Canada: What American Employers Should Know About Canadian Employment Law

Last Updated: August 21 2019
Article by Fiona Brown and Michael F. Horvat

For American companies, expanding operations into Canada often makes good business sense. Our similar professional cultures make doing business together easy, and our economic ties make it almost inevitable. However, employers who take the countries' similarities for granted put themselves in a precarious position. It's easy to overlook small differences in American and Canadian employment laws, but by doing so, employers can expose themselves to far-reaching legal liability. Before commencing operations in Canada, American employers should be aware of several key differences in the countries' legal landscapes.

Structure of laws

In the United States, jurisdiction over employment matters is shared between local, state and federal governments. Canadian employment law is simpler in this respect—jurisdiction over employment matters typically lies with provincial governments, unless the particular industry is within federal jurisdiction. While legislation varies from province to province, employment law is largely similar across the country—with the exception of Quebec, the only Canadian province to use a European-style civil law system, rather than a common law system inherited from the United Kingdom. In Quebec, while common law principles are often respected in employment matters, additional care must be taken to recognize the applicable civil legislative employment codes.

Much of Canadian employment law will feel familiar to employers used to operating in the United States. In general, the legal regimes regulate the same kinds of behaviour and protect similar rights. However, Canadian employment law tends to adopt a more protective attitude towards employees. This is especially true of laws regulating matters directly tied to the security of employees' livelihoods, including accommodation rights, restrictive covenants and termination.

Employment agreements

  It is crucial that employers beginning operations in Canada do not attempt to rely on existing employment agreements used in American workplaces. Employment agreements that contravene provincial standards, even unintentionally, will not be treated sympathetically by the courts. Canadian courts have clearly stated that they will not "blue pencil" or otherwise read-down an employment contract in terms of enforceability.

A fundamental difference between Canadian and American employment agreements is that, in Canada, the concept of "at-will" employment does not exist. Unless employees are dismissed with cause, they are entitled to notice of termination or pay in lieu. An employment agreement that attempts to restrict an employee's notice entitlement to less than statutory minimums is voidable, and may leave the employer liable to provide substantive notice to the terminated employee. Canadian law related to termination is discussed in more detail in the following section.

Some clauses used in American employment agreements may be unenforceable in Canada. Restrictive covenants, or clauses that purport to limit what employees may do after their employment ends, are scrutinized carefully by Canadian courts. Restrictive covenants that do not safeguard a legitimate proprietary interest deserving of protection, that are overbroad or unfair, or that are deemed contrary to the public interest will not be enforced. As Canadian courts will not "rescue" an employer's overly broad restrictive covenant, employers should seek legal advice when drafting these clauses to avoid them (and other aspects of the agreement) being struck in their entirety.

Agreements with independent contractors must be structured carefully in order to avoid creating employment relationships. In Canada, reviewing bodies closely scrutinize independent contractor arrangements, and regularly deem individuals to be dependent contractors or employees, notwithstanding parties' own characterization of their relationship. Under Canadian employment law, the parties' practice can be more determinative of the result, regardless of the written terms of the "independent" contract. Non-written factors, such as exclusivity and economic dependence are hallmarks of employment relationships. Employers drafting independent contractor agreements should seek legal advice on how to structure (and apply) these agreements in Canada to reduce the risk of a disgruntled former contractor alleging that they were actually a dependent contractor or an employee. When these allegations are successful, the employer does not have the benefit of an employment agreement restricting the individual's entitlements to statutory minimums, and may be liable to provide them with accrued and unpaid public holiday pay, vacation pay, overtime, or extensive notice of termination. Agreements with independent contractors should, among other things, indemnify the company from any judgment, order, claim or assessment resulting from a finding that the individual was an employee.

Finally, it is important to note that, in Canada, changes to employment agreements introduced to currently employed employees must always be supported by fresh consideration, generally in the form of a wage increase, bonus, or other clear benefit to the employee that otherwise would not have been provided except as related to the proposed contractual change. Continued employment, generally, does not constitute consideration capable of supporting a contractual amendment unless the employer can demonstrate forbearance from termination.


As noted above, there is no "at-will" employment in Canada. Employers' legal obligations with respect to termination depend in part on whether the employee is being dismissed with or without cause.

When dismissing an employee without cause, employers are required to provide reasonable notice of termination, or pay in lieu thereof, before dismissing an employee without cause. Minimum notice periods are set out in employment legislation, and typically entitle employees to approximately one to two weeks of notice per year of service, depending on the employee's length of service and the employer's payroll. It is extremely important to note, however, that unless their employment agreement specifies otherwise, employees will be entitled to reasonable notice at common law. The amount of reasonable notice to which an employee is entitled at common law typically exceeds statutory entitlements—sometimes drastically so. What constitutes "reasonable notice" at common law depends not only on an employee's length of service, but also on their age, the nature of their employment, and the likelihood that they will face difficulty securing a comparable job in a timely manner. To avoid unexpected, lengthy notice obligations or liability for an unintended wrongful dismissal, employers should seek legal advice to ensure that their employment agreements validly limit the amount of notice to which employees are entitled.

While employers need not provide notice before dismissing an employee on a with-cause basis, what constitutes "cause" does not always accord with employers' expectations. Though particularly serious misconduct may justify an employee's immediate dismissal, employers often have an obligation to engage in progressive discipline before resorting to termination. Because it can be difficult to know whether an employee's moderate misconduct or underperformance constitutes cause for dismissal without seeking legal advice, many employers will elect to provide notice even when they suspect an employee's dismissal is justified. Employers used to operating within the United States should remember that Canadian employment law relating to termination is quite different, and should take care not to underestimate the effect that the lack of "at-will" employment has on their legal obligations.

Compensation, payroll and remittances

In addition to human rights and anti-discrimination legislation, many provinces have legislation expressly prohibiting discriminatory or inequitable pay practices, some of which requires employers to collect and maintain certain data related to employee compensation. Failing to comply with this legislation, even inadvertently, can be costly—employers could be obligated to correct wage inequities by paying adjustments to affected employees, even those who no longer work for the company.  

Canadian employers are legally required to retain payroll records for a period of six years. While Canadian employment law is largely a matter of provincial jurisdiction, employers in all provinces except Quebec remit payroll taxes to the federal Canada Revenue Agency, the equivalent of the IRS. These remittances are comparable to those that American employers make in most states, and include contributions to the Canada Pension Plan (similar to social security) and Employment Insurance (similar to the Federal-State Unemployment Insurance Program). Employers and employees share the cost of funding these contributions.

In Manitoba, Quebec and Ontario, employers must also make contributions to the province's universal health care system. Because all Canadian provinces provide universal health care, employers do not need to bear the responsibility of providing basic health insurance to their employees. However, many employers choose to offer supplemental insurance to their employees as part of their benefits plans. Typically, this insurance will cover vision and dental care and prescription drugs—medical services not paid for by public universal care.


Canadian employment laws do not recognize classes of "exempt" and "non-exempt" employees with respect to overtime entitlements, particularly those based only on titles or manner of compensation. Unlike employees in the United States, the manner in which Canadian employees are compensated (salary vs. hourly) does not affect their (potential) statutory entitlement to overtime pay. While some employees are not entitled to overtime pay based on specific provincial exemptions (managers and supervisors, for example), such an overtime exemption depends on their actual job duties, and not on how their jobs are characterized by their employer or in their employment agreement.

In Ontario, eligible employees are entitled to overtime pay at the rate of one and one half times their regular rate after working 44 hours in a work week. Certain information technology professionals, certain salespersons, as well as other designated professionals are also exempt from overtime pay. When determining whether employees are entitled to overtime pay, employers should refer to how courts and the legislation define these positions.

Even if an employee's job duties do not fall within one of the above-noted exemptions, it may be possible to structure their employment agreements to reduce the overtime pay they accrue. An employee and employer can agree in writing that the employee will receive paid time off in lieu of overtime pay, or to average the number of hours worked by the employee over a specified period of two or more weeks. Under the latter arrangement, the employee would only qualify for overtime pay if their average number of hours worked exceeds 44 hours per week.

Vacation and leave

Employees in most Canadian and American jurisdictions have comparable vacation entitlements. Canadian minimum vacation entitlements vary somewhat by province, but are generally similar across the country.

In Ontario, employees are entitled to annual vacation time subject to their completion of a 12-month vacation entitlement year. Employees with less than five years of service are entitled to two weeks of vacation time, while employees with more than five years of service are entitled to three. Regardless of the length of their employment, all eligible employees are entitled to vacation pay at a rate of at least four per cent (or six per cent, for employees with more than five years of service) of their gross wages. Employment contracts may provide for vacation entitlements in excess of these statutory minimums.

Public holidays do not count towards an employee's vacation time. Most employees are entitled to take these days off and receive public holiday pay. While employers are not obligated to give employees time off to observe public holidays recognized in other jurisdictions, employees can agree to work on a Canadian public holiday for their regular wages, and take a substitute holiday on another date, on which they must be paid public holiday pay.

In Canadian jurisdictions, including Ontario, legislation protects an employee's ability to take leaves of absence in certain personal circumstances. These "statutory leaves" are generally unpaid job protected leaves, which apply in cases of maternity and parental leave, serious illness, or other exceptional personal and/or family circumstances. It is not necessary for employers to set out the availability of these leaves in employment agreements or handbooks, nor is it a requirement of an employee to "save" personal time off to access such unpaid leaves of absence.

Human rights, health and safety, and accommodation

Like employers in the United States, employers in Canada are prohibited by law from engaging in discriminatory practices. Employers may not engage in differential treatment of employees on the basis of a protected ground, except where doing so is a bona fide occupational requirement ("BFOR"). To establish that a discriminatory practice is a BFOR, the employer must demonstrate: (1) an honest and sincere belief that the practice is necessary to achieve a legitimate business purpose; (2) that the practice is reasonably necessary to ensure the effective performance of the job without endangering the employee, others in the workplace, or members of the public; and (3) that it is impossible to accommodate the employees affected by the discriminatory practice without "undue hardship."

In Canada, workplace human rights legislation is largely a matter of provincial jurisdiction. This legislation is remarkably similar across the country, and is more uniform than equivalent American state legislation tends to be. While both countries have laws prohibiting workplace discrimination, the scope of these laws is different in several important respects.

First, protected grounds in Canada include some characteristics that are not uniformly protected in the United States. Sexual orientation and gender identity are protected grounds in every Canadian province and territory. Gender expression is listed as a protected ground in every provincial and territorial human rights statute except those of Manitoba, Saskatchewan and the Northwest Territories. While provincial and territorial human rights legislation often does not expressly identify addiction as a protected ground, courts and tribunals across the country have consistently held that drug or alcohol dependence constitutes a disability subject to legal protection.

Second, Canadian employers have a greater duty of accommodation than many of their American counterparts. In Canada, employers are obligated to accommodate employees' protected characteristics—including addiction—to the point of "undue hardship." What constitutes "undue hardship" will depend on the facts of each case. Large, well-resourced employers will typically be expected to take greater measures to accommodate employees.

In addition to having obligations under the applicable provincial or territorial human rights codes, Canadian employers may have duties to accommodate under legislation aimed specifically at protecting individuals with disabilities. In Ontario, all employers are required to meet certain accessibility standards prescribed by the Accessibility for Ontarians with Disabilities Act, 2005. To comply with accessibility legislation, employers must implement certain workplace policies and training programs. Workplace health and safety legislation also requires similar actions. The obligation to comply with these pieces of legislation is another reason why employers should be wary of importing documents and protocols used in American offices without careful revision.


In Canadian workplaces, employees generally have a higher expectation of privacy. While employers retain the right to monitor, for example, employees' activities on company computers or phones for legitimate business-related purposes, they do not have an unfettered right to engage in workplace surveillance. Employers have an implied duty of good faith at common law, which may include an obligation to refrain from clandestine or unnecessarily invasive surveillance of their employees. In Ontario, an employer's secret videotaping of an employee without adequate justification was found to have caused a poisoned workplace environment, amounting to the employee's constructive dismissal.

Another area in which Canadian laws about workplace privacy differ from many states is with respect to random drug and alcohol testing. Random workplace drug and alcohol testing is almost always illegal in Canada, unless the employer can demonstrate that the practice is a BFOR. If an employee's drug or alcohol use in the workplace is the result of an addiction, their employer may not be entitled to terminate their employment on the basis of that use without first accommodating the employee to the point of "undue hardship," which can include granting the employee leave to complete a rehabilitation program.

Closing thoughts

Before commencing operations in Canada, American employers must take a number of steps. Employment and independent contractor agreements should be drafted from a Canadian perspective, to comply with statutory minimums. Existing workplace policies should be localized to ensure compliance with applicable health and safety and accessibility legislation, and new policies and protocols required by law should be implemented. Crucially, employers must not let the cultural familiarity of Canadian workplaces mask the importance of investigating their legal obligations just as thoroughly as they would before beginning to conduct business in any other international jurisdiction. There may not be many differences, but those that exist can have major implications.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions