Responsibility for labour and employment legislation in Canada is split between the federal and provincial or territorial governments in accordance with the nature of the undertaking in which the employer is engaged. Employees of businesses which fall under federal jurisdiction are subject to federal labour laws. These include such businesses as broadcasting, interprovincial trucking, banks, airlines and railroads. Employees of businesses which are not "federal undertakings" will fall under the applicable provincial or territorial jurisdiction.
The core labour and employment legislation in Canada consists of legislation governing employment standards and further, a framework for dealing with the establishment of labour rights and relations. The federal government and each province and territory have legislation dealing with these areas. In addition, the federal, provincial and territorial governments each have additional employment-related legislation dealing with human rights and occupational health and safety. Workers' compensation legislation exists in each province and territory. Many jurisdictions have legislation aimed at pay equity, employment equity and employee privacy.
In every Canadian jurisdiction, the rights of employees on termination of employment are governed in part by statute and in part by common law, except where there is a union representing employees, in which case the terms of the collective agreement apply. The obligations of an employer to provide notice or payment in lieu of notice at common law may be augmented or limited where appropriate by the terms of any contract entered into between the employer and the employee, which contract must generally be entered into prior to the commencement of employment. However, the employer cannot provide payments or other benefits that are below the minimum thresholds contained in the applicable employment standards legislation.
EMPLOYMENT STANDARDS LEGISLATION
Each jurisdiction in Canada has minimum standards by which employers must abide. While an employer and employee may agree to benefits in excess of these minimum requirements, they may not "contract out" of the minimum standards. Areas that are the subject matter of legislation include: (a) minimum wage; (b) hours of work, overtime pay and rest periods; (c) vacation time, vacation pay and holidays; (d) leaves of absence such as bereavement leave, sick leave, compassionate care leave, court leave, family responsibility/ emergency leave, reservist leave and education leave; and (e) layoff and termination of employment.
Notice of Termination
As will be discussed more fully under the heading "Employee Rights and Obligations Under Common Law," unlike in certain other countries, there is no "at-will" employment in Canada.
When an employer terminates the position of an employee in Canada, the employee is generally entitled to a minimum amount of notice from the employer by statute, and in some provinces, severance pay. Each statute provides for the circumstances that constitute termination, and the length of notice required in those circumstances. Notice may be given in advance of the termination date (working notice), or paid to the employee in a lump sum or as salary continuance while the employee does not attend work (pay in lieu of notice). The requirements vary widely across Canada, but an employer is generally obliged to provide an employee with one to two weeks' notice per year of service, up to a maximum of eight weeks' notice. For federally regulated industries, an employee is entitled to two weeks' notice of termination after three months of service. Statutory notice may be greater where there is a mass or temporary layoff.
In addition to the notice of the termination of an employee's employment, employees working in Ontario or for federal undertakings may also be entitled to severance pay when their employment is terminated. The provincial severance pay provisions generally provide for payment of a lump sum equivalent of an employee's wages calculated on their service. Thresholds for payment can include the Company payroll and the employee's length of service.
Note that the requirement to provide notice of termination (or pay in lieu of notice) and severance pay (where applicable) is a minimum requirement. Reasonable notice at common law (which generally applies across Canada except for Quebec) and is set out below, addresses the generally greater notice requirement where there is a termination without cause.
Mass and Temporary Layoff
Generally, where an employer terminates the employment of 50 or more employees at an establishment within a four week period, a special set of termination rules apply. In Ontario, the notice period for employees in a mass termination is determined by the number of employees affected.
For federally regulated businesses, employers must give the federal government 16 weeks' notice and set up a joint planning committee to reduce the number and impact of terminations.
Employment legislation varies across provincial and territorial jurisdictions on the permissible length of temporary layoffs. In addition, non-union employees have common law protections against wrongful dismissal, which include notice provisions that may extend beyond those imposed by statute. If an intended temporary layoff is found by a court to be constructive dismissal, the employee may be deemed to have been terminated at the time the layoff commenced.
The estimate of "common law" reasonable notice is more of an art than a science. In estimating the appropriate "reasonable notice period," Canadian courts will consider the employer's age, length of service, overall remuneration and position, as well as the existence of any employment agreement and inducement or enticement from former employment. The "common law" period of reasonable notice is inclusive of any statutory amounts and is subject to the concept of mitigation, which means any monies earned by the employee during the reasonable notice period can be deducted from any common law damage award.
Human rights legislation protects people from discrimination in a number of situations, including employment.
Employees are protected from unfair treatment in Canadian workplaces based on the following grounds: race; religion; age; disability; sex/gender; marital status; and pregnancy/ childbirth. Other grounds exist in only some provinces including: ancestry; nationality/citizenship; language; civil status; drug or alcohol dependence; family status; family affiliation; gender identity; gender expression; political beliefs and activity; criminal conviction; social condition and source of income. Employers are prohibited from making employment decisions, including hiring, firing and promoting employees, based on any of the prohibited grounds. In addition, they must not condone or ignore discrimination or harassment in the workplace.
An employer may discriminate on the basis of a prohibited ground only if it relates to a bona fide occupational requirement and the employer is otherwise unable to accommodate the individual. If the discrimination relates to a non-prohibited ground, human rights tribunals do not have the jurisdiction to deal with the complaint.
Jurisdictions across Canada have different types of pay equity/equal pay legislation, which represent different principles. Each of these laws prohibits disparity between wages for men and women.
Employment equity is a concept that addresses the barriers to equal treatment of employees and the process of ensuring such equal treatment. People with disabilities, people of minority backgrounds and others may face discrimination in hiring, promotion and payment of benefits, as well as inadvertent systemic discrimination. Québec and the federal government are currently the only jurisdictions that have employment equity legislation. In Ontario, the Employment Equity Act was in force for just over a year in the 1990s. It was repealed and Ontario now promotes workplace diversity through the Equal Opportunity Plan. Most other jurisdictions deal with employment equity through human rights legislation.
As of January 1, 2012, all employers in Ontario who provide goods or services to members of the public or other third parties, and that have at least one employee in Ontario, must comply with various regulations pursuant to the Accessibility for Ontarians with Disabilities Act, 2005 (the "AODA"). This legislation was enacted to make the province of Ontario fully accessible to disabled persons by 2025. The AODA requires, amongst other things, that employers establish policies and procedures which ensure that goods or services are provided in a manner that respects the dignity and independence of persons with disabilities and affords them equal opportunity to use or benefit from the goods or services and train its employees with respect to these requirements. Organizations with 20 or more employees are required to file an AODA compliance report.
OCCUPATIONAL HEALTH AND SAFETY
Most employers are subject to provincial or territorial occupational health and safety ("OHS") legislation intended to minimize the risk of workplace accidents and injuries to their employees. In certain jurisdictions, the legislation protects all individuals at or near the workplace.
Provincial and territorial legislation mandates: (a) general health and safety standards; (b) industry-specific obligations; and (c) hazard or substance-specific obligations for provincially regulated employers. The Canada Labour Code applies to employees under federal jurisdiction and provides for rights and obligations comparable to those contained in provincial statutes. The Workplace Hazardous Material Information System ("WHMIS") is a national program implemented by the provinces and requires that hazardous substances be properly labelled, information regarding the substances is made available to workers, and workers receive education and training on storage, handling and use of the substances. Employment contracts cannot be used to avoid OHS legislation, but they can impose health and safety rights and obligations that exceed the standards set out in the legislation.
OHS legislation imposes duties on and grants rights to both employers and employees. An employer's general duties under the legislation require that they take all reasonable precautions to protect the health and safety of employees, comply with the legislation and ensure their workers comply with the legislation. Employees are under a general duty to take reasonable care to protect their own health and safety and that of their co-workers. An employee's refusal to work is followed by an investigation. If the work is found to be dangerous, that danger must be addressed. In 2010, Ontario amended its OHS legislation to require employers to conduct workplace violence assessments and implement policies to address workplace violence and harassment. Many other provinces also have similar legislation.
Workers' compensation legislation creates a provincially or territorially regulated no-fault insurance program that is funded by employers in most industries. Workers' compensation legislation is intended to facilitate the recovery and return to work of employees who sustain injuries arising out of and in the course of employment or who suffer from an occupational disease. The legislation provides compensation and other benefits to workers and the survivors of deceased workers. Employers in businesses or industries specified in the regulations pay annual premiums based on the risks associated with worker activities in their industry. In some jurisdictions, premiums are adjusted to reflect the employer's claim history, permitting rebates for employers who have relatively injury-free workplaces or increasing premiums for workplaces that have proven more dangerous than expected.
LABOUR RELATIONS LEGISLATION
Each province and territory has legislation that regulates the relationship between employers and employees of provincially regulated industries where a union represents or seeks to represent the business' employees. The Canada Labour Code regulates labour relations for federal works, undertakings or businesses. When a provincially or territorially regulated employer carries on business in multiple jurisdictions, unions must seek certification from the labour board of the applicable province. Each province or territory, and the federal government, has a labour relations board that adjudicates labour relations disputes.
Labour relations legislation has two main purposes: (a) to permit employees to organize without interference from their employers; and (b) to permit collective bargaining between employers and employees represented by bargaining agents. The legislation governs the formation and selection of unions, collective bargaining procedures, the conduct of employees and employers in unionized workplaces, and the adjudication of complaints alleging a violation of the particular legislation.
Certification of Unions
Each province and territory has labour relations legislation which governs the establishment of union collective bargaining rights, and the negotiation and administration of collective agreements once such rights have been established. For employers in the federal jurisdiction, the Canada Labour Code contains these provisions.
Issues relating to collective bargaining and unfair labour practices are addressed by provincial and federal labour relations legislation. Rules concerning the certification of unions vary, (legislation sets out the manner in which unions can establish bargaining rights), as well as the rules surrounding the termination of such rights. Once a union is certified as the representative of a bargaining unit and has given notice to the employer, the employer has a duty to bargain with that union in good faith to reach a collective agreement.
The labour relations legislative framework also deals with employers involved in the construction industry. These vary from province to province, as well as federally, and are often quite different from the normal rules for non-construction employers.
Disputes between an employer and union once certified (that is, once a collective agreement is negotiated) are referred to a sole arbitrator or Board of Arbitration for adjunction. Labour relations legislation requires a collective agreement to have this dispute resolution process in place.
Strikes and Lockouts
Before a bargaining unit can strike or its employer can lock them out, certain statutory conditions must be satisfied. In all jurisdictions, a strike or lockout is unlawful while a collective agreement is in effect. In certain jurisdictions a lawful strike or lockout can only begin once attempts at negotiation and conciliation have been exhausted.
The labour relations board in each jurisdiction can make declaratory orders with respect to the legality of a strike or lockout and the order can be filed in court to become enforceable as a judgment. In addition, a court may issue an injunction, prohibiting a strike or lockout, restrict legal picketers where there is illegal conduct which includes the risk of physical injury or property damage.
Employers are prohibited from hiring permanent replacement workers during the course of strike. However, some jurisdictions permit the employer to hire workers while its unionized employees are on strike.
Picketing is regulated by labour relations statutes, tort law and criminal law in Canada. Lawful picketing includes communication of information; however, intimidation, threats, assaults and blocking of premises is unlawful. It is lawful for striking workers to picket at the employer's place of business (i.e., "primary picketing") as long as there is a legal strike/lockout in effect. However, depending on the nature of the picketing and interference, it may be lawful to picket the premises of third parties who deal with or are affiliated with the employer (i.e., "secondary picketing") as long as such picketing is for informational purposes.
Impact on Sale of a Business
If all or part of a business is sold, bargaining rights are protected. However, if the nature of the business has changed substantially, the labour relations board may terminate the bargaining rights of the union.
There are also successorship provisions which bind any purchaser of the business to a validly executed collective agreement to which the employer is bound. The definition of "sale" is very broadly worded for the purposes of determining a successorship.
EMPLOYEE RIGHTS AND OBLIGATIONS UNDER COMMON LAW
All Canadian provinces and territories are common law jurisdictions, with the exception of Québec (where the Civil Code of Québec governs). Common law rights can be characterized as those established by the courts based on jurisprudence—or judge-made law—also called the common law. Common law employee rights exist in addition to the rights granted by employment standards legislation, however, any payments made by an employer under the applicable employment standards legislation will be deducted from the common law assessment.
In Canada, certain contractual terms are implicit in a written employment contract (subject to permissible contract provisions to the contrary) or where no written contract of employment exists.
All employees have at least three duties that are implied terms (unless they are explicit terms) of their employment: (a) duty of good faith and fidelity to their employer; (b) duty to exercise skill and care; and (c) duty to obey.
After employment has terminated, all employees have an implied duty to not remove customer lists and not misuse other confidential information. Non-fiduciary employees are free to compete as soon as employment has terminated, subject to a valid restrictive covenant (discussed below) prohibiting such competition.
Fiduciary employees have more extensive duties than those that apply to all other employees. Generally stated, fiduciary employees are those who have authority to guide the affairs and affect the direction of the employer. In most cases, top management are considered fiduciary employees and, in certain situations, other employees who fulfill a sufficiently critical role and to whom the employer has a particular vulnerability ("key personnel") may be found to be fiduciaries. A fiduciary's general duties have been described as requiring loyalty, honesty, good faith with a view to the employer's best interests and avoidance of conflicts of interest, and a prohibition regarding self-dealing.
Termination of Employment & Reasonable Notice
Whether termination of employment occurs with or without cause will determine the rights and obligations of the employer. Termination with cause follows from an employee's breach of an express or implied term of the employment contract. Cause is narrowly construed by the courts. If an employer intends to terminate the employment of an employee with cause, the employer is not required to provide the employee with notice of termination. If an employer intends to terminate the employment of an employee without cause, the employer must provide the employee with reasonable notice or pay in lieu thereof.
An employer may not contract out of the statutory minimum notice period (discussed above). However, a contract of employment that includes a term limiting reasonable notice to the period prescribed in employment standards legislation will be valid, provided that the limit is clear and was the subject of consideration (i.e., it was accepted at the time of the original offer of employment). An employee whose employment is terminated without cause is generally entitled to reasonable notice of termination at common law. Although determining a reasonable notice period is not based on a static formula, reasonable notice is calculated based on assumptions about how long it will take the employee to find alternative work of a similar nature. The assumptions are based on a number of factors, including the following: the character of the employment; the employee's length of service; the age of the employee; and the availability of similar employment having regard to the experience, training and qualifications of the employee and, in some cases, whether there has been inducement/enticement from formerly secure employment. If an employer has not provided an employee with adequate notice, the employee may commence an action for wrongful dismissal, seeking damages equivalent to what the employee might have earned (which includes a calculation of benefits and perquisites) during the "reasonable notice period." Also, employers should note that if a former employee can prove that the employer's conduct in the manner of termination caused him or her mental distress, additional damages may be awarded to the former employee. Reasonable notice periods typically do not exceed 24 months.
Any period of "reasonable notice" determined by a court of competent jurisdiction is subject to the employees' duty to "mitigate" their damages by seeking alternate or selfemployment. Generally, damages at common law for wrongful dismissal will deduct any monies earned by the employee during the common law period of reasonable notice.
Restrictive covenants are explicit contractual obligations that survive the termination of employment. They typically consist of non-competition or non-solicitation clauses. Restrictive covenants may also include protection of the employer's intellectual property beyond those protections already afforded to employers by common law and statute.
There is a strong policy inclination in employment law disputes towards ensuring an individual's ability to make a living doing what he or she knows best and avoiding restraints on trade. Therefore, restrictive covenants are highly scrutinized by Canadian courts. Courts have the discretion to strike out a restrictive covenant that limits the employee's ability to compete, if it is found to be excessively broad in time, geography or scope of activities prohibited. Non-solicitation covenants, providing they are reasonable and validly executed, are far more defensible.
However, restrictive covenants which constitute consideration arising from a sale or legitimate business arrangement may be more likely to be enforceable.
EMPLOYMENT AND RETIREMENT BENEFITS
Old Age Security & Canada Pension Plan
Old Age Security ("OAS") and Canada Pension Plan ("CPP") are federally legislated pension programs. CPP is administered as a joint federal-provincial program.
The federal Employment Insurance Plan ("EI") is employer and/ or employee-funded insurance regulated by the federal government which covers employees in every jurisdiction in Canada.
Employers deduct premiums from employees' insurable earnings and remit these deductions along with the employers' premiums. Employer premiums are paid at a rate of 1.4 times the amount of the employee's premiums. Employer contributions are a business expense that can be deducted from the calculation of income.
EI benefits are paid to employees whose employment is terminated without cause or who are on maternal, parental, sick or compassionate care leave, and who satisfy the regulatory requirements, which include a minimum period of employment. No benefits are paid to employees who quit their employment or are terminated with cause. Since January 2011, self-employed individuals have been able to access EI special benefits, notably maternity, parental, sickness and compassionate care benefits.
Regular benefits (i.e., paid to those whose employment has been terminated) last for a maximum of forty-five weeks depending on unemployment rates in the individual's region and the number of qualified insurable hours accumulated during the prior period of employment. Benefits paid are taxable income for the individual.
Employers can reduce their EI premiums by providing equal or superior benefits to employees through private insurance plans.
The federal Canada Health Act requires that every province and territory in Canada must have a basic health insurance program that covers the costs of medically necessary treatment, including physician costs and hospital stays. Each province and territory then has discretion to offer additional benefits under its health insurance plan.
Wage Earner Protection Program ("WEPP")
For workers of an employer in bankruptcy or receivership, the WEPP provides compensation if employment has been terminated with unpaid wages, vacation pay, severance pay (if applicable) and termination pay. Such compensation is limited to wages and certain other types of pay which accrued between the date six months prior to a restructuring event and the date of the bankruptcy or the imposition of receivership. If there is no restructuring event, then compensation is provided for wages and certain other types of pay for the six month period preceding the date of the employer's bankruptcy or receivership. Under the WEPP, the employee will receive no more than the equivalent of four weeks of insurable EI earnings, minus certain prescribed amounts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.