Employment and employee benefits in Canada: overview

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: employment status; background checks; 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; 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 global guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-guide.

Brian W Burkett, John D R Craig and Christopher D Pigott, Fasken Martineau DuMoulin LLP
Contents

Scope of employment regulation

1. Do the main laws that regulate the employment relationship apply to:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Laws applicable to foreign nationals

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.

Laws applicable to nationals working abroad

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.

 

Employment status

2. Does the law distinguish between different categories of worker? If so, what are the requirements to fall into each category, the material differences in entitlement to statutory employment rights and are there any maximum time periods for which each category of worker can be engaged?

Categories of worker

Canadian law distinguishes between employees (who are engaged under a contract of service) and independent contractors (who are engaged under a contract for services).

Statutes that confer rights or obligations on employees and employers usually contain definitions of those terms. However, there is no widely applicable legal definition of "independent contractor", and at times it can be difficult to distinguish an independent contractor relationship from an employment relationship.

The key indicator of independent contractor status is that the person who is engaged to perform the services does so as a person on their own account. Factors which would indicate an employment relationship, rather than an independent contractor relationship, include:

  • Where the worker provides services exclusively to the principal.

  • Where the worker is subject to the control of the principal not only with respect to the work to be done, but also with respect to when, where and how the work will be performed.

  • Where the worker does not have an investment or interest in the "tools" relating to his service.

  • Where the worker does not undertake any risk in the business sense or, alternatively, does not have any expectation of profit associated with the delivery of the service as distinct from a fixed commission.

  • Where the worker does not own a share of the business for which they are working.

Entitlement to statutory employment rights

Employees are protected by employment standards legislation with respect to matters such as hours of work, overtime, paid vacation and notice of termination, while independent contractors are not protected by these provisions.

Businesses that retain independent contractors do not have to withhold income tax or other employment-related statutory deductions, or provide workers' compensation coverage and other health, insurance or pension-related benefits, in respect of these individuals. In turn, independent contractors can claim business-related expenses to offset gross income. However, contractors must pay all applicable employment insurance, taxes and other government remittances in respect of themselves and their employees, and cannot claim government employment insurance benefits after a job has ended or the contract for services has terminated.

Relationships involving a dependent contractor have an "intermediate status" between independent contractor and employment. Persons holding this intermediate status, which is characterised by economic dependence, are deemed to be employees for the purposes of some legislation, and are protected by the requirement to provide reasonable notice of termination.

Time periods

Most employment and contractor relationships are not subject to a maximum legal duration. However, an employer who wishes to minimise its termination liability by engaging temporary employees should ensure that the employment does not continue beyond the expiry of the term or the completion of the task, and that the temporary employees are not engaged for repetitive or automatic extended terms. Statutory notice is required if the employment ends before the term expires or the task is completed, or if the employment continues beyond the expiry of the term or the completion of the task.

 

Recruitment

3. Are any grants or incentives available for employing people? Does any information/paperwork need to be filed with the authorities or given to new employees when employing people?

Grants or incentives

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.

Filings

An employer wishing to participate in the Canada Youth Employment Strategy or similar federal initiative should apply through Service Canada online (www.servicecanada.gc.ca). 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.

 

Background checks

4. Are there any restrictions or prohibitions on carrying out background checks in relation to applicants?

Human rights legislation across Canada, as well as privacy legislation in the federal jurisdiction, Québec, British Columbia and Alberta, limits the pre-employment screening of potential candidates. Background checks that could disclose information related to a prohibited ground of discrimination (for example, health inquiries) should be conducted only after a conditional offer of employment has been made, preferably in writing. Candidates should be informed at the beginning of the recruitment process that a satisfactory background check will be a condition of employment.

To lawfully take into account information that relates to a prohibited ground of discrimination in the pre-employment context, an employer must show (on the very high standard of "undue hardship") that the personal characteristic was a bona fide occupational requirement for the job.

Only inquiries and background checks that are reasonably connected to the requirements of the job should be made. For example, consumer credit information should be obtained only where the candidate will be acting in a position of trust with financial responsibility. Informed consent should be obtained from the individual before conducting any background check.

Employers in British Columbia, Ontario, Québec, Prince Edward Island and the federal jurisdiction are restricted in terms of how they consider a potential employee's criminal records. In Ontario, for example, an employer cannot refuse to hire an employee because of a past criminal conviction if a pardon has been granted. Medical assessments to check a person's ability to perform the essential duties of a job should occur only after a conditional offer of employment has been made.

Medical testing should be done only to obtain information relevant to the applicant's ability to perform the essential duties of the job, any restrictions that may limit this ability and any reasonable accommodation that the employer can provide to enable the applicant to perform those duties.

Employers frequently retain third parties to conduct background checks. This is permissible, but the employer should ensure that any checks comply with the applicable law.

 

Permission to work

5. What prior approvals do foreign nationals require to work in your country? What information/paperwork needs to be kept or filed with the authorities when they start work?

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.

Visa

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 temporary resident 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$100 (single entry), Can$100 (multiple entry) and Can$500 (family rate).

Time frame. This varies greatly depending on the country of application and the visa office's caseload at the time of the application. A temporary visa can be renewed in Canada. However, the application must be made before the expiry of the individual's latest permit.

Further, if an individual makes a visa application while in Canada and subsequently leaves Canada before a final determination is made, then they may lose any implied status to remain in Canada while the application is being processed. The individual will then need to make any subsequent visa application outside of Canada at the appropriate Canadian embassy or consulate.

Sanctions. There are no sanctions for making an application at a specific office or for abandoning an application. However, there are strict sanctions for misrepresentation to Citizenship and Immigration Canada for a fixed period of time, including imprisonment.

Permits

Procedure for obtaining approval. Securing a work permit is often a two-step process. First, the applicant's job offer from a Canadian employer must be confirmed by Employment and Social Development Canada (ESDC), a federal government agency. ESDC will then issue a Labour Market Impact Assessment (LMIA). The employer seeking to obtain an LMIA 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. Employers must carry out a comprehensive recruitment process for Canadians and permanent residents of Canada before applying for an LMIA.

If a positive LMIA is obtained, the foreign national can apply for a work permit from Citizenship and Immigration Canada (CIC), which will allow the applicant to work in Canada for a defined period.

However, there are significant exemptions from the need to follow a two-step process. 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, professional, 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 LMIA 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$1,000 per individual LMIA and Can$155 per work permit.

Time frame. For LMIA applications submitted inside Canada, the time frame is generally unpredictable, ranging from a couple of weeks to a few months. The processing time frame is dependent on caseload. However, the ESDC has pledged to process certain LMIA applications within ten days.

Sanctions. There are strict sanctions for misrepresentation to ESDC or Citizenship and Immigration Canada (CIC) which can include:

  • Financial penalties.

  • A bar from entering Canada.

  • Imprisonment.

This includes misrepresentation with respect to the terms of any job offer and with respect to any request made by CIC or ESDC.

Employers also face ongoing obligations to comply with all restrictions regarding the terms of employment provided by ESDC in a LMIA. Employers can accordingly be subject to audits, and failure to demonstrate compliance can result in financial penalties and a bar from hiring foreign workers.

Other

Procedure for obtaining approval. Foreign nationals can also apply to be permanent residents of Canada. There are several categories under which individuals can apply for permanent residency. This includes Canada's Federal Skilled Worker programme, Canadian Experience Class, and through certain familial sponsorship. These programmes began undergoing significant change in 2015. Certain provinces also have provincial nominee programmes, which allow a provincial government to sponsor desirable applicants for permanent residency. Depending on the jurisdiction, individuals can also obtain work permits pending residency. Permanent residency must be renewed every five years, and is subject to a requirement of remaining physically present in Canada for a minimum of 730 days out of every five-year period.

Cost. Immigration fees are category dependent. The fees range from Can$475 to Can$1,050 for the initial applicant, with additional fees for dependants and for landing as a permanent resident.

Time frame. Approval for permanent residency can take anywhere from 12 months to several years, depending on the category under which an application is made and the location in which an application is being processed. Nomination approvals at the provincial level can take anywhere from three months to over one year.

Sanctions. There are strict sanctions for misrepresentation to provincial nomination authorities or to Citizenship and Immigration Canada. Penalties can be severe and can include:

  • Financial penalties.

  • A bar from entering Canada for a fixed period of time.

  • Imprisonment.

The obligation not to misrepresent extends not only to the applicant but also to any individual who assists an individual in a misrepresenting application to Citizenship and Immigration Canada.

 

Restrictions on managers and directors

6. Are there any restrictions on who can be a manager or company director?

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.

Age restrictions

Persons who are less than 18 years of age are disqualified from being a director of a corporation.

Nationality restrictions

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.

Other restrictions

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).

 

Regulation of the employment relationship

7. How is the employment relationship governed and regulated?

Written employment contract

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.

Canada is an officially bilingual country with French and English speaking populations. With the exception of the province of Québec, there are no rules governing the language of employment contracts. In all provinces except Québec, employment contracts are most often drafted in English.

In the province of Québec, French is the everyday language of work, education, communication, commerce and business. By virtue of the Québec Charter, French is the official language of Québec. As such, the Québec law recognises that employees have the right to carry on their activities in French and it requires the use of French in relation to employment matters and employee relations. However, the Québec Charter does not require employment contracts to be exclusively written in French. Employment contracts, provided they are "tailor-made" and not pre-determined by one party or non-negotiable, can be drawn up in English. Only contracts pre-determined by one party must be written in French. However, a unilingual English version is allowed provided that both parties agree. In that case, the parties should include a typical "language clause" in the contract which states that the parties agreed to have the contract written in English.

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 (see below, Implied terms).

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.

  • The employee continued working after the termination date specified in the contract.

Implied terms

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.

Collective agreements

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 2015, 31.8% of Canadian employees were union members or covered by a collective agreement. This reflects a slight increase from 2014, when 31.5% of Canadian employees were union members or covered by a collective agreement.

 
8. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment?

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.

 

Minimum wage

9. Is there a national (or regional) minimum wage?

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 October 2016, the minimum wage was Can$11.40 per hour in Ontario and Can$10.75 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$9.20 per hour.

 

Restrictions on working time

10. Are there restrictions on working hours? Can an employee opt out on either an individual or collective basis?

Working hours

Employment standards legislation in each jurisdiction 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.

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.

Rest breaks

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.

Shift workers

The general requirements with respect to working hours and rest breaks above also govern shift work (see above, Working hours).

 

Holiday entitlement

11. Is there a minimum paid holiday entitlement?

Minimum paid holiday entitlement

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.

Public holidays

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.

 

Illness and injury of employees

12. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Who pays the sick pay and, if the employer, can it recover any of the cost from the government?

Entitlement to paid time off

Many employers also provide employees with sick pay for a certain number of days off due to illness. However, employers are generally not legally obliged 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.

Government employment insurance sickness benefits may be available to employees whose normal weekly earnings are reduced by more than 40% because of non-occupational sickness, injury or quarantine.

Entitlement to unpaid time off

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.

Recovery of sick pay from the state

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.

 

Statutory rights of parents and carers

13. What are the statutory rights of employees who are:
  • 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$537 per week (as of 2016).

Maternity rights

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.

Paternity rights

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 "parental" 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. Length of service requirements differ across jurisdictions. As noted above, employees who take parental leave are usually entitled to Employment Insurance benefits for some or all of their leave.

Surrogacy rights

The general maternity rights described above (see above, Maternity rights) also apply to surrogate pregnancies.

Adoption rights

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. Length of service requirements differ across jurisdictions.

Parental rights

New parents (father and/or mother) are entitled to an unpaid parental leave of absence of between 35 to 52 weeks each, depending on the jurisdiction, provided that the employee meets the length of service requirement in the applicable legislation.

Caregivers' rights

An employee is entitled to eight weeks (up to 16 weeks in Québec and Saskatchewan and up to 104 weeks in Québec where the patient is a child) 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.

Human rights legislation prohibits discrimination in employment because of family status. This has been interpreted to require employers to provide an unpaid leave of absence to accommodate employee childcare and eldercare responsibilities.

 

Continuous periods of employment

14. Does a period of continuous employment create any statutory rights for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer?

Statutory rights created

Many entitlements provided by employment-related statutes have eligibility requirements that are based on length of employment. For example:

  • 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 a 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 or civil law.

Consequences of a transfer of employee

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, although the purchaser may inherit the existing length of service of continuing employees. The employment standards statutes of most Canadian jurisdictions deem 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). The traditional common law position that employees start as new employees with the purchaser has been eroded, and purchasers who are not willing to recognise service for common law purposes should be explicit.

In unionised workplaces, labour relations legislation in each jurisdiction generally mandates that a union's bargaining rights and any collective agreements survive the sale of business and "flow through" to the purchaser.

 

Fixed term, part-time and agency workers

15. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees? To what extent are part-time workers entitled to the same rights and benefits as full-time workers?

Temporary workers

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.

  • Freedom from discrimination and harassment in employment.

However, in practice, 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.

The statutory obligation to give notice of termination (or pay instead) can be avoided by hiring on a fixed-term or task basis. In Ontario, for example, an employer can dismiss an employee who has been hired for a definite term of 12 months or less, or for a specific task that will take 12 months or less to complete, when the contract or task ends without having to provide statutory notice. Statutory notice is required if the employment ends before the term expires or the task is completed, or if the employment continues for three months or more beyond the expiry of the term or the completion of the task.

An employer who hires an employee for a specific task, such as the completion of a particular project, or for a specific term, such as the busy retail holiday season, can also avoid being held liable for the common law reasonable notice requirement if the task is finite and well defined.

Fixed-term contracts should be recorded in writing and used selectively. They are not appropriate as a general device to avoid notice of termination for all employees and are best restricted to hiring for specific, temporary needs.

A fixed term or task employee who continues to work after the contract expires may become an indefinite term employee entitled to statutory and reasonable notice of termination. Under Ontario law, for example, a fixed term employee becomes entitled to statutory notice if the employment continues for three months or more after the term expires. Similarly, a series of rolling, fixed-term contracts may be disregarded by a court or other tribunal on the grounds that the employee has in reality become an indefinite employee.

Agency workers

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.

Part-time workers

Canadian employment law does not draw a clear distinction between full-time and part-time employment, nor does it establish a fixed threshold of hours after which an employee is considered to work full-time. However, it is not unusual for employers to establish what they mean by full-time and part-time employees and to provide different benefits based on that status. 30 hours each week is commonly used to differentiate full-time from part-time employment (that is, employees working 30 hours or more are considered full-time, and those working less are considered part-time), although an employer can use a different threshold if appropriate for the job.

 

Data protection

16. Are there any requirements protecting employee privacy or personal data? If so, what are an employer's obligations?

Employees' data protection rights

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 example, 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.

Employers' data protection obligations

In the federal jurisdiction and in the provinces of British Columbia, Alberta and Québec, an employer's collection, use or disclosure of employee personal information must be done solely and reasonably for the purposes of recruitment, dismissal or management of the employment relationship. The employer is also required to provide employees with notice of the purposes for which their personal information is being collected, used or disclosed. If notice is not given, consent is required.

In these privacy jurisdictions, employees should be notified in advance if their personal information will be transferred out of the country for storage, processing or any other purpose. If data will be transferred to the United States, the notice should include a statement that such personal information may be available to the US government or its agencies under US law. Outside British Columbia, Alberta, Québec and the federal jurisdiction, no privacy legislation is binding on employers in the private sector with respect to employee data, other than employees' personal health information. Access to personal health information is regulated by specific legislation that applies when an employer obtains information directly from a healthcare provider. This legislation contains detailed requirements regarding the collection, use and disclosure of personal health information.

 

Discrimination and harassment

17. What protection do employees have from discrimination or harassment, and on what grounds?

Protection from discrimination

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.

  • Gender identity.

  • Gender expression.

  • 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.

Protection from harassment

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.

  • Gender identity.

  • Gender expression.

  • 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 example:

  • 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 must develop policies and procedures or management practices to identify, prevent and address workplace harassment and provide appropriate information and training to employees.

 

Whistleblowers

18. Do whistleblowers have any protection?

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.

  • 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.

 

Termination of employment

19. What rights do employees have when their employment contract is terminated?

Notice periods

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. For example, in Ontario, an employer must provide employee notice of termination equal to one week per year of service up to a maximum of eight weeks' notice. 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. Courts have found that anywhere between two and six weeks' notice of termination should be given per year of service based on these factors, and in some cases have found that long-service employees may be entitled to up to around 24 months' notice of termination. 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.

Severance payments

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' continuous service receive the greater of either:

  • Two days' wages at their regular wage rate for each completed year of employment.

  • 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 either:

  • The employer's payroll is Can$2.5 million or more.

  • 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.

Procedural requirements for dismissal

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 can 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.

 
20. What protection do employees have against dismissal? Are there any specific categories of protected employees?

Protection against dismissal

Employers can dismiss their non-unionised employees without cause, subject to notice of dismissal as discussed above (see Question 19). 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.

Protected employees

Employment standards legislation in each jurisdiction protects certain employees from dismissal. These include employees who take pregnancy and parental leave, as well as other protected leaves of absence (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 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.

 

Redundancy/layoff

21. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Are there special rules relating to collective redundancies?

Definition of redundancy/layoff

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 19). 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. A separate concept of "redundancy" does not exist in Canada.

Procedural requirements

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.

Redundancy/layoff pay

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.

Only a few jurisdictions provide for severance pay, which some employees may be entitled to receive in addition to notice of termination (or pay in lieu of notice). For example, in Ontario employees who have five or more years of service and work for an employer with a payroll greater than Can$2.5 million are entitled to severance pay equal to one week's regular salary for each year of service, up to a maximum of 26 weeks.

Collective redundancies

Special rules apply to the calculation of the statutory notice period when a collective redundancy occurs. The threshold for group dismissals and the applicable notice periods vary among jurisdictions. Federally, for example, a group dismissal occurs when there are 50 or more dismissals within a four-week period in a single establishment. In Saskatchewan, ten or more dismissals within a four-week period will trigger the group dismissal requirements. In the event of a group dismissal, the employer may also be required to give notice to government authorities.

In some jurisdictions, the law prescribes adjustment procedures that require the employer to consult with employees (or their representatives). For example, in the federal jurisdiction, employers who dismiss 50 or more employees within a period of four weeks must co-operate in the establishment of a joint planning committee. The committee has a mandate to endeavour to eliminate the necessity of termination of employment or to minimise the impact, and to assist in job search activities.

 

Employee representation and consultation

22. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? What does consultation require? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?

Management representation

Employees are not entitled to be represented within management, whether as part of a board of directors or otherwise.

Consultation

Employers are not required to consult with employees regarding business decisions (except where required in the case of collective redundancies (see Question 21, Collective redundancies)). 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 obliged to consult with the union.

Major transactions

Aside from any specific contractual obligations to individual employees or trade unions, 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).

 
23. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?

Remedies

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.

Employee action

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.

 

Consequences of a business transfer

24. Is there any statutory protection of employees on a business transfer?

Automatic transfer of employees

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). The common law has evolved toward recognising continuity of service, absent a contractual term to the contrary.

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.

At common law, an employee cannot be transferred from one employer to another under a sale of business without the employee's consent. Therefore, in an asset sale, non-unionised employees are not required to accept an offer of employment with the purchaser, although refusal of continued employment will often greatly impact common law termination entitlements. Further, an employee's refusal to accept an offer of employment with the purchaser will not constitute a resignation from his or her employment with the seller, but as previously noted may impact common law termination entitlements.

Similarly, in most jurisdictions (Alberta being a notable exception), unionised employees have the option of remaining with the seller or following their jobs to the purchaser/successor employer. There may be no benefit to retaining employee status with the seller employer, particularly when there has been a full sale of a business. However, that ultimately depends on the particular terms of the relevant collective agreement. In either a full or partial sale scenario, unionised employees' rights are determined by the applicable collective agreement that will bind both the selling employer and the successor employer upon the completion of the sale transaction.

Protection against dismissal

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 employment terms

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.

 

Employer and parent company liability

25. Are there any circumstances in which:
  • 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?

Employer liability

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.

Parent company liability

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.

 

Employer insolvency

26. What rights do employees have on the insolvency of their employer? Is there a state fund which guarantees repayment of certain employment debts?

Employee rights on insolvency

Priority liens have been created in Canadian insolvency law to protect workers' wages and pension plan contributions. These liens give employees a super priority with respect to certain wage arrears, statutory vacation pay and expense reimbursement. These claims rank ahead of most other creditors' claims. The wage and vacation pay lien is over the employer's current assets, while the pension lien is over all of the employer's assets.

In unionised workplaces, collective agreements continue to apply in the event of insolvency. Any changes to terms and conditions of employment must be negotiated with the union. A debtor company that is a party to a collective agreement and is unable to reach a voluntary agreement with the union to revise the collective agreement can apply for a court order authorising the employer to serve notice to bargain on the union. A court will issue the order only if it is satisfied that:

  • A viable compromise or arrangement could not be made in respect of the company, taking into account the terms of the collective agreement.

  • The company has made good faith efforts to renegotiate the provisions of the collective agreement.

  • A failure to issue the order is likely to result in irreparable damage to the company.

If notice to bargain is served but the employer and the union do not agree on a compromise, the debtor employer must continue to apply the unamended collective agreement.

State guarantee fund

The federal Wage Earner Protection Programme (WEPP) offers compensation to employees who are owed money by an employer who becomes bankrupt or goes into receivership. An individual can apply under the programme if:

  • Their employment ends.

  • The employer has filed for bankruptcy or is subject to receivership.

  • The employee is owed wages, vacation pay, termination or severance pay from the former employer.

  • The amounts owing were earned during the "eligibility period". The eligibility period starts six months before a restructuring event and ends on the date of bankruptcy or receivership.

Eligible individuals may receive a WEPP payment to compensate them for unpaid wages, vacation, severance and termination pay earned during the eligibility period. The maximum payment is equal to four weeks' insurable Employment Insurance (EI) earnings (Can$3,907.68 for 2016). WEPP payments are subject to a reduction of 6.82%, and are further reduced by any amount that the individual receives from other parties with respect to eligible wages after the date of bankruptcy or receivership.

WEPP only covers wage claims that arise upon bankruptcy or receivership. It does not apply in proceedings conducted under the Companies' Creditors Arrangement Act.

 

Health and safety obligations

27. What are an employer's obligations regarding the health and safety of its 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.

 

Taxation of employment income

28. What is the basis of taxation of employment income for:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Foreign nationals

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.

Nationals working abroad

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.

 
29. What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?

Rate of taxation on employment income

Canada has a progressive taxation rate system. The top federal tax rate for individuals in 2016 is 33%, and the rates are applied as follows:

  • 15% on the first Can$45,282 of taxable income.

  • 20.5% on the next Can$45,281 of taxable income.

  • 26% on the next Can$49,825 of taxable income.

  • 29% on the next Can$59,612 of taxable income.

  • 33% on taxable income over Can$200,000.

Provincial tax rates apply in addition to the federal rate and vary by province. In 2015, Ontario's top marginal rate is 13.16%, Québec's is 25.75% and Alberta's is 15%.

Social security contributions

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 in 2016 is Can$54,900:

  • The maximum contribution in 2016 by an employee is Can$2,544.30.

  • The maximum contribution in 2016 by an employer is also Can$2,544.30.

The maximum "insurable earnings" for Employment Insurance purposes is Can$51,300:

  • The maximum contribution in 2017 by an employee will be Can$836.19.

  • The maximum contribution in 2017 by an employer will be Can$1,170.67 (1.4 times the employee contribution).

Relief from these taxes for foreign nationals working in Canada may be available under an applicable double tax treaty.

 

Bonuses

30. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded, whether generally or in particular sectors?

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.

 

Intellectual property (IP)

31. If employees create IP rights in the course of their employment, who owns the rights?

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 are recommended to have employees confirm by agreement the ownership and transfer of IP rights.

 

Restraint of trade

32. Is it possible to restrict an employee's activities during employment and after termination? If so, in what circumstances can this be done? Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

Restriction of activities

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.

Post-employment restrictive covenants

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. If the covenant is imposed at the point of hire, then the offer of employment is sufficient consideration. However, if the covenant is imposed at a later date, an additional payment or benefit to the employee will be required.

 

Proposals for reform

33. Are there any proposals to reform employment law in your jurisdiction?

In early 2015, the Ontario Government launched "The Changing Workplaces Review", a comprehensive review that is considering how Ontario's employment standards and labour relations legislation could be amended to adapt to the changing economy. In July 2016, the Ministry of Labour released an Interim Report based on this review that outlines a range of options to amend the Labour Relations Act 1995 and the Employment Standards Act 2000. The review's special advisors are inviting organisations to provide feedback on the options of the Interim Report until October 2016. It remains to be seen whether this review process will result in significant legislative change.

The authors wish to thank Rachel Younan and Alyssa LeBlanc for their invaluable assistance in preparing this chapter.

 

Online resources

Canadian Legal Information Institute (CanLII)

W www.canlii.org

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.

Department of Justice Canada Laws website

W http://laws-lois.justice.gc.ca/eng/

Description. Online source of consolidated Acts and regulations of Canada. Updated weekly. Available in French and English.



Contributor profiles

Brian W Burkett

Fasken Martineau DuMoulin LLP

T +1 416 865 4466
F +1 416 364 7813
E bburkett@fasken.com
W www.fasken.com

Qualified. Ontario, Canada, 1978

Areas of practice. Collective agreement interpretation and negotiation; strategic advice; labour relations board proceedings; international labour law.

Recent transactions

  • Concentrates exclusively in the areas of management labour relations and employment law, both domestically and internationally.
  • Represents employers in collective bargaining, arbitration, labour board proceedings, human rights complaints and wrongful dismissal complaints.
  • Offers proactive strategic advice on behalf of employers and employer organisations, as well as involvement in the development and design of labour law policy, both in Canada and globally.
  • Director of and counsel to the Canadian Employers Council, which represents the interests of the Canadian employer community at the International Labour Office in Geneva, Switzerland, and in connection with the Summit of the Americas Process.

John D R Craig

Fasken Martineau DuMoulin LLP

T +1 416 865 4502
F +1 416 364 7813
E jcraig@fasken.com
W www.fasken.com

Qualified. Ontario, Canada, 1999

Areas of practice. Labour and employment law; international labour law; pension law and governance; human rights; privacy.

Recent transactions

  • Practises exclusively in the area of labour, employment and pensions law.
  • Provides proactive strategic advice to employers, and represents them in collective bargaining and before arbitrators, labour relations boards, human rights tribunals, and the courts.
  • Regularly represented Canadian employers at meetings of the International Labour Organization (ILO) and the Inter-American Conference of Ministers of Labour (IACML).
  • Advises Canadian, foreign and multinational employers on a full range of cross-border and international labour matters.

Christopher D Pigott

Fasken Martineau DuMoulin LLP

T +1 416 865 5475
F +1 416 364 7813
E cpigott@fasken.com
W www.fasken.com

Qualified. Ontario, Canada, 2010

Areas of practice. Labour and employment law; international labour law; constitutional and administrative law; human rights.

Recent transactions

  • Practises exclusively in the areas of labour, employment and public law.
  • Provides advice to employers, and represents them in collective bargaining and before arbitrators, labour relations boards, human rights tribunals, and the courts.
  • Acts as counsel in significant public law cases arising from labour disputes, including recent appeals before the Supreme Court of Canada.
  • Adjunct professor at Western University Law School.

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