In Canada the vast majority of employers are regulated by provincially enacted labour and employment laws. Nevertheless, approximately 5 to 10% of the workforce in Canada is federally regulated. Despite the relatively small size of the federal workforce, it is critical to Canada’s economy and national infrastructure. Specifically, the federal government regulates labour and employment matters in sectors recognised under the Constitution Act as federal works or undertakings. These sectors include postal services, banks, airlines, radio, television and telecommunications companies, railways, shipping companies, inter-provincial trucking companies, and federal Crown corporations.
Each Canadian jurisdiction has enacted legislation regarding labour and employment law, including employment standards, human rights, occupational health and safety, workers’ compensation and labour relations legislation (which governs unionised workplaces). The common law (or the civil law system in the province of Québec) also applies to certain non-legislated aspects of the employment relationship.
Employment Standards Legislation
All jurisdictions in Canada have enacted employment standards legislation that set out the minimum standards for wages, hours of work, overtime, public holidays, various leaves of absence, and entitlements upon termination of employment. An employee cannot waive his or her right to these minimum standards, except as part of a collectively bargained agreement in a unionised workplace.
Canada is not an “employment-at-will” jurisdiction, although employers can generally, but not always, terminate non-unionised employees on a without cause basis. Where a termination is without cause, employment standards legislation prescribe the minimum notice and, in certain jurisdictions, severance pay that must be provided to the terminated employee(s). Employers typically have the option to provide pay in lieu of notice of termination. Where severance pay is required, on the other hand, it must be paid and cannot be provided as notice. In the case of group or mass terminations, employment standards legislation stipulates additional requirements to provide notice to the applicable government agency.
Absent an employment agreement explicitly stating otherwise, employees are also entitled “reasonable notice” of termination at common law (or, in Québec, under the Civil Code). In many cases, the common law will require months or years of notice of termination or pay in lieu thereof. However, employees have a duty to mitigate their common law notice entitlements by seeking alternate employment during the reasonable notice period. Earnings made by the employee during the reasonable notice period will typically offset the employer’s obligation to provide pay in lieu of notice of termination.
Human Rights and Privacy Law
All jurisdictions have passed human rights legislation prohibiting discrimination and harassment of employees and prospective job candidates. The prohibited grounds of discrimination and harassment vary depending on the jurisdiction and can include race, sex, age, religion, political conviction, colour, disability, marital or family status, ethnic or national origin, social condition, pregnancy, gender identity, sexual orientation, and record of offences. Human rights legislation requires employers to provide reasonable accommodation to employees who cannot fulfil occupational requirements due to a prohibited ground of discrimination (e.g. disability or religion). However, an employer may be able to defend an otherwise discriminatory requirement where it is a bona fide occupational requirement and where reasonable accommodation would result in undue hardship for the employer.
The federal government and certain provincial governments have also enacted privacy legislation that applies to employment policies and practices. This legislation, in addition to the common law or Québec Civil Code, governs the treatment and use of personal employee information. Generally, the legislation requires notification and consent from employees prior to transferring employee information to another party, and establishes strict record-keeping and retention standards. The common law also provides employees with a limited protection from an intrusion into their private affairs by their employer.
In response to the growing number of Canadians with disabilities, some Canadian jurisdictions have enacted or are considering legislation that contains requirements for employers to enhance the accessibility of their workplaces for individuals with disabilities. Accessibility legislation differs from human rights legislation in that it requires employers to be proactive, rather than responsive, in making changes to the workplace to better integrate individuals with disabilities. Among other things, accessibility legislation typically requires employers to provide employee training, accessible information and other resources to assist individuals with disabilities throughout the recruitment process and the employment relationship.
Presently, slightly less than one third of all Canadian employees are members of unions. Legislation in each jurisdiction protects an employee’s right to join a trade union. A trade union with sufficient employee representation may apply to the labour relations board in its jurisdiction to be certified as the exclusive bargaining agent for a group of employees. A certified bargaining agent has the right (and corresponding obligation) to attempt to collectively bargain conditions of employment on behalf of employees.
Acquiring a Canadian Business
When the shares of a company are purchased, the legal personality of the corporation does not change. Even though a change of control has occurred because there is a new owner of the shares, the corporation still continues to be the employer and generally there is no resulting reduction or break in the service and seniority of employees. Furthermore, any liabilities, regulatory penalties or entitlements existing prior to a sale are unaffected by the acquisition and corresponding disposition of shares.
In an asset sale, in contrast, an employee’s employment will be deemed terminated upon the conclusion of the sale for common law purposes, except in Québec. It is generally advisable that employees receive a new contract or offer of employment with the purchaser. The offer is usually, but not necessarily, based on the same or substantially similar terms, and employees who accept the offer will usually but not always carry over their accumulated service and seniority.
Labour relations legislation usually requires a purchaser of all or part of a business to assume any applicable union relationship and collective agreements.
Canada has a mandatory public pension scheme for all employees and employers. In addition, many employers provide private pension schemes for their employees.
All employees and employers are required to contribute to the Canada Pension Plan (CPP) or, for employees in Québec, to the comparable Québec Pension Plan (QPP). These plans provide individuals and their families with a basic level of income protection in the event of retirement, disability or death. Currently, employees and employers pay 4.95% of salaries into CPP, up to a maximum income level of CAD54,000 per year. However, the federal government has announced its intentions to expand the CPP in order to address the growing shortfall in middle-income retirement planning that has resulted as the number of workplaces offering private pensions decreases.
Many employers provide retirement or savings plans for their employees. Traditionally, employers provided defined benefit pension plans. However, the trend for at least the past decade has been to provide defined contribution plans and to either convert, close or freeze defined benefit plans in order to reduce risk and stabilise costs. Retirement and savings plans generally must be registered and are regulated under the Income Tax Act, particularly with respect to maximum contribution and benefit limits. Pension plans are further regulated by employment standards legislation, and must also be registered in the province in which the majority of employees are employed.
Pension legislation addresses minimum funding and contribution requirements, permitted forms of benefit payments at retirement, termination or death, permitted investments for pension funds, and the responsibilities of employers and plan administrators. Employers tend to also act as the administrators of their plans and, as such, are held to “prudent person” fiduciary standards of care. They are permitted to delegate their administrative and investment responsibilities, but must supervise the delegates in a prudent manner. Canada’s pension regulators have published numerous governance guidelines to assist plan administrators in meeting their fiduciary obligations.