In its Toronto office, Dickinson Wright has a team of lawyers experienced in Canadian labour and unemployment law, among other areas of legal expertise. U.S.-based organizations with business interests in Canada should understand that there are significant differences in labour and unemployment law in the two countries as outlined below.
Termination of Employment
In the United States, employment is generally “at will” and notice of termination by an employer is required only by contract or company policy. In Canada, employment is governed by principles of contract law and statute. An employee is employed pursuant to a contract of employment, either express or implied. If an employee does not have a written contract of employment, there is an implied contract of employment. Consequently, where the employer and employee have not agreed to fundamental terms such as notice of termination, a court will determine what the parties would have agreed to if they had put their mind to it. In this context, Canadian employers are required to give employees at least statutory notice of termination or pay in lieu pursuant to the applicable Provincial Employment Standards Act. These standards are minimum standards only and an employer may be required to give lengthier notice or pay in lieu as provided by contract or company policy or under Common Law.
Severance
The Ontario Employment Standards Act provides that employees with more than 5 years service with an employer, which has a payroll in excess of $2.5 million or is shutting down an establishment and terminating more than 50 employees, are entitled to 1 weeks’ pay per year of service to a maximum of 26 weeks.
Wrongful Dismissal
Where an employee is not provided with sufficient notice or pay in lieu thereof, the courts take the position that the employee has been wrongfully terminated. Damages would generally be assessed in an amount corresponding to the employee’s remuneration for the period of time it would take the employee to find reasonably comparable employment (putting the employee in the position he/she would have been in if the contract, including implied contract, had not been breached). The amount of notice required, subject to such factors as age, position, length of service and availability of alternate employment, is generally 1 month per year of service.
Minimum Standards
Provincial legislation establishes minimum standards for working conditions, wages, hours of work, overtime pay, public holidays, vacation, pregnancy/parental leave, medical leave and personal emergency leave. Contracting out of these minimum standards is prohibited unless a corresponding greater right or benefit is provided.
Employment Litigation
Employment litigation in Canada tends to result in predictable damage awards. There is, however, the possibility of punitive or mental distress damages if the circumstances warrant it.
Litigation practice and procedure in Canada is quite different from the United States: rights of discovery are limited (i.e., a party may as of right examine only one individual from a corporate party and examinations by one party of all adverse parties cannot exceed 7 hours without a court order), civil jury trials are rare, and generally, the losing party pays the winning party’s costs. In addition, consistent with the employment contract concept, an employer or employee cannot unilaterally make significant changes to the terms and conditions of employment without either notice or consideration flowing to the employee.
Consideration
Continued employment does not generally constitute valid consideration to support changes in the terms of employment in Canada. Accordingly, if restrictive or other terms are added to a Canadian employee’s contract of employment (such as a post-employment non-competition or non-solicitation covenant), fresh consideration such as an increase in salary should be provided. Again consistent with the contract of employment concept, more material adverse changes to the terms and conditions of a Canadian employee’s employment can be only made on reasonable notice.
Restrictive Covenants
Canadian courts generally enforce non-competition and non-solicitation covenants that are reasonable (given the business interest to be protected) in time, geographic scope and the nature of the protected business, if they do not unduly limit an employee’s ability to secure employment. Canadian courts do not “blue pencil” or modify restrictive covenants, so a covenant that is too broad will be struck out completely.
Executive Compensation
Information circulars prepared for an annual meeting of shareholders must include detailed disclosure about the compensation paid to certain executive officers and directors in connection with their office or employment by a reporting issuer or a subsidiary of a reporting issuer. The disclosure requirements for executive compensation of named executive officers (“NEO’s). Any awards, earnings, payments, or payables to an associate of an NEO, or of a director, as a result of compensation awarded to, earned by, paid to, or payable to the NEO or the director, in any capacity with respect to the company must also be disclosed.
Changes to Post-Retirement Benefits
Mandatory retirement is unlawful in most Canadian Provinces pursuant to Human Rights legislation. In Canada, it is difficult to reduce post-retirement benefits without notice and almost impossible to reduce these benefits for existing retirees, again a corollary of the employment contract concept.
Human Rights
In Canada, discrimination in employment is prohibited on specified grounds which include race, citizenship, place of origin, gender, ethnic background, religion/creed, age and sexual orientation. There appear to be more prohibited grounds in Canada than in the United States. Dealing with complaints under the Ontario Human Rights Code, even if frivolous, can be costly and time-consuming for employers. In both jurisdictions, disability-based discrimination is prohibited by legislation, and employers have a duty to accommodate the disability. In Canada, however, the duty to accommodate disability obligates an employer to “accommodate” an employee’s disability to the point of undue hardship to the employer as a whole. “Undue hardship” is a very high standard. Alcoholism and drug addiction are considered to be disabilities for which the law requires accommodation. Workplace drug and alcohol testing in Canada are restricted.
Labour Relations
While the general concepts of certification, the labor management relationship and the process relating to grievances are generally similar in Canada and the U.S., there are some important differences, many of which would become evident in any given fact situation. In Canada, during the life of a collective agreement, no strikes or lock outs are allowed. This is a fundamental principle in Canadian labor relations law. Generally speaking, it is easier for a union to achieve certification in Canada. Where an employer is perceived to be intimidating or discrediting the union drive to employees during an organizing drive, it is likely that an order of automatic certification will be made by the Ontario Labour Relations Board. Examples of some finer points in labor relations law in Canada which would be different under U.S. law; an employer cannot provide an undue advantage to one union over another in a work environment. There are relatively limited restrictions in Canada on conferring a benefit to union personnel and that there is essentially no prohibition in providing gifts, or “perks” to union personnel by the company.
Health and Safety
The employer must “take every precaution reasonable in the circumstances for the protection of a worker…” This includes a requirement to have a competent supervisor present in the workplace. In Canada, employees are entitled to refuse to perform unsafe work as determined in the subjective judgment of the employee. An investigation is required by the employer, using the objective standard, of what a reasonable person would be expected to do in the circumstances. The employer must fully investigate circumstances of the employee complaint and will typically attempt to convince the employee that the work at issue is not unsafe. At this second stage, the employer can offer the work at issue to another employee but the obligation to investigate remains the same. If the employee who has made the complaint is not satisfied after the second stage, then an investigation would be made by the Ministry of Labour. If the inspector considers that there has been a violation of the Health and Safety Legislation, the employer can be charged under quasi criminal provisions of the Provincial legislation. There is also a potential for criminal charges under the Federal Criminal Code. Officers, directors and senior employees of corporations who fail to take reasonable steps to prevent workplace accidents.
Workplace Harassment and Violence
As of 15 June 2010, all Ontario employees with more than 5 employees are required to put in place a policy to prevent harassment and violence in the workplace.