Canadian Labor Law: 10 Important Rules for Foreign Employers



Canadian Labor Law: 10 Important Rules for Foreign Employers

Canada's strong economy, skilled workforce, and access to large retail chains make it an ideal market for global companies to invest and grow. However, in Canada, federal law only regulates certain industries, while all others are governed by provincial laws. Learn more about the 10 important rules for foreign employers in Canada and the top questions about labor laws

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According to statistics, about 7% of foreigners own an enterprise with employees in Canada. Most often, citizens of China, Singapore, India and the USA open a representative office or a new company in the country.

Canadian labor and employment law has many peculiarities and nuances and can become a real maze for a foreign employer. If you plan to open a representative office of your business in the country of the maple leaf, then you need to take into account the differences in labor legislation between states. Moreover, if your company employs workers from different provinces and territories of Canada, working in compliance with the law can be even more difficult, because each region has different worker rights and labor standards.

So, what are the most important provisions in the Canada Labor Act? 10 rules for foreign employers further.

1. It is impossible to dismiss without warning

In Canada, firing an employee without notice or with compensation in lieu of notice is possible only if there are reasonable grounds. Also, the case must fall into the category of serious misconduct and the employer must have strong evidence of the worker's guilt. If you plan to fire an employee without cause, you must comply with provincial notice periods or pay the employee money.

2. Penalty for incorrect classification of employees

In Canada, two categories of workers are distinguished:

- Employees - perform work exclusively under the direct supervision of the employer for an indefinite period of time and are entitled to benefits.

- Contractors are self-employed individuals who work autonomously for a specified period of time and are not entitled to benefits.

Combining these categories may result in misclassification penalties and backdated benefits with interest. Sometimes it can cost a company millions of dollars.

3. Strong anti-discrimination legislation

Federal and provincial laws protect Canadians from all forms of discrimination. The Canadian Human Rights Act prohibits employment based on race, age, sexual orientation and gender. Also, most provinces have their own protections, for example, British Columbia prohibits discrimination based on criminal convictions unrelated to employment.

4. Application of various laws in certain fields

Canada Labor Code legislation applies only to federal government employees and private sector workers in the banking, telecommunications and transportation industries. This represents less than 10% of Canada's workforce. The work of the rest of Canadians is governed by provincial employment laws and other national laws. Canada has labor relations boards in all its jurisdictions.

5. The right to join trade unions

Canadian workers have the right to freedom of association, and any non-management worker in Canada can lead a union without fear of reprisals from the employer. Through collective bargaining, the employer and the trade union create a collective agreement that establishes new working conditions. During negotiations, workers will have the right to strike.

6. Fines, Penalties, and Legal Consequences for Failure to Offer Workers Benefits

Every worker in Canada is entitled to statutory benefits – pension, employment insurance, vacation, public holiday, compensation, etc. Each Canadian province has its own Employment Standards Act that sets minimum working conditions. Employers who do not offer benefits to employees can be fined.

7. Non-disclosure agreements (NDAs) are mandatory in Canada

Non-disclosure agreements (NDAs) can be included as confidentiality clauses in Canadian employment contracts. They are designed to protect confidential information if they are reasonable, specific and in the public interest, i.e. they do not conceal the organization's criminal activities.

8. The employer is responsible for occupational health and safety standards at the workplace

According to the Code of Labor Laws, employees must be warned about possible risks at the workplace and have contact with representatives of the labor protection service. Canadian workers are also protected from any harassment. In case of sexual violations, the employer is obliged to protect the anonymity of the complainant and his interests.

9. Protect personal information of employees

Canada has a federal law that protects personal information and electronic documents (PIPEDA). Similar provincial legislation has also been approved in the regions of Alberta, British Columbia and Quebec. These rules oblige the employer to obtain consent from the employee before collecting any personal information, as well as to request only necessary data from him and to collect them only by legal means.

10. Transparency in payment of labor

The Employment Equity Act required employers to report wage data to identify any pay gaps among demographic groups. This rule promotes fair pay for women, minority groups, and people with disabilities. Prince Edward Islands also recently passed a law requiring salary information to be included in public job advertisements.

Top questions about Canadian labor laws

1. What is the minimum wage in Canada?

As of April 1, 2023, the federal minimum wage in Canada is C$16.65 per hour. However, this fee applies to federal employees and workers in industries that span provincial boundaries (such as transportation, banking, and telecommunications). For all other workers, the minimum wage varies by province and territory. However, the average is $14.75-$15.00 Canadian per hour.

The size of the minimum wage regularly increases depending on inflation in the country.

2. What overtime rules are approved in Canada?

  The provinces have different overtime payment rules. However, usually the payment should exceed at least 1.5 times the base rate.

The working week in most regions of Canada is 40 hours. However, in Alberta and Ontario, work over 44 hours is considered overtime, Prince Edward Island and Nova Scotia have a threshold of 48 hours, etc.

3. Benefits for workers in Canada

All full-time Canadian employees are entitled to the following statutory benefits: pension, employment insurance (which covers parental leave, vacation entitlements (which vary by year of service), public holidays, sick leave (except Alberta and Manitoba). However the minimum of these entitlements is also set by provincial councils and paid by employers.

All Canadian workers are also covered by health insurance plans, and employers have the option of offering additional coverage through private providers.

4. How to fire an employee in Canada?

Voluntary dismissal is not recognized in Canada, two methods of forced dismissal of an employee are approved in the country:

- Termination of employment without cause - the Canadian employer must notify the employee in writing of its intention to fire him or pay compensation. The length of the notice period is determined by each province and depends on how long the employee has worked for the company.

Federally regulated employees are entitled to two weeks' notice and receive severance pay equal to two days' pay for each year of service. Among the provinces, only Ontario requires severance pay.

- Dismissal with reasons - if the dismissal is for a valid reason, then a warning or payment in lieu of notice is not required. However, the employer is obliged to confirm the fairness of the dismissal - employee misconduct, theft, fraud, violence, etc.

Igor Usyk - Head of Legal Department at Visit World

For a safe move to Canada, refugee status and employment, consult an international lawyer. We help to solve complex and simple issues for your comfort and safety in Canada.

Products from Visit World for a comfortable trip:

Checklist for obtaining a visa and necessary documents in Canada;

Legal advice on business issues in Canada;

Travel insurance for foreigners in Canada;

Medical insurance all over the world.

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How many immigrants is Canada ready to accept in 2024-2026? The government has published a new plan.

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