Canada: Carrying On Business In Canada - An Overview Of The Canadian Legal And Business Landscape For Investing, Starting And Operating A Business In Canada

Last Updated: May 13 2013
Article by Heenan Blaikie


Carrying on Business in Canada is a general overview of, and introduction to, Canadian legislative and business considerations involving starting and operating a business, and investing in Canada.

Carrying on Business in Canada was written by lawyers from Heenan Blaikie with significant experience and knowledge in the area of the law which each lawyer covered. The commentary herein is intended to be a general overview and should not be regarded as advice or legal opinions of Heenan Blaikie and its practitioners.

Changes to the law can occur at any time. This document reflects the law at a moment in time, but depending on when the document is read, may not reflect recent changes in the Canadian legal and business systems. Qualified advice should be sought when considering investing or starting a business in Canada. Unless otherwise provided, all money amounts are in Canadian dollars.


2.1 Location And Area

Canada is located principally above the 49th parallel in North America. Canada is a constitutional, federal state consisting of ten provinces and three territories. The country has an abundance of natural resources including forests, oil and gas, various mineral deposits, and water. Much of Canada is sparsely populated and a large percentage of Canada's population of more than 33 million people live within 160 km of the border with the United States. Ontario and Quebec, with approximately 12.8 million and 7.7 million people respectively, are the two largest and most populous Canadian provinces. The powers of the federal and provincial governments are set out in the Constitution Act, 1867. Matters that cross provincial borders such as immigration, banking, the national currency, international trade and intellectual property are within the exclusive jurisdiction of the federal government. The provinces are responsible for private property rights, commerce, education and a number of social programs. The political head of the government of Canada is its Prime Minister. The system of government is similar to that of the United Kingdom, in that the House of Commons is the source of legislative authority in Canada. The Prime Minister is the head of the political party with the most members in the House of Commons. The Supreme Court of Canada is the country's last court of appeal. Below it are two separate court systems, that of the federal government and that of the provincial government, each with its own trial and appellate divisions. Each court system hears cases on issues within either the federal or provincial jurisdiction, although all criminal matters are heard in the provincial courts. The Supreme Court of Canada is the final court for both the federal and provincial court systems.

2.2 Population And Language

Canada has two official languages: English and French. Although most Canadians consider English their mother tongue, French is the mother tongue of most people living in Quebec. The federal and provincial governments have a number of legislative initiatives to ensure the use of both English and French is promoted in Canada. This includes the general requirement to display all information on retail product labels in both English and French. Quebec has its own legislative initiatives promoting the use of the French language, including rules relating to the use of French in business.

2.3 Currency

Canada's currency is the Canadian dollar. As of October 16, 2012, the exchange rate of one Canadian dollar is set out in the following table (current information on exchange rates is available at


Rate of Exchange

U.S. dollar
UK pound sterling
Japanese yen
Swiss franc
Mexican peso
Hong Kong dollar
Indian rupee
Brazilian real



3.1 Work Permits And Permanent Residency

3.1.1 In General

Immigration to Canada is generally overseen by the federal government and administered under the Immigration and Refugee Protection Act. Certain provinces, particularly Quebec, have control with respect to the selection of immigrants. People who are neither Canadian citizens nor permanent residents of Canada are not permitted to work in Canada without obtaining a work permit. However, there are certain exceptions to this general principle as explained hereinafter.

Generally, hiring a foreign worker in Canada requires the employer to obtain a "labour market opinion" (LMO) from Human Resources and Skills Development Canada (HRSDC); thereafter the worker must apply for a work permit, either to a Canadian visa office or at a port of entry. There are specific exemptions from the requirements of obtaining an LMO. These exemptions are provided by the Immigration Regulation and international agreements where Canada is a signatory. Two such examples are the General Agreement on Trade in Services (GATS) to which most European countries are signatories, or the North American Free Trade Agreement (NAFTA) to which both the United States and Mexico are signatories. The most common exemptions provided under NAFTA are intra-company transferees and professionals.

In addition, there are exemptions from the requirements of obtaining work permits for certain categories of individuals such as "business visitors", representative of foreign governments, certain athletes, artists and public speakers to name a few.

3.1.2 Business Visitors

"Business visitors" are people entering Canada on a temporary basis in order to attend business meetings, establish business contacts, sell foreign manufactured goods, provide after-sales service, supervise the installation of specialized merchandise purchased or leased outside Canada, or provide familiarization or training services to prospective users and sales persons for goods and services manufactured and developed outside of Canada.

Business visitors are employees of a foreign enterprise who continue to be paid by that entity throughout their time spent in Canada. At the completion of their visit to Canada, these individuals return to their employment with the foreign entity. Business visitors can facilitate their entry into Canada by carrying a letter from their employer confirming their employment with the foreign entity, the reasons for their visit, and certify that their remuneration will remain outside of Canada and that the profits of the company will accumulate outside of Canada.

Business visitors may request a Visitor's Record to facilitate multiple entries into Canada, particularly if they have to spend several days a month in Canada. As a general rule, business visitors stay in Canada for a short duration on each visit.

3.1.3 Intra-Company Transfers

People who are in an executive or managerial capacity or who possess specialized knowledge, may be transferred from a foreign entity to the Canadian parent, subsidiary, branch or affiliate entity. Work permits for executives and senior managers can be granted for up to seven years and up to five years for specialized knowledge workers.

To qualify as an intra-company transferee, the individual must have been employed by the foreign entity for at least one year in the preceding three-year period and must be currently be employed by the foreign entity. To qualify as a "senior manager", the individual must supervise and control the work of other managers and supervisors or manage an essential function within the organization and have the authority to hire and fire individuals. To qualify as someone who possesses "specialized knowledge", the employee must possess an advanced level of knowledge or expertise critical to the well-being of the entity in Canada. This specialized knowledge cannot be knowledge generally held throughout the industry. Under this category, employers who seek to transfer foreign workers are exempt from obtaining a LMO. If the foreign worker is from a country that requires a visa to enter Canada, an application for the work permit is made to a Canadian visa office abroad. If the foreign worker is from a visa-exempt country, the application for a work permit may be made at the port of entry.

3.1.4 International agreements – Professionals

Both NAFTA and GATS specify occupations that are exempt from the requirement of obtaining LMOs. The list of exempted professions under NAFTA, which is far more extensive than under GATS, includes more than 60 occupations such as management consultants, accountants, computer systems analysts, hotel managers, physicians, dentists and urban planners to name a few. These individuals must have the necessary credentials and, in some instances, will need to be licensed to practice in Canada. Under NAFTA, an initial work permit may be issued for one to two years, and may be renewed; under GATS, a work permit may be issued for a maximum period of 90 days in any one-year period.

3.1.5 Labour Market Opinion

Where there is no applicable exemption, an application for an LMO must be made by an employer to HRSDC. In most instances, the employer must establish that it has attempted to hire a Canadian citizen or permanent resident and that a search has not produced a suitable candidate. In doing so, employers must at least advertise the position nationally for varying periods of time depending on the occupation. Once a positive LMO has been issued, a work permit application can be submitted.

When assessing an application for an LMO, officers will consider various factors in order to determine the impact the employment of the foreign worker is likely to have on the Canadian market. A positive LMO will normally be issued if the employment of the foreign worker is likely to result in direct job creation or job retention, creation or transfer of skills and knowledge to Canadians, and/or to fill a labour shortage. Furthermore, the wage offered must be consistent with the prevailing wage rate for the occupation and region where the worker will be employed. Essentially, the working conditions must be in accordance with acceptable Canadian labour standards.

As a result of recent changes to government policies effective April 1, 2011, an LMO will be refused if during the preceding two-year period, when a new LMO application is submitted, the employer did not offer each foreign national employed by the employer, wages, working conditions and employment that were substantially the same as what was offered in that previous LMO.

3.1.6 Work Permits – Applications

Applications for work permits must either be made at a Canadian visa office outside of Canada for citizens of countries requiring a visa prior to their admission in Canada, or in some circumstances, may be made directly at a port of entry for citizens of visa exempt countries. Applications made at a Canadian visa office may usually be made by mail or in person.

Furthermore, citizens or residents of specific countries will also be required to undergo a medical examination prior to their entry in Canada if they intend to reside for more than six months in Canada.

3.1.7 Provincial Nominees

Many provinces in Canada have signed agreements with the federal government allowing them to nominate foreign workers who wish to settle in their provinces. These programs are referred to as Provincial Nominee Programs (PNPs).

3.1.8 Permanent Residence

There are several ways for a foreign national to obtain permanent resident status in Canada. The most popular categories are that of "skilled worker" and the "Canadian or Quebec experience class".

In order to qualify in the "skilled worker" category, an individual will be selected based on certain criteria including, among others, education, age, work experience, job classification, and abilities in French or English. Provided the individual's score meets the threshold, he or she may obtain permanent residence.

The "Canadian or Quebec experience class" will enable an individual who has been working in Canada or in Quebec for at least twelve months over the last two or three years preceding their application to obtain permanent residency. Said individual needs to be or has been employed on a full-time basis in a skilled or semi-skilled occupation and must meet certain language abilities in English or French.

In addition to these categories, individuals can become a permanent resident in Canada under the "business immigrant category", including self-employed, entrepreneurs and investors.

Once an individual has been physically present in Canada, as a permanent resident, for at least three years within a four-year period, the individual may apply for Canadian citizenship, provided that other criteria have been met.

3.2 Labour, Employment & Human Rights

3.2.1 In General

The Constitution Act confers broad powers on the federal government. Yet the provinces retain jurisdiction in many fields, including property and civil rights, which encompasses labour and employment law in most sectors. All provinces have enacted employment standards legislation governing such issues as minimum wage, hours of work, overtime, vacation and public holidays, pregnancy and parental leave and notice or pay in lieu of notice upon dismissal. Each province has also enacted legislation governing labour relations and collective bargaining in unionized workplaces. Further, all provinces have enacted human rights legislation, occupational health and safety and workers' compensation legislation.

Most employers fall under provincial jurisdiction. Companies operating in certain sectors are recognized under the Constitution Act as federal works, undertakings or businesses. These include federal Crown corporations, the postal service, banks, airlines, radio, television and telecommunications companies, railways, shipping companies and trucking companies providing inter-provincial services. Federally-regulated companies represent approximately ten percent of the workforce and are subject to the application of the Canada Labour Code, which governs employment standards, labour relations and collective bargaining. The Northern territories have limited autonomy and, for the most part, fall under federal jurisdiction.

In addition to these statutory regimes, the common law or in the case of Quebec, the Civil Code, applies to all contracts of employment.

3.2.2 Worker Representation

In Canada, the Charter of Rights and Freedoms provides everyone with the constitutional freedom to associate and meet peacefully.

The freedom to associate has recently been extended by the Supreme Court of Canada to protect a limited, procedural right to engage in collective bargaining. The scope of this right is currently unclear and controversial, although the Supreme Court has emphasized that no particular model of collective bargaining has been constitutionalized. Future cases should provide guidance as to the application of the new right of collective bargaining.

Provincial and federal labour legislation establishes the right to join a union and bargain collectively. Provided the requisite number of employees desire to be represented by a union (generally a simple majority), an employer will be obliged to negotiate with the union for the purposes of creating a collective agreement that governs the terms and conditions of employment and the rights and obligations of the parties.

Rules pertaining to union certification differ from province to province. In Quebec, a union must represent 35% of the employees of a group if it wishes to file a petition to seek certification as the bargaining unit. If less than 50% of the persons have signed, a vote is required. If more than 50% of the employees have signed, the union will be certified to represent the employees without a vote. In Ontario, the 35% level increases to 40% and a vote is required before a union can be certified. The union will be certified if more than 50% vote to support the bargaining union.

3.2.3 Strikes, Lock-Outs & Replacement Workers

An employee strike or employer lock-out is illegal during the term of a collective agreement. These actions only can occur following the termination of the agreement and if the parties have failed to reach an agreement through collective bargaining. In certain instances, the government may mandate conciliation.

The ability to take the following actions during work disruptions depends on the labour legislation applicable to the employer, namely, federal or provincial legislation:

  • The right of employers to hire temporary replacement workers
  • The right of employers to redeploy non-bargaining unit employees to do bargaining unit work
  • The right of bargaining unit employees to cross picket lines and return to work.

3.2.4 Discrimination in Employment

All jurisdictions have enacted human rights legislation designed to ensure that workplaces are free from discrimination and harassment. The Canadian Charter of Rights and Freedoms also protects a variety of fundamental individual rights from government action in all jurisdictions.

The prohibited grounds of discrimination under human rights legislation vary to some extent according to jurisdiction and can include age, race, colour, ethnic or national origin, social condition, language, religion, creed or political conviction, gender, sexual orientation, pregnancy, disability, marital status, family status and record of offences. An employer may defend an allegation of discrimination by demonstrating that the job standard or requirement at issue was adopted in the good faith belief that it is a bona fide occupational requirement and that it is impossible to accommodate the individual without incurring undue hardship.

3.2.5 Terms of Employment

All jurisdictions have employment standards legislation mandating minimum standards, five of which are referred to below.

  1. Hours of Work

    Statutory minimum standards governing hours of work vary by jurisdiction. Employers and employees may not opt out of these standards unless this is expressly permitted by the applicable statute. The standard work day is generally eight hours. Legislation in some jurisdictions sets limits on the number of hours that may be worked in a week without a permit. For example, although the weekly maximum in Ontario is 48 hours, upon entering into a written agreement with the employee, the employer may apply for an excess hours permit to exceed this limit up to a maximum of 60 hours per week. Employment standards in some jurisdictions also prescribe the number of consecutive hours an employee must have free from work daily, weekly, bi-weekly and between shifts. Although restrictions on hours of work generally do not apply to managerial employees, professionals (doctors, lawyers, accountants, etc.) and teachers, each jurisdiction has its own excluded categories. Special regulations, which also vary by jurisdiction, govern hours of work in specific industries.
  2. Overtime Pay

    Although statutory minimum standards vary, in most jurisdictions overtime is triggered at 40 hours a week (44 hours in Alberta, Ontario and New Brunswick; 48 hours in Nova Scotia and Prince Edward Island). Overtime pay is generally calculated at 1.5 times the employee's regular hourly rate. Parties cannot opt out of these minimum standards absent an express statutory provision to the contrary.

    Statutory overtime provisions vary by jurisdiction but generally do not apply to managerial employees, professionals and teachers. Special regulations in each jurisdiction also govern the statutory overtime entitlement in specific industries.
  3. Vacation and Holidays

    In each jurisdiction, employees are entitled to an annual vacation of at least two weeks per year upon completing one full year of employment, although some jurisdictions provide for increased vacation time as the length of employment increases. Employers have significant control over when the vacation may be taken.

    Employment standards legislation also entitles eligible employees to paid public holidays. Eligibility requirements vary by jurisdiction. Designated public holidays also vary by jurisdiction but generally include New Year's Day, Good Friday, Canada Day (1 July), Labour Day, Thanksgiving Day, Victoria Day (third Monday in May) in the common law provinces and St. Jean Baptiste Day (24 June) in Quebec. Most employees are not required to work on public holidays, but if they do, local legislation generally entitles them to regular pay plus premium pay for the holiday or the right to take an alternate paid holiday within a specified time thereafter.
  4. Leaves of Absence

    Employment standards legislation in Canada provides for several types of unpaid leave, including pregnancy leave (17 or 18 weeks), parental or adoptive leave (35 to 37 weeks in most jurisdictions), sick leave and bereavement leave. As stated above, the types of leave available and eligibility requirements vary by jurisdiction. Although the statutory leaves are unpaid, employees may be eligible for compensation during the leave through the federal Employment Insurance (EI) program. EI benefits are also available for eligible employees who take time off work to provide care or support to a gravely ill family member at risk of dying within a 26-week period. Several provincial jurisdictions have revised or are in the process of revising their statutory leave provisions to correspond with this entitlement.
  5. Employee Benefits

    Canadians have universal access to medical and hospital care funded primarily by general tax revenues. Beyond this, most employers offer some form of extended medical and dental plans and other insurance benefits to supplement the public health insurance system.

    Employers are not required to provide supplemental pension or benefit plans. Where an employer elects to do so, the plan must be formulated and administered in accordance with the applicable human rights, employment and pension legislation.

3.2.6 Termination

Employees may be dismissed for "just cause" in which case they are not entitled to notice of termination or payment in lieu of such notice. The threshold for establishing just cause is high. The degree of misconduct must be such that it fundamentally undermines the employment relationship.

In most jurisdictions, an employer may dismiss non-unionized employees without just cause upon providing the requisite statutory and common or civil law notice of termination or payment in lieu of notice. Certain jurisdictions provide exceptions to this general rule. Employment standards legislation in Nova Scotia, Quebec and the federal jurisdiction protects non-managerial employees from dismissal without just cause and provides for the possibility of reinstatement, subject to enumerated exceptions.

In unionized workplaces, the collective agreement generally protects employees from unjust dismissal and arbitrators may order reinstatement of unjustly dismissed employees, with or without compensation.

Where a dismissal is without just cause, employment standards legislation requires employers to provide written notice of termination or payment in lieu of such notice. Although the applicable statutory notice periods vary by jurisdiction, all are directly related to the individual employee's length of service. The federal and Ontario jurisdictions also require the payment of statutory severance pay. In addition, under the common law (and civil law in Quebec) an employee is entitled to a period of "reasonable" notice, the length of which is based on the individual's length of service, age, position and any other factors deemed to be relevant to the individual's ability to secure new employment. In most cases, an employee's common or civil law notice entitlement will exceed the applicable statutory notice period and statutory evidence.

With the exception of Prince Edward Island, every jurisdiction has enacted employment standards legislation regulating collective or mass dismissals. The applicable statutory provisions are triggered when a set number of employees' contracts are terminated with a specific time period.

In Quebec and Nova Scotia, as well as under federal jurisdiction, employees who meet certain requirements may seek reinstatement by filing an unjust dismissal complaint. Further, in all Canadian provinces as well as under federal jurisdiction, employees may also file recourses contesting prohibited and discriminatory practices under employment standards and human rights legislation.

3.2.7 Workers' Compensation and Occupational Health & Safety Legislation

All Canadian jurisdictions are covered by no-fault workers' compensation regimes, which are administered through statutory bodies generally known as workers' compensation boards. Generally, a worker's common law right to sue for workplace injury is statutorily barred and, in lieu of that right, workers can claim statutory benefits for injuries that are shown to be work-related. Workers' compensation in Canada is funded by employers through premiums calculated as a function of total payroll. The amount of premium payable is typically calculated on an industry-by-industry basis, depending on the risks and historical claims costs associated with these industries as determined by workers' compensation boards. Individual employers with poor safety records may also be subject to individual fines or surcharges. In some jurisdictions, injured workers are entitled to reinstatement at modified duties following an accident. Injured workers may also be entitled to vocational rehabilitation services to reintegrate them into the workforce when, due to the nature of their injuries, returning to work at the accident employer is no longer possible.

Workplace occupational health and safety is also regulated in all Canadian jurisdictions. The occupational health and safety legislation of a given jurisdiction typically places responsibility for safety on all workplace parties. Beyond specific legislated safety norms, such as requirements for machine guarding and fall arrest protection, employers are broadly required to take "all steps reasonable in the circumstances for the protection of a worker." Compliance with occupational health and safety legislation is achieved principally through two mechanisms. Government appointed safety inspectors have broad powers to order workplace parties to comply with legislation and to stop work in cases of non compliance. Regulatory prosecutions are also frequently resorted to, especially when non-compliance results in workplace injury or death. The fines under such prosecutions can be substantial, ranging into the hundreds of thousands of dollars. For example, in Ontario each charge resulting in conviction for a corporation can result in a maximum $500,000 fine, plus a 25% gross-up for a "Victim Fine Surcharge." All workplace actors and outside experts taking proactive due diligence to ensure compliance, is often the best defence to avoiding or minimizing the risk of such prosecutions.

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