Hiring Your First Employee Canada - Q&A with a Canadian Employment Lawyer
Canada’s first-class international trade networks, highly skilled workforce, and tenth largest economy in the world make it the perfect destination for ambitious businesses seeking their next growth opportunity. If you plan on expanding your business by entering the Canadian market, a good starting point is hiring your first employee in Canada to physically grow your presence.
While Canada does have some similarities in employment law with the US, to avoid penalties regarding employment regulations you must compliantly navigate the differences. That’s why we asked Inna Koldorf, Partner and leading employment lawyer at Canadian law firm Miller Thomson, for advice when hiring your first employee in Canada.
1. When companies are expanding business to Canada, what advice do you give before they hire employees?
Determine the province your employee is working in
Nearly all employees in Canada are governed by provincial law, instead of federal law which is followed in the US. Therefore, if you are hiring your first employee in Canada my number one piece of advice is to first determine which province they will be working in. Employment standards, occupational health, and safety laws may be similar in some provinces in Canada but there are significant differences to be aware of.
Know the province’s minimum employment standards
Once you narrow down which province your employee will be working in, you should research the minimum standards in the province’s employment standards legislation. Each province has its own set of minimum standards that address terms and conditions of employment such as:
Minimum wage
Hours of work
Vacation pay
Leaves of absence, and much more.
Require new employees to sign employment contracts
When hiring your first employee in Canada, or expanding your current workforce, signing an employment contract should be a requirement for new employees. The majority of Canadian employees who aren’t unionized are deemed by law to be working under an employment contract.
If an employment contract is not written by the employer and signed by the employee, common law (judge-made law) will fill in the void by implying terms and conditions which often exceed the minimum standards.
As an employer, you can override the conditions imposed by common law in Canada through a written employment contract. To be enforceable the employment contract must comply with the minimum standards in the applicable employment standards legislation.
2. What differences are US companies hiring in Canada most surprised by?
Canadian employment is not “at-will”
If you are a US company hiring your first employee in Canada, one of the main differences that catch most US employers by surprise is that Canada does not have “at-will” employment. In most Canadian jurisdictions, and certainly in Ontario, an employer must have just cause to terminate an employee without notice or pay in lieu of notice. The burden is on the employer to show that just cause existed and the threshold is quite high.
What is considered just cause for termination in Canada?
Employment terminations in Canada for just cause are reserved for really egregious employee conduct such as theft and dishonesty. All other terminations in Ontario are considered to be without cause. In that case, the employer must either provide working notice of the pending termination to the employee or provide pay-in-lieu of the notice.
How much notice does an employer have to give to terminate employment in Canada?
Employment standards legislation provides the minimum length of notice required in Canada for employment separation. If the employee signed an employment contract that contains an enforceable “termination without cause” provision, then the length of notice would be limited to the contractual entitlement.
If the employee did not sign an employment contract or the contract doesn’t contain an enforceable “termination without cause” provision, common law kicks in. Common law in Canada entitles the employee to a notice period longer than the minimum standard. The notice period depends on the employees:
Position within the company
Seniority
Age, and;
The likelihood of finding alternate employment.
In other words, most terminations attract a notice period or a payment that can be limited by an employment contract. In the absence of proper contractual language, terminations can become an expensive burden for employers operating in Canada.
3. What is available to employees in Canada in terms of vacation pay and statutory holidays?
US companies hiring in Canada often find the differences in vacation pay and public holidays surprising. Here’s what you need to know when hiring your first employee in Canada.
Vacation pay in Canada
The level of vacation pay employees in Canada is entitled to increases based on the number of consecutive years of employment with the same company.
1 – 4 years of employment
In Ontario, an employee with four or fewer years of employment with the same employer is entitled to two weeks of vacation time. Vacation pay is calculated as 4% of their yearly gross wages.
5+ years of employment
An employee who has completed five or more years of consecutive employment is entitled to three weeks of vacation time. These employees are entitled to receive 6% of their gross wages as vacation pay.
Statutory holidays in Canada
Each Canadian jurisdiction has its own list of public holidays. Ontario has 9 public holidays during which employees may take a day off and earn public holiday pay.
How is public holiday pay calculated in Canada?
Public holiday pay in Canada is calculated by adding all the regular wages and vacation pay earned by the employee in the four weeks leading up to the week with the public holiday divided by 20.
Employees in Canada also have the option of working on a public holiday if the employer requests that they work and they consent. In that case, an employee will earn 2.5 times their wages for working on the public holiday.
4. What entitlements do employees have to leave of absence in Canada?
Ontario’s Employment Standards Act includes different types of leaves of absence that workers are entitled to, at a minimum. The list includes:
Family Caregiver Leave
Critical Illness Leave
Domestic or Sexual Violence Leave
Infectious Disease Emergency Leave.
There are two types of leaves of absence that are particularly surprising to US employers hiring in Canada.
1) Sick Leave
Sick leave in Canada requires an employer to provide each worker with 3 days off from work due to a personal illness, injury, or medical emergency.
2) Parental and pregnancy leave
Second, parental and pregnancy leave in Ontario, when combined, entitles women who give birth to up to 18 months of unpaid pregnancy and parental leave. All other parents are entitled to 63 weeks of unpaid parental leave.
The law requires employers to continue employee benefits during all statutory leaves of absence. It also requires employees to reinstate an employee into his or her previous position when the employee returns from leave. In other words, the employee’s job is protected during any statutory leave of absence.
5. If you could offer only one piece of advice to US companies hiring in Canada, what would it be?
Do your research before hiring your first employee in Canada. There are various rules and employment regulations in Canada surrounding:
Minimum standards
Health and safety at the workplace
Accessibility for employees and the public.
Ignorance of the rules is no excuse. The resulting fines and damages can come at a high cost to your business. If in doubt seek legal advice from a local Canadian employment lawyer who is familiar with the province’s employment law regime.
Need help hiring your first employee in Canada?
Navigating the provincial laws and employment regulations in Canada can be a lot to come to terms with when hiring your first employee in Canada. Using a specialized Canadian Employer of Record like PGC to onboard, payroll, and provide benefits to your employees on your behalf and seeking advice from a lawyer like Inna Koldorf can help you avoid serious repercussions for your business.
Disclaimer: PGC does not endorse any personal views or opinions of the author. All information here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.