FAQs for US Employers in Canada

While we may share a love of hockey, beer and Justin Bieber, there remains many intangible cultural and legal differences between Canadian and US employment law.  Given the global nature of most of the clients I work with, I frequently advise US employers on the subtle - and sometimes not so subtle - distinctions between our legal landscapes.

Here are a few of the more common questions:

1.  Which laws apply to our Canada-based employees?

It will depend on which province the employee works in, as well as the type of industry.  Section 92(13) of the Constitution Act, 1867 lays out the list that divides the powers up between the provinces and federal government. 

Keep in mind the context of when and where this list was made:  in 1867, Canada (finally) became a country, there were only four provinces (the largest of which was a French, catholic population), and there was a quasi-alcoholic anglo prime minister in Ottawa (which was essentially in the middle of the forest to avoid attack by the Americans) who was trying to hang on to the areas that would consolidate political power, while encouraging economic growth and political support in the regions.  So, railroads, banks, postal service, telegraphs, shiplines and the military, for example, are governed by the federal government. 

"Property and civil rights", however, falls under provincial jurisdiction, and over the years, as been read more and more broadly, contributing to the growing decentralization of powers since the country's 19th century birth.  To make a long constitutional story short, labour and employment falls under this category, so that by default, the provincial laws usually apply (unless your industry was useful to the federal government in 1867, as per preceding paragraph).  Wikipedia has an article on Canadian federalism if you are keen to know more.

2.  There is no "at-will" employment in Canada?  I can't just fire anyone I want??

Actually, employers can usually fire all they want, but it will be very, very expensive.  The biggest difference between US and Canadian employment law is that we do not have "at-will" employment north of the border.  Every employment relationship is deemed to be based on an employment contract.  An employer breaches the employment contract if it terminates an employee without sufficient notice, giving rise to an entitlement to the employee for damages.

3.  Isn't the employment contract just the signed agreement between the parties?

No, the employment contract can be express or implied, written or oral, and ultimately, all  workplace documents, handbooks, policies, offer letters, etc. form part of the terms and conditions of employment.  Employees can therefore initiate legal claims for promises made in any of these workplace documents, such as benefits, compensation, and vacation days. 

4.  Why should an employer bother making an employment agreement?

While employees can rely on the employment agreement to enforce rights, by far the most important advantage to employers is to limit the scope of the package upon termination.  While an employer cannot contract out of the minimum requirements set out in the various employment law statutes, the parties can agree to cap such payments slightly above the statutory minimums.  It also enables the parties to articulate other workplace expectations such as compensation, vacation, hours of work, reporting structures and other factors important to a particular workplace.

5.  There's no employment contract, so why do I have to pay termination pay?

Welcome to Canada!  Land of the termination payment!  All Canadian jurisdictions have employment law statutes that set out the minimim notice an employer must give an employee if it wants to end the employment contract.  An employer can instead pay out that notice, provided the minimums in the statute are met. 

In the absense of an employment contract that contains a termination provision, on top of the statutory minimums, the courts will award a "common law" amount.  This is the amount that adjudicators over the years have awarded to employees above the statutory minimums.  Thus, an employer can pay out the statutory minimum only, but the significant risk is that the employee will take his or her termination letter to a lawyer, who will advise that the employee should sue for the amount above the statutory minimums.

This area is by far the greatest source of employment litigation in Canada.  Typically, a plaintiff lawyer will first take a look at any of the employment contracts to see what can be attacked and rendered void to get access to the "common law" damages, so it is always a good idea to seek legal advice when both drafting the original employment contract documents, as well as when developing a termination package for an employee. 

6.  One of my employees is not working out.  Can I fire her and give working notice instead of a termination payment?

Employers must either provide sufficient notice (i.e. "working notice"), or make a payment in lieu of notice that required notice.  Some employers want to give notice that the position will end in X weeks, and then expect the employee to remain motivated, loyal and cheerful until that end date. 

See my post from July 2010 on working notice - I'm not a big fan for all kinds of practical reasons, most of which turn on the reality that most do not want to keep working when they've just been fired.  More often than not, it will be cheaper, less hassle and less risk to your business information and operations to simply pay out the employee and have a clean break.

7.  "My employee takes SO much vacation - like, 3 or 4 weeks a year!"

This is actually an exact quote from one client.  Again, welcome to Canada!  While we are no France, it is quite standard to take at least 3 or 4 weeks a year.  And yes, women tend to take more than 3 hours off for maternity leave.  And heck, occasionally men do too. 

8.  Can a salaried employee claim overtime pay?

Entitlement to overtime pay is based on the tasks performed in the job itself, not whether the employee is categorized by an employer as salaried or hourly.  Typically, all employees are entitled to overtime, unless an exemption (such as managerial employees) applies.  The exemptions are generally applied more narrowly than the US overtime laws.

9.  Where are all of your class action suits?

While class actions for employment claims are nowhere near the popular vehicle that they are in the US, there have been a number of claims in Canada, particularly dealing with overtime and with pension/benefit issues.  Individuals have a number of employee-friendly avenues of recourse in Canada, so it's unlikely we'll see the heavy use of class actions as a legal vehicle up here anytime soon.

10.  Does everyone speak French in Canada?

Non, pas tout le monde parle le français au Canada.  Okay, I admit that no client has ever asked me this, but I do get questions about managing a workplace in Quebec.  Let's just start by saying that Quebec, Canada's French speaking province, is different than any other place on earth.  Quebec has some of the oldest, deeply held culture on the continent, which, as an aside, is partly why there continues to be such a robust, home-grown music and arts scene in Montreal.  Who doesn't love Arcade Fire, after all?

Quebec continues to comprise of approximately a quarter of the Canadian population, and yes, pretty much everyone in Quebec speaks at least conversational French.  Immigration, sign and education laws all foster the use of French throughout the province.

In addition to a language difference, Quebec's legal system is based on the civil code, rather than the common law.  While overall the approach to employment law is similar, there are always unique nuances that requires the expertise of a bilingual lawyer called to the bar in that province.  (And yes, there is such an expert a few doors down from me in my office, if you should require such expertise.)

11.  What's up with the Queen?

Yes, statistically, many Canadians (mostly outside of Quebec) still love the Queen, who technically remains the head of Canada.  We went wild when Will and Kate visited us this past summer.  I recently heard that the magazine Hello Canada (which is clearly a front for the Monarchy) is the second highest selling magazine in Canada.  We're a generally non-rebellious, rule-following culture up here.  The Queen and her matching hats and handbags make us feel good and proper about the universe.

12.  Did you guys really burn down our White House?

Yup, on August 14, 1814 - the only time a foreign power occupied the US capital.  To be fair, the US started it, burning and looting York (now Toronto) in 1813.  

 

To my US readers, this FAQ list is just a starting point for discussion.  Please feel free to send me your questions about expanding into Canada and/or about handling HR issues in Canada.  I'll continue to add to this list as they come in.

 

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