12.16%, Québec's is 24% and Alberta's is 10%.
Canada and its provinces also impose taxes on payroll. Federally, payroll taxes include contributions to the Canada Pension Plan and Employment Insurance. The maximum "pensionable earnings" for the Canada Pension Plan is Can$50,100: the maximum contribution in 2012 by an employee is Can$2,306.70 and by an employer is also Can$2,306.70. The maximum "insurable earnings" for Employment Insurance purposes is Can$45,900: the maximum contribution in 2012 by an employee is Can$839.97 and by an employer is Can$1,175.95 (1.4 times the employee contribution). Relief from these taxes for foreign nationals working in Canada may be available under an applicable tax treaty.
In every jurisdiction except Québec, employees make pension contributions to the Canada Pension Plan. Employees in Québec make pension contributions to the Québec Pension Plan. Employee contribution rates are 5.025% and 4.95% under the Quebec Pension Plan and Canada Pension Plan respectively of employment earnings up to the year's maximum pensionable earnings. Employer pension contributions are at the same rate as that for the employee.
Contributions to the Canada/Québec Pension Plan are treated on a tax deductible basis.
The Canada/Québec Pension Plan provides 25% of average monthly pensionable earnings adjusted in relation to the average year's maximum pensionable earnings in the year of retirement and the preceding four years. The maximum monthly pension payable under either pension plan in 2012 is Can$986.67.
Is linked to the employee's salary?
Is linked to employer and/or employee contributions and investment return on those contributions?
Many Canadian employers provide supplementary pension plans to employees even though this is not legally required. These plans come in two basic designs: defined benefit plans and defined contribution plans.
Under a defined benefit plan, a pension's value is linked directly to an employee's salary. Defined benefit plans are decreasing in popularity among Canadian employers.
It is increasingly common for employers to offer defined contribution plans. The value of these plans is linked to contributions made by the employer and/or employee and, more importantly, the return on investment income.
Regulators in each jurisdiction administer and enforce pension legislation. There is also a reciprocal agreement between pension regulators that enables them to administer the pension standards legislation of the other jurisdictions on a co-ordinated basis.
Pension plans in Canada are governed by the federal Income Tax Act 1985 and provincial pension standards statutes. All provinces (except Prince Edward Island) have this type of legislation. There is similar federal legislation which covers federally regulated employees and employers as well as employers and employees in the three territories.
Supplementary pension plans receive favourable tax treatment. All pension plans must be registered in order to operate and receive tax-favoured treatment. The income tax system is integrated in order to equalise the tax limits for defined contribution and defined benefit plans. The Income Tax Act 1985 also prescribes contribution limits and benefit levels.
Employer pension contributions to supplementary pension schemes are generally tax deductible.
Employee pension contributions to supplementary pension schemes are generally tax deductible.
Most jurisdictions in Canada have enacted rules and regulations that set out pension rights that apply in the event of a business transfer. In particular, most jurisdictions allow for both pensions assets and liabilities to transfer from a vendor's pension plan to a purchaser's. These rules also dictate that a new plan must recognise an employee's previous years of service for the purpose of determining both eligibility and vesting rights.
Pension rights accrued with the vendor employer can be preserved in various ways. In the event that the pension plan remains with the vendor, the employee can continue to retain their benefits under the previous plan. These benefits will not be engaged until the individual employee retires or ends their employment with the purchasing business. At this time, the employee can ordinarily exercise several options, including moving the funds to a Registered Retirement Savings Plan or other pension plan. Pension rights can also be preserved through a direct transfer of the benefits to the purchaser's pension plan.
Employees who are working abroad?
Employees of a foreign subsidiary company?
It is possible for employees who work abroad to participate in a pension scheme established by a parent company in Canada. However, employees who work abroad are generally entitled to participate for a maximum of five years.
An employee of a foreign subsidiary company will not be able to participate in a pension scheme established by a parent company in Canada unless the employee was first employed in Canada and was subsequently transferred to another location. As described above, such an employee would only be entitled to participate in a plan for a maximum of five years.
The federal Bankruptcy and Insolvency Act 1985 establishes a super priority in an insolvency situation in favour of plan members for current service contributions. This protection does not extend to provide protection to pension plan members with respect to unfunded liabilities.
Canadian employers commonly reward employees through contractual or discretionary bonuses for their individual performance and their contribution to company objectives. There are no restrictions or guidelines on the type or size of bonuses that can be awarded to employees, but the size and type of the bonus will impact the income tax consequences for the employee.
The employer generally owns the copyright in literary, dramatic, musical or artistic works created by individuals if they are employed under a contract (that is, they are not a freelancer) and the work was created in the course of that employment. In order to be created in the course of employment, the creation of the literary, dramatic, musical or artistic work must be contractually required.
Employees who invent something during the course of their employment are presumed to own the intellectual property rights in their invention unless there is an express term to the contrary in their employment contract, or they were employed for the purposes of inventing. In determining whether an employee is retained for inventing, the courts will consider a number of factors, including:
The express reason for employment.
The employee's prior history of inventions.
The existence of incentives from the employer for inventing.
Any directions from the employer that led to the development of the invention.
Any help sought from the company in the course of making the invention.
The existence of any term of employment preventing the employee from using ideas for their own benefit.
Employers can restrict an employee's activities during employment through clauses which limit an employee's ability to hold other employment. These clauses can require exclusive service to the employer or prohibit holding other employment that would result in a conflict of interest. Clauses can be included in a written employment contract or be contained in employer policies.
The enforceability of these clauses depends on the level of restriction imposed on the employee. Broad clauses restricting employees from holding any other employment regardless of the nature and character of that employment are unlikely to be enforceable, while specific clauses that prohibit working with competitors or holding employment that is likely to result in a conflict of interest are more likely to be enforceable.
Employers can restrict post-employment activities through restrictive covenants that limit or prohibit competition with the employer's business or the solicitation of customers, suppliers, employees or contractors. Restrictive covenants in employment agreements are prima facie unenforceable unless the covenant is reasonable between the parties and in relation to the public interest, and the terms are unambiguous. In determining whether the covenant is reasonable, courts will consider whether the employer has a proprietary interest to be protected and whether the covenant is reasonable in terms of the activity restricted and the duration and scope of the restriction.
Employers can also attempt to limit post-employment activities through the use of confidentiality clauses. Confidentiality clauses limiting the use and disclosure of non-public, proprietary information about the employer's business during and post-employment are generally enforceable.
There is no obligation for an employer to pay a former employee while they are subject to a post-employment restrictive covenant or confidentiality clause, but a restrictive covenant or confidentiality clause will only be valid if consideration was provided at the time the covenant/clause was imposed.
In late 2011, Bill 96 was introduced in the Nova Scotia legislature to repeal the existing Pension Benefits Act and replace it with a new act. The provisions of Bill 96 include enhanced disclosure requirements, new surplus entitlement and withdrawal rules, contribution holidays where sufficient surplus levels and authorised by plan terms, and phased in retirement. Bill 96 received Royal Assent on December 15, 2011 but has not yet been proclaimed into force.
In Prince Edward Island, Bill 41 was introduced in May 2012. If passed, the resulting Pension Benefits Act will be the first legislation governing private sector pension plans in the province. It is similar to Nova Scotia’s Bill 96, but is considered more employer-friendly as it does not provide for grow-in benefits or additional employer funding obligations on plan wind up.
In April 2012, Bill 38 was introduced to amend the British Columbia Pension Benefits Standards Act. If passed, Bill 38 would bring significant changes to British Columbia’s pension regime, including enhanced plan member disclosure requirements, requirements for plan administrators to establish governance and funding policies, and a distinction between excess assets over liabilities in an ongoing plan (actuarial excess) and excess assets over liabilities in a terminated plan (surplus).
The government of New Brunswick introduced Bill 63 in May 2012 to support a new pension model called Shared Risk Pension Plans. The model was developed by the New Brunswick Task Force on Protecting Pensions in collaboration with union leadership, and has received support from several public and private sector plan sponsors.
In Ontario, a Bill was tabled in June 2012 to amend the Labour Relations Act 1995 to allow unions and employers to apply for interest arbitration in a long lockout or strike where conciliation or mediation has failed. The Ontario Labour Relations Board would be empowered to order interest arbitration for all outstanding issues if it determines that the strike or lockout has been ongoing for 180 days and a collectively bargained settlement is unlikely within 30 days. If the Board orders interest arbitration, the strike or lockout would be immediately brought to an end, employees would be reinstated on terms and conditions of employment frozen at the pre-labour dispute levels, and the dispute would be referred to interest arbitration. The parties would be given the opportunity to agree on a private arbitrator, but failing agreement the Labour Relations Board would appoint one. A decision would have to be rendered within 45 days and is binding on the parties for a period of two years. As these amendments have been proposed in a private member’s Bill, it is far from certain that they will become law.
*The authors wish to thank Sara Boule-Perroni, Benoit Brouillette, Bonny Mak, Christian Paquette, Christopher Pigott, and Sharaf Sultan for their invaluable assistance in preparing this chapter.
Description. Website provided by CanLII, a non-profit organisation managed by the Federation of Law Societies. Includes statutes, regulations, court decisions and some tribunal decisions from every Canadian jurisdiction. Reproduces consolidations of statutes and regulations as published by official printers. Available in French and English.
http://laws-lois.justice.gc.ca/eng/
Description. Online source of consolidated Acts and regulations of Canada. Updated weekly. Available in French and English.
T +1 416 360 3529
F +1 416 360 8425
E bburkett@heenan.ca
W www.heenanblaikie.com
Qualified. Ontario, Canada, 1978
Areas of practice. Collective agreement interpretation and negotiation; strategic advice; labour relations board proceedings; international labour law.
Recent transactions
T +1 416 360 3527
F +1 416 360 8425
E jcraig@heenan.ca
W www.heenanblaikie.com
Qualified. Ontario, Canada, 1999
Areas of practice. Labour and employment law; international labour law; pension law and governance; human rights; privacy.
Recent transactions
