Businesses that wish to operate in Canada must understand and comply with these six categories of employment laws.
For businesses planning to establish a presence in Canada, it's important to learn all there is to know about Canada's complex employment law landscape - which will inform your HR policies and practices.
There are no nationally-applicable labor and employment laws in Canada, but some industries, including banking, interprovincial and international shipping and transportation, and telecommunications and broadcasting, fall under federal jurisdiction. And even when a business is federally regulated, in some matters -- such as minimum wage, for example -- it will have obligations under provincial and territorial laws as well.
To underscore this point: there are 14 different jurisdictions in Canada, accounting for the 13 provinces and territories as well as the federal jurisdiction, which governs about 6% of the Canadian workforce. If your business operates in more than one province or territory, it must satisfy the laws in all relevant jurisdictions. And keep in mind that employers with unionized employees face additional, usually more complex obligations.
While there are many similarities between jurisdictions, significant differences do exist. Therefore, it's a best practice to consult suitably qualified legal professionals in each jurisdiction where your business plans to operate and work with a qualified HCM provider that can help you navigate Canadian employment laws.
Below is a brief overview to help your organization understand the basics:
1. Individual Employment Contracts
The employee relationship is considered a contract whether a physical document exists or not. Each Canadian jurisdiction's employment-related laws will imply certain terms to an employment contract, and courts and employment tribunals interpret explicit and implied contract terms when a matter progresses to litigation.
The length of most employment contracts is indefinite, but a contract can end for reasons such as an employee's resignation, a termination with cause for serious misconduct, or, much more frequently, a termination without cause. There is no "at-will" employment in Canada and, in most circumstances, employers must provide "reasonable notice" (or several months of compensation in lieu; the amount is always fact specific and depends on a number of factors) as part of a severance package when terminating an employee without cause.
2. Employment Conditions Governed by Legislation
Minimum employment conditions are governed by legislation – including employment standards, human rights, occupational health and safety, and privacy statutes. Note that employees cannot opt out of the minimum standards, and employers can offer more than the minimum employment standards – such as additional paid vacation time- to attract candidates. Employment standards legislation covers a broad range of rights and duties, including minimum wage, hours of work, overtime, vacation pay, sick leave and other protected leaves, and equal pay for equal work.
3. Pension Regimes
The Canada Pension Plan is administered by the federal government and requires contributions from employers and employees at prescribed rates. In Québec, the province administers its own Québec Pension Plan.
There is no legislation requiring an employer to implement a private pension plan for its employees, except in Québec, where employers must provide employees with the opportunity to contribute to a private pension plan, without the obligation to contribute themselves. Federal and provincial laws regulate the terms, conditions and administration of private pensions.
Many employers offer other retirement saving vehicles, the most common financial benefit being a Registered Retirement Savings Plan- or "RRSP"- with an employer match. A RRSP, gives employees the opportunity to contribute a portion of wages to individual accounts with certain tax advantages, and employers may also contribute to these plans to increase the investment.
4. Public Health Insurance
While Canada's public healthcare system covers most critical medical services, it does not cover prescription drugs or dental visits, for example. Consequently, many Canadian employers provide their employees with supplemental benefits coverage. Note that new Canadian residents must wait three months to receive coverage under the public healthcare system. To bridge the gap, special health insurance programs exist.
5. Workers' Compensation
As is the case in other countries, workers' compensation in Canada provides benefits for an employee who becomes ill or injured as a result of their job. Each province or territory manages its own program, and the coverage is compulsory for most employers. If coverage is not mandatory for an employer, private insurance is available.
6. Employment Insurance
Employment Insurance, administered by the federal government, provides income to a worker who experiences an interruption in their earnings for reasons other than misconduct. For example, an employee who takes maternity or parental leave or who needs to care for a critically ill family member can receive payments under the program. The Employment Insurance regime receives funding from premiums paid by employers and employees via payroll deduction.
To learn more about Canadian employment laws, including how to adapt your business policies and procedures to ensure compliance, listen to the on-demand webinar Workplace Compliance Spotlight: Navigating Canadian Employment Law and HR Strategy.