Canada: Employment Contracts

Individual Contracts of Employment

Individual contracts of employment are generally governed by the Civil Code of Québec (the "Civil Code"). A contract of employment, whether it be oral or in writing, is defined as a contract by which the employee undertakes to do work for remuneration, according to the instructions and under the direction or control of the employer. It is to be distinguished from a contract of services, under which the contractor or provider of services (often a consultant) is free to choose the means of performing the contract and under which no relationship of subordination exists between the contractor or the provider of services and the client.

Under a contract of employment, the employer is bound not only to allow for the performance of the work and to pay the remuneration agreed upon, but he must also take any measures consistent with the nature of the work to protect the health, safety and dignity of the employee.

The employee is bound not only to carry on his work prudently and diligently, but he must also act faithfully and honestly and not use any confidential information he may obtain in the course of his work.

The parties may stipulate in writing and in express terms that, even after the termination of the contract, the employee may neither compete with his employer nor participate, in any capacity whatsoever, in an enterprise which would then so compete. Such a stipulation must be limited, however, as to time, place and type of activity, to whatever is necessary for the protection of the legitimate interests of the employer. An employer may not avail himself of a non-competition covenant if he has terminated the contract without a serious reason (without cause) or if he has himself given the employee such a reason for terminating the contract (constructive dismissal).

Contracts of employment are either for a fixed term or an indeterminate term. A fixed-term contract will be tacitly renewed for an indeterminate term where the employee continues to carry on his work for five (5) days after the expiry of the term without objection by the employer.

Employees may be terminated for a serious reason (cause) without reasonable prior notice of cessation of employment or an indemnity in lieu thereof.

Subject to certain very important statutory exceptions, employees may be terminated without cause by giving prior notice of termination or paying a compensatory indemnity in lieu thereof. The notice of termination must be reasonable, taking into account, in particular, the nature of the employment, the special circumstances in which it is carried on and the duration of the period of work. Under a fixed-term contract, the notice requirement is usually the unexpired portion of the term in the event the contract is terminated prior to its expiry.

An employee may not renounce in advance his or her right to obtain compensation for any injury he or she suffers where insufficient notice of termination is given or where the manner of termination is abusive. Therefore, even though the length of notice may be stipulated in the contract of employment, a court may consider that the notice provided is insufficient and therefore, unreasonable.

There are no set guidelines to determine what constitutes a reasonable notice. However, Québec case law will often, as a rule of thumb, calculate the prior notice of cessation of employment or an indemnity in lieu thereof based on one (1) to four (4) weeks per year of service, with a usual maximum threshold of 24 months. Note also that notices usually range from one (1) to two (2) weeks per year of service for first line employees and from two (2) to four (4) weeks per year of service for managers.

The amount of reasonable notice that an employer must provide to an employee pursuant to the Civil Code is inclusive of the amount for the statutory notice provided by the Act Respecting Labour Standards ("Labour Standards Act").

Moreover, an employee whose employment has been terminated has an obligation to make reasonable efforts to obtain alternative employment in order to mitigate his damages. Any income which an employee may derive or should have derived from alternative employment cannot be used to reduce the employer's mandatory minimum obligation under the Labour Standards Act, but may be used to reduce the employer's obligation to provide reasonable notice or pay in lieu of notice under the Civil Code or to reduce the employer's obligation to pay for an employee' loss of wages from a granted recourse under the Labour Standards Act.

In certain circumstances, the Civil Code also provides for the annulment or the reduction of any obligation arising from an abusive clause in an employment contract when the essential stipulations are imposed by the employer and are not negotiable by the employee.

Medical Testing

In Québec, an employer's right to require a medical exam is limited both by an employee's human rights and their right to privacy.

Employees have the obligation to work for their employer on a regular basis and to maintain a satisfactory level of performance. The employer therefore has the right to ensure that a candidate has the capacity to work consistently and efficiently and that the candidate has no medical condition that would prevent him or her from fulfilling his or her duties.

Employers have the obligation to take all necessary measures to ensure the health, safety and well-being of their employees pursuant to both the Act respecting Occupational Health and Safety ("Health and Safety Act") and article 2087 of the Civil Code. Employers may therefore ensure the candidate's performance of work will not compromise his or her health and safety or that of his or her colleagues.

Consequently, while pre-employment medical testing may be executed, the above two justifications only create limited opportunities to do so. Pre-employment medical tests may only be performed if the nature of the position sought or the position's anticipated medical risks clearly justify the measure. That is, there must be a rational link between the elements of the exam imposed by the employer and the job in question; otherwise, the medical exam would contravene the Québec Charter of Human Rights and Freedoms (the "Québec Charter").

In Québec, one cannot undermine a person's integrity without their free and liberal consent. Medical exams are considered to be such an interference. Consequently, employers should get the (written) consent of prospective employees, before conducting medical exams. In order to minimize exposure to discrimination complaints, pre-employment medical exams should only be undertaken after the candidate receives a formal offer of employment which is made conditional on the results of the exam. The employment offer letter should state which tests will be conducted, that further testing may be required, and explain that all medical information obtained would be held confidentially and used only as necessary to determine the candidate's suitability to perform the job sought.

The medical exam itself cannot serve as a reason to exclude candidates on the basis of their "handicap", a term which has been largely interpreted to include anatomical or psychological anomalies which would limit an individual in his or her ability to function normally, such as, for example, depression, drug addiction, agoraphobia, or alcohol dependency. If the medical exam indicates such a limitation, it could therefore not constitute a valid reason to exclude a candidate except if he or she could not, even with accommodation, satisfy the employment requirements. Additionally, employers may not refuse to hire applicants because they have disabilities, ailments, or physical anomalies that could be problematic in the future if they pose no problems at the time of hiring.

Drug Testing

In Québec, there are additional concerns imposed by statute which relate to employees right to privacy, security, and equality. ln particular, the Civil Code and the Québec Charter contain specific provisions relating to an employee's right to integrity and to the inviolability of their person.

Decisions specifically focusing on pre-employment drug testing are few and far between in Québec, and to our knowledge, there are a very limited number of cases which directly address this issue. However, in light of a recent Supreme Court of Canada judgment, relating to drug and alcohol testing during the course of employment, we believe that Québec Courts will adopt a restrictive view of pre-employment drug testing.

Screening Assessments

Québec employers occasionally screen potential employees by making them undergo pre-employment aptitude or psychological testing. In doing so, employers must tread carefully because of Québec's strict privacy and human rights laws.

Generally, employers may ask candidates to undergo pre-employment aptitude or psychological testing so long as they do not infringe on the applicant's privacy and human rights either in the testing process itself or the way in which the test results are managed.

Section 20 of the Québec Charter establishes a narrow exception to otherwise discriminatory employment practices, such as screening assessments. This section reads as follows:

According to this provision, a policy which is adopted honestly and with regard to the aptitudes or qualifies required by a position may affect the rights of an individual or of a group differently without being deemed to be discriminatory under the Québec Charter.

The aptitude requirements must be based upon the qualities and abilities objectively required of a certain profession or job and must be those common to all companies exercising the same type of business activities as the one in question. However, the professional characteristics required by the position cannot be justified by the subjective perception of what constitutes the clients' preference if these perceived preferences are themselves discriminatory. As section 20 of the Québec Charter is an exception to the general rule, it must be interpreted restrictively. Therefore, the duty to accommodate would still continue to be applicable to employers, as it pertains to screening assessments.

Background check

The information sought by an employer pursuant to a pre-employment credit check is clearly information that would fall within the scope of Québec privacy laws. Moreover, as opposed to the use of court records to conduct criminal background checks, credit records are not public by law.

Consequently, any credit background check conducted on prospective employees in Québec could be challenged on the basis of a guiding principle of Québec privacy law, which limits an employer's right to collect personal information to that which is necessary for the "object of the file" or, in other words, for the purposes of the employment relationship. As in the case of restrictions relating to criminal background checks, credit background checks should only be performed where an employee has freely consented to such a credit check and where the credit check is necessary for the conclusion or performance of the employment contract. In other words, Québec employers must be prepared to demonstrate the reasons for which credit background checks would be considered necessary.

In light of the foregoing, unless the nature of an employer's business is such that it may justify serious concerns linked with a prospective employee's financial status, requesting information on said prospective employee's credit history would likely constitute a breach of Québec privacy laws.

Employee Handbook

The employer may also want to provide employees a handbook that details insured benefits plans and employer policies or rules governing probationary period, absences, safety, discipline, IT, social media, and so forth. Employee handbooks are quite common in Québec.

Should an employer decide to provide employees with an employee handbook, the provisions of the handbook should be stated as binding on the parties, subject to the employer's ability to change the policies. This approach will allow the employer to rely on the provisions included in the handbook, without having to enter into a separate written employment agreement with each individual employee. An acknowledgement of receipt of the handbook on the part of the employee will suffice. If the employer expressly reserves the right to modify the policies unilaterally, while it may in some circumstances be obligated to give advance, reasonable notice of such changes, such a reserved right maximizes the degree of flexibility the employer retains.

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