Throughout the past 12 months, and excluding modifications or particular measures taken as a result of the COVID-19 pandemic (see 1.2 COVID-19 Crisis), Canadian employment legislation was mainly marked by amendments introduced to the Canada Labour Code and provincial Employment Standards legislation, including amendments regarding hours of work and the right to request flexible work arrangements, new or expanded leaves (such as paid personal leaves) and limited right to refuse overtime.
Canada Emergency Response Benefit
In response to the COVID-19 pandemic, the federal government created, in early April 2020, the Canada Emergency Response Benefit (CERB), intended for workers who have stopped working and are without employment or self-employment income for reasons related to COVID-19, regardless of whether or not the workers would normally be entitled to employment insurance benefits. The CERB provided a weekly taxable benefit of CAD 500 and, was available for up to 28 weeks.
Canada Emergency Wage Subsidy
The federal government also created the Canada Emergency Wage Subsidy (CEWS), in order to:
The CEWS was initially implemented for a 12-week period (March 15th to June 6th) but has subsequently been extended to 25 September 2021, with the ability to extend the wage subsidy further to November 30th. The federal government recently introduced Bill C-30, in which it proposes to extend the CEWS until 21 September 2021 and redesigns the requirements to make the subsidy accessible to a broader range of employers by providing a gradually decreasing base subsidy to all eligible employers that are experiencing a decline in revenues.
Changes from Bill C-30 are such that employers must have had a revenue drop of over 10% to receive the CEWS. Moreover, the rate of CEWS will gradually decline in the subsequent claim periods. The various rules for the calculation of the wage subsidy can be found on the Government of Canada’s website.
Canada Recovery Hiring Program
Beginning 6 June 2021, the federal government introduced the Canada Recovery Hiring Program (CRHP). Like the CEWS, the CRHP is a subsidy for employers impacted by the COVID-19 pandemic to support wages. Most of the eligibility criteria for the CRHP and CEWS are the same, including payroll account requirements and required revenue drops.
Most employers who are eligible for the CEWS will also be eligible for the CRHP. However, there are some additional requirements for for-profit corporations and partnerships to be eligible for the CRHP. When deciding whether to apply for the CEWS and CRHP, employers are encouraged to apply for whichever subsidy provides the higher amount.
Canada Labour Code
In term of legislative amendments, the Canada Labour Code, which applies to federally regulated employers, now includes a new COVID-19 job-protected leave of absence of up to 24 weeks. These amendments also extended the time period for temporary layoffs by up to six months for employees laid off prior to 31 March 2020 or to 30 December 2020 for employees laid off between 31 March 2020, and 30 September 2020.
British-Columbia’s government amended the Employment Standards Act to provide for COVID-19 paid vaccination leave, paid sick leave and unpaid leave. Amendments also provide that employers may temporarily lay off employees, for 24 weeks during any 28-week period, without triggering the deemed termination provision under the Act. This does not apply to layoffs beginning on or after 1 June 2020, and the amendment expires on 30 August 2020. The Employment Standards Act was also amended so that after 90 consecutive days of employment, the employee is entitled to up to three days of unpaid leave in each employment year for personal illness or injury. This section will still be effective after the COVID-19 pandemic is over.
Bill 32: Restoring Balance in Alberta’s Workplaces Act, 2020 (“Bill 32”) received royal assent on 29 July 2020, with various changes taking effect in late 2020 and early 2021. Bill 32 made significant changes to both the Employment Standards Code and the Labour Relations Code, such as eliminating requirements around group termination notice and increasing the temporary layoff period from 120 to 180 days for employees who have been laid off for reasons related to COVID-19. The government also amended the Employment Standards (COVID-19 Leave) Regulation, effective 15 August 2020, to extend the unpaid job-protected leave for care of a child (due to school or daycare closures) or for care for an ill or self-isolating family member.
In Ontario, the government published a regulation which, among other things, deems temporary reductions in hours due to COVID-19, or any temporary layoffs due to COVID-19, which began on or after 1 March 2020, not to trigger constructive dismissal claims or the deemed termination and severance provisions under the Employment Standards Act, 2000 (ESA). The regulation deems employees who are not performing work (eg, those on a temporary layoff under the ESA) on or after 1 March 2020, to have been on a job protected unpaid Infectious Disease Emergency Leave (IDEL) under the ESA. Though leaves of absence under the ESA generally require employers to continue employee benefits plans, the regulation does not require such participation or employer contributions if an employee who is not performing work (eg, who is on a temporary layoff) is not participating in these plans or if the employer was not making contributions as of 29 May 2020.
The regulation applies until 25 September 2021, at which time employees will no longer be deemed to be on leave, and rules regarding constructive dismissal under the ESA resume. After 25 September 2021, employees may continue to be eligible for IDEL. The ESA was amended further in April 2021 to provide employees with three days’ paid IDEL due to certain reasons relating to COVID-19. This is in addition to employees’ rights to the unpaid IDEL. Entitlement to paid leave ends on 25 September 2021.
Canada is a federal jurisdiction in which the provinces have principal authority over labour and employment matters. However, the federal government has exclusive authority over labour and employment matters in certain important areas, including banking, the postal service, interprovincial transportation, telecommunications and certain other sectors that make up part of Canada’s national infrastructure.
Labour and employment legislation across Canada does not generally differentiate between blue-collar and white-collar workers. However, separate requirements or exemptions – in respect of matters such as minimum wages, eligibility for overtime and maximum hours of work – are often established for different types of work, including in respect of specific industries or for specific types of employees.
For example, in most jurisdictions supervisory and managerial personnel are exempt from the payment of overtime. Other groups are also excluded from overtime pay provisions in most jurisdictions, including professionals (lawyers, doctors, engineers, etc), domestic workers, teachers, police and IT professionals. Similarly, supervisory and managerial personnel, and specified groups, are also excluded from maximum hours of work provisions.
In addition, regulations in each jurisdiction establish exceptions to the maximum hours that can be worked in specific industries, such as tourism and trucking.
Definite and Indefinite Contracts
Contracts of employment may be for a definite or indefinite term.
Employees hired on a definite, or fixed-term, employment are hired for a specific period of time. In such employment relationships, there is no intent to create an ongoing employment relationship.
The requirement to provide notice of termination, discussed below, may be avoided in certain circumstances by hiring on a definite-term basis if the term is well defined. An employee hired on a definite-term contract is entitled to be employed for the entire term of the contract unless the contract is terminated for cause or is rendered impossible to perform. As a result, and in the absence of an enforceable clause providing the option to terminate the contract early, if a definite-term employee’s employment is terminated before the expiry of the term, the employee will be entitled to damages based on the remainder of the contract.
By contrast, employees hired on an indefinite basis can generally only be terminated with reasonable notice of termination, or pay in lieu thereof, where the termination is without just cause, as discussed below.
Notably, courts in Canada have found that a series of indefinite-term contracts leads to a conclusion that the employment relationship has become indefinite. Accordingly, a series of renewals to definite-term contracts will likely be overlooked by courts and not relieve an employer’s obligation to provide reasonable notice of termination.
Formal Requirements and Terms
Contracts of employment may be oral or written or a combination of both. Increasingly, employers enter into written employment contracts with non-unionised employees to set out the terms and conditions of the employment relationship. Written employment contracts are especially common between employers and senior, managerial or key employees, and employees hired for a particular term or to perform a particular task.
There are no specific terms that must be included in a contract of employment. However, any terms set out in the contract must respect the minimum standards set out in the employment standards legislation that has been enacted in each Canadian jurisdiction. Employment standards legislation applies whether or not an employer and employee have set out the terms of their relationship in a contract. However, employment standards are only minimum standards – employers and employees are not prohibited from agreeing to greater rights or benefits in employment contracts.
Express terms set out in written employment contracts typically relate to salary, benefits, vacation entitlement, hours of work, title, job duties, and termination of employment as discussed below.
Importantly, unlike the USA, Canada does not allow for “at will” employment. Rather, unless there is an express term providing otherwise, it is an implied term of every employment relationship that the relationship can only be terminated with reasonable notice of termination, or pay in lieu thereof, where the termination is without just cause. Reasonable notice of termination can be significant, particularly for employees in senior positions, older employees, and those with lengthy service with the employer. As a result, employers often use termination clauses in employment contacts to limit the amount of reasonable notice to be provided upon termination of employment. Such clauses are, however, subject to strict analysis in some jurisdictions, while courts are not bound by them in others.
To be enforceable, employment contracts must be agreed to at the time of hire. If an employment contract is signed or amended once employment has begun, new consideration would be required for the contract to be valid.
Most jurisdictions limit the number of hours that can be worked in a week.
Meal breaks and other shorter breaks during the working day are also typically required by legislation. In most cases, an employee is entitled to an unpaid meal break of at least 30 minutes after having worked five consecutive hours. If an employee is required to remain at their workstation or otherwise be available for work during a break, the employer will be required to pay the employee for the break time. Employment standards legislation also often requires additional rest periods during the work day once an employee has worked a certain number of consecutive hours.
Generally, the same laws apply to employees who perform full-time as those who perform part-time work. There are no specific terms required for part-time employment contracts.
Employment standards legislation provides for overtime pay once a specific number of hours are worked in a week. In most jurisdictions, overtime is triggered at 40 hours a week and is paid at one and a half times the employee’s regular rate of pay. However, in Alberta and Ontario, overtime begins at 44 hours a week and in Nova Scotia and Prince Edward Island, at 48 hours a week. However, some categories of employees can be excluded from the application of overtime rules, such as managerial personnel or, for example, in Quebec, employees paid on a basis other than an hourly one.
In some circumstances, the applicable legislation allows employers and employees to enter into “averaging” agreements that allow for hours of work to be averaged over a period of several weeks for the purposes of determining entitlement to overtime pay.
Each jurisdiction in Canada has enacted legislation providing for a minimum wage for most full-time, part-time and casual employees. The minimum wage is typically adjusted by regulation on an annual basis. The minimum wage for employees employed in the federal jurisdiction is the minimum wage rate established in each province and territory.
In addition to providing employees with their base wage or salary, employers in Canada often provide end-of-year bonuses to employees or offer employees the opportunity to earn performance-related pay to motivate productivity. Grants of shares, stock options and profit-sharing programmes are also common for executive-level employees.
Employers may be liable to provide payment on account of any bonus, performance-related pay, or other perquisite that an employee would have received had they continued to be employed during either the statutory or reasonable notice period, discussed further in 7.2 Notice Periods/Severance. Courts will consider whether the applicable perquisite formed part of the employee’s compensation package or was simply provided at the employer’s discretion on occasion. Carefully drafted employment contracts and policies may serve to limit such payments during any reasonable notice period, so long as statutory requirements are met. Such terms are typically included in executive employment contracts where perquisites may be a significant component of the executive’s compensation.
Beyond minimum wages, some jurisdictions have enacted legislation regulating executive compensation in the public sector. That legislation typically prescribes requirements for public disclosure, caps on salary and performance-related pay, signing bonuses, severance payments and the like.
By contrast, executive compensation in the private sector is not specifically regulated by employment law. However, certain corporate, securities and tax laws governing compensation (particularly where compensation includes grants of shares and options) as well as board requirements and shareholder approvals may be triggered and must be considered when determining the compensation of executives.
The federal Pay Equity Act comes into force later this year. Once in effect, federal sector employers with ten or more employees will have three years to develop a pay equity plan that identifies and corrects gender-based wage gaps for incumbents of predominately female job classes.
Vacation and Vacation Pay
In each Canadian jurisdiction, employees are entitled to paid vacation. Most often, employees are initially entitled to a minimum of two weeks of paid vacation per year. However, employers commonly provide their employees with a total of three to four weeks' paid vacation per year. Many jurisdictions have tiered vacation allotments, whereby employees with three or more years of service can be entitled to three weeks of vacation.
Furthermore, many jurisdictions entitle employees to vacation pay dependent on length of service and usually equal to a percentage of accumulated wages earned per year, such as 4% to 6% for Ontario, British Columbia and Quebec, for example.
In addition, public holidays are also prescribed by federal, provincial and territorial employment standards legislation. Employees are generally entitled to take public holidays off with regular pay. However, employees can agree to work on a public holiday and, in these circumstances, will normally be entitled to receive a day off in lieu of the public holiday or be paid at a premium rate for hours worked that day.
The Canada Labour Code was recently amended to add a tenth paid holiday starting in 2021 for employees in the federally-regulated sector, which will be designated as the National Day for Truth and Reconciliation.
Employment standards legislation in each jurisdiction establishes various leaves of absence during which employees' jobs must be protected. Common to most jurisdictions are maternity, parental, adoptive, bereavement and sick leave. Some jurisdictions also provide for reservist leaves, jury duty leaves, organ donation leaves, family obligations leaves, emergency personal leaves and family caregiver leaves for seriously ill family members, in addition to COVID-19 related leaves. Recently, British Columbia introduced a paid leave respecting domestic or sexual violence for five days, which is in addition to the five days of unpaid leave also available to employees.
Following a protected leave of absence, the employer is generally required to return the employee to the position that they held at the start of the protected leave, or to a comparable position if the original position no longer exists. The timing, duration, qualifying periods of employment, proof and notification requirements, as well as rules regarding the employer’s obligation to continue benefit-plan contributions applicable for the above-noted leaves, vary by jurisdiction.
As a general rule, employment standards statutes do not require paid leaves of absence. Other government-provided payments may, however, be available to those on leaves of absence. For example, unemployment insurance benefits are provided to those on maternity and parental leave, and, in prescribed circumstances, for those on sick leave. Further, where an absence from work is the result of a work-related illness or injury, compensation may be available under the statutory workers compensation regime administered by each province.
However, many employers provide paid leave for periods of certain leaves as part of their benefits programmes or compensation packages (for example, paid maternity or parental leave is common). Recently, Quebec’s legislation regarding labour standards was also amended to provide employees with two paid days per year for sickness or family obligations. Throughout the years, many employers have adopted in-house policies providing employees with a prescribed number of paid sick days.
In some circumstances, employers could be obliged to provide a longer period of leave than required by statute in order to meet the duty to accommodate imposed by human rights law.
Limits on Confidentiality
At both common law and in civil law, employees have an obligation to maintain the confidentiality of the employer’s proprietary information and not to disclose or make use of such information for personal advantage. Employment contracts are frequently used to specifically reinforce this obligation. Confidentiality clauses that limit the use and disclosure of non-public, proprietary information about the employer’s business, both during and following the end of the employment relationship, are generally enforceable.
Canadian employers are also increasingly beginning to insert non-disparagement clauses in separation agreements with departing employees. These clauses prohibit the former employee from making comments or statements that negatively impact the former employer’s reputation, business, management, products, services and/or clients. Non-disparagement clauses that are clearly drafted are generally enforceable.
Generally, employees will not be found personally liable when acting in the course of their employment within the scope of their authority. Rather, an employer will often be found to be vicariously liable for the actions of its employees committed in the course of discharging their employment duties that cause harm to third parties, even if an employer has not been negligent or committed other faults.
Canadian courts have identified policy reasons for placing fault and liability on employers rather than employees in such instances, including the employer’s power to direct and control its employees, the employer’s role in creating the risk of harm to others by creating the circumstances in which the harm occurred and the employer’s ability to pay the harmed third party.
However, an employee may be held liable, without vicarious liability for an employer, for actions causing harm to third parties that are not sufficiently connected to their employment or committed outside the course of discharging employment duties.
There are instances in which an employee may nevertheless be held personally accountable for their actions that cause harm during the course of their employment even if such actions are connected to their employment. For example, supervisory employees who fail to discharge their responsibility to take reasonable steps to ensure the safety of workers may be found criminally negligent alongside an employer. Indeed, courts have recently convicted supervisory employees of criminal negligence for deaths and injuries resulting from non-compliance with workplace safety legislation, meting out prison sentences for days or years depending on the severity.
Further, where an employee engages in certain illegal conduct in the context of their employment, such as discrimination prohibited by human rights legislation, liability may potentially flow to both the employee and employer.
Employers can restrict an employee’s activities during and after employment through clauses that limit an employee's ability to compete with the employer’s business. During employment, those clauses can prohibit the employee from holding other employment or holding employment that would result in a conflict of interest. Following the end of the employment relationship, employers can seek to restrict a former employee’s post-employment activities by limiting or prohibiting competition with the employer's business.
In Canada, courts view restrictive covenants in employment agreements as restraints of trade that are prima facie unenforceable. Unless the employer can prove that the non-competition clause is reasonable between the parties and in the public interest, the clause will not be enforced. A non-competition clause will only be enforceable if it is proportional in time, territory and scope to the former employer’s legitimate business interest that is in need of protection.
Typically, non-competition clauses are enforceable only where the former employee subject to the clause held an important customer-facing position or otherwise personifies the business. In such cases, courts are willing to recognise that employment by a competitor or the creation of a similar business is likely to unfairly disrupt the former employer’s business.
Like all contractual terms, a non-competition clause will only be valid if consideration was provided at the time the covenant was imposed. If imposed at the point of hire, then the offer of employment is sufficient consideration. However, covenants imposed following the start of employment – for example, upon an employee’s promotion within the business – require fresh consideration flowing from the employer to the employee in exchange for the employee’s commitment.
Employers can restrict a former employee’s post-employment activities by limiting or prohibiting the solicitation of the employer’s employees or contractors following the end of the employment relationship. Unlike non-competition clauses, courts are more inclined to uphold and enforce non-solicitation clauses, often commenting that such clauses are sufficient in conventional employment situations (ie, where the former employee is not an executive, director, key employee or fiduciary). Like all restrictive covenants, the scope of the clause must be reasonable. Non-solicitation clauses of limited duration – six months to 18 months – are more likely to be found to be enforceable.
Limitations or prohibitions on the solicitation of a former employer’s customers or suppliers are also commonly used to restrict an employee’s post-employment activities. As with non-solicitation of employee provisions, any restrictions will only be enforceable if proportional in time and scope to the former employer’s legitimate business interest. Non-solicitation clauses of limited duration – six months to 18 months – and applicable to those customers or suppliers with whom the former employee had contact as a result of their employment, are more likely to be found to be enforceable.
In Canada, the Personal Information Protection and Electronic Documents Act (PIPEDA) governs the collection, use and disclosure of personal information. However, in the employment context, PIPEDA only applies to federally regulated organisations. PIPEDA requires employers to adhere to ten basic principles regarding the collection, use or disclosure of employees’ personal information:
British Columbia, Alberta and Quebec have enacted similar legislation that applies to employees and employers in those provinces.
In the event that an individual believes their privacy rights have been violated, a complaint can be filed with the provincial or federal privacy commissioner.
In some jurisdictions, the general principles relevant to the application of privacy principles to employees are that the collection, use and disclosure of employee personal information must be for the reasonable purposes of managing, establishing or terminating an employment relationship. Additionally, the employer must give notice to the employees of the purposes for which their personal information is being collected, used or disclosed. If notice is not given, the employer will need to obtain employee consent.
Safeguards and Processes
Safeguards and processes must be put in place by employers to prevent unauthorised access, use or disclosure of employees’ personal information. Employers must also have privacy processes and procedures in place. Employees are entitled to request access to the personal information collected by their employer and may correct any inaccuracies therein.
In addition, rules regarding the transfer of data across borders are also included in privacy legislation and must be respected. If employees’ personal information is to be transferred out of Canada, including to a subsidiary, the same rules of notification and consent apply. In the event of transfers to the USA, any notice given to employees should include a statement that the information may be available to the US government or its agencies in accordance with local laws.
Provincially Regulated Workplaces
For provincially regulated workplaces outside of Alberta, British Columbia and Quebec, there is no legislation that specifically establishes requirements around employee privacy (except in respect of employees’ personal health information). However, courts and adjudicators in all Canadian jurisdictions are increasingly attentive to privacy-related concerns, and have begun using common law principles to hold employers and other parties liable for violations of privacy rights.
In Canada, only Canadian citizens and individuals who meet the immigration requirements for permanent residency may engage in employment as of right. Citizens of other countries must obtain a work permit to work in Canada.
Under Canadian law, if an employee is working without a valid permit or other government authorisation, the employer is deemed to have knowledge that the employee is not permitted to work in Canada. Employers can face fines as well as imprisonment for employing such employees.
Obtaining a Work Permit
To obtain a work permit in Canada, a person must have their job offer “confirmed” by a government agency (Employment and Social Development Canada) in the area in which the employer conducts business. Through this process, the employer must demonstrate that it has made reasonable efforts to hire a Canadian, that there were no Canadians available who were qualified to perform the job and that the effect of allowing the foreign worker to work in Canada will enhance employment opportunities in the country or, at the least, will not detract from employment opportunities. Thereafter, an immigration officer may issue a work permit for a specific period of time.
There are a number of exemptions to the requirement for a work permit and special rules applicable to certain industries, such as agriculture, or particular work positions, such as live-in caregivers. Exemptions or expedited processes for professionals, senior employees of multinational companies, intercorporate transferees, traders and salespersons are also available. In many circumstances, the Canada-United States-Mexico Agreement (CUSMA) provides for special rules applicable as between the USA, Canada and Mexico.
Others may work in Canada as business visitors if they can demonstrate that their business activities are international in scope and that they are not entering the Canadian labour market. This can be shown if the main source of pay for the work done in Canada originates from outside Canada. Normally, a business visitor will be permitted to work in Canada for six months at a time.
Public Registry for Employers of Foreign Workers
As of December 2020, the BC government began a public registry of employers who are registered to hire foreign workers. Employers, including individuals, who hire a domestic worker are required to register the worker with the BC Employment Standards Branch within 30 days of their hiring. There are however exceptions, for instance, if they currently employ foreign workers and don’t intend to hire more workers, or if they only hire foreign workers under the Provincial Nominee Program or the International Mobility Program.
Each jurisdiction in Canada has labour relations legislation that establishes employees’ rights to join a union, engage in a process of collective bargaining and enter into a collective agreement with the employer that defines the terms and conditions of employment in the unionised workplace. Employees’ rights to organise and engage in a process of dialogue with their employer are recognised and protected in both labour relations legislation and the Canadian Charter of Rights and Freedoms, which is a part of the Canadian Constitution.
Unions in Canada acquire bargaining rights most commonly through certification or voluntary recognition. Through certification, a union acquires the right to represent a specific group of employees – a “bargaining unit” – by demonstrating to the governing labour board that it has the support of the majority of employees it seeks to represent. In some jurisdictions, a union may be voluntarily recognised by the employer as representative of the employees. Finally, in exceptional circumstances, a union may be certified as representative of the employees by a labour board as a remedy for an unfair labour practice committed by an employer.
Two certification procedures are found in Canadian jurisdictions: “cardcheck” and “mandatory vote” certification. In card-check jurisdictions, a union that presents a sufficient number of signed membership cards may be certified solely on that basis and without an employee vote. In mandatory vote jurisdictions, unions must present a sufficient number of signed membership cards in order to trigger a secret ballot vote; the union will only be certified if it wins the support of more than 50% of employees who cast ballots. Some jurisdictions combine elements of both certification systems.
Entitlement to Unionise
However, not all employees in Canada are entitled to unionise. Indeed, personnel who exercise managerial or supervisory functions or who are employed in a confidential capacity in matters relating to labour relations (for example, HR professionals) are generally excluded from the protections in labour relations legislation. Additionally, certain sectors or industries (for example, the education sector, the police and the agricultural industry) can have separate labour relations legislation that establishes individualised regimes.
Employee representative bodies, most commonly referred to as employee associations in Canada, are generally not regulated and are generally not afforded the same rights and protections as trade unions across the country. Such associations can be instituted by any person, including an employee or the employer. While an employer has no legal obligation to recognise or engage with an employee association, many employers in Canada choose to do so as a means of involving employees in workplace matters and proactively identifying and resolving worker dissatisfaction.
However, the right of certain employees to form or become members of an employee association is protected by legislation. For example, agricultural workers in Ontario have a statutory right to
The employer has a duty to bargain in good faith with the union, once it has been certified, to reach a collective agreement. The collective agreement defines the terms and conditions of employment for the bargaining unit. The collective agreement reached will apply to all employees in the bargaining unit and not only those who showed support for the union during the certification process. The employer is no longer permitted to negotiate or contract directly with employees in the bargaining unit over terms and conditions of employment.
Certain minimum standards are required in collective agreements in Canada or, in the absence of such a term, are implied at law. For example, most Canadian jurisdictions require that a collective agreement provide for a minimum term of one year, although employers and unions may agree to a lengthier term. The collective agreement must also provide that no strikes or lockouts will occur during the term. Additionally, collective agreements across Canada must include a grievance and arbitration procedure for resolving disputes.
While parties to a collective agreement may agree to a variety of terms and conditions of employment, the parties cannot contract out of certain protections, including human rights protections and minimum employment standards. Canadian courts have concluded that those laws are necessarily incorporated into each collective agreement, even if the express terms of the agreement provide otherwise.
In a non-union employment relationship, employers can terminate an employee’s employment for just cause on a summary basis or, in most jurisdictions in Canada, without cause upon provision of notice of termination or pay in lieu thereof. Except in some jurisdictions, an employer is generally not required to provide a reason for electing to terminate an employee on a without cause basis.
By contrast, in a unionised workplace, the collective agreement between the union and the employer will almost always provide that employees can only be terminated upon an assertion of just cause.
An employer must provide notice of termination to the employee in writing. During the statutory notice period, an employer must not reduce an employee’s wages or alter any term or condition of employment, including contributions to any existing benefits plan. As mentioned in 2.2 Contractual Relationship, employees in Nova Scotia, Quebec and the federal jurisdiction who are non-unionised and are non-managerial may resort to a statutory mechanism to challenge their termination if they have the requisite level of service. There are specific procedures to challenge a termination in these circumstances and reinstatement upon a finding of unjust termination is a potential remedy.
An employer’s failure to adhere to requirements in employment standards legislation may result in the imposition of fines or orders to compensate employees for losses incurred as a result of the employer’s contravention.
In most Canadian jurisdictions, employment standards legislation requiring notice, or pay in lieu thereof, is not automatically applicable where an employee has been laid off on a temporary basis. However, once a layoff surpasses a specified period of time, it will generally be considered a termination and employer obligations regarding notice of termination will apply.
Mass terminations attract different statutory treatment. Every jurisdiction, with the exception of Prince Edward Island (and now Alberta), has employment standards legislation imposing obligations on employers where the number of employees dismissed at the same time surpasses a prescribed threshold. The minimum number of dismissed employees required to attract the mass termination notice requirements ranges from ten to 50 employees, depending on the jurisdiction.
The required amount of notice in a mass termination is based on the number of terminated employees, rather than the employee’s length of service. In a unionised workplace, the collective agreement established through the bargaining process between a union and the employer will almost always provide a protocol governing employer obligations and employee rights where individual or mass layoffs occur.
In circumstances where an employee is dismissed without cause, written notice of termination, or pay in lieu of notice, must be provided by the employer. While statutory minimum notice requirements vary across jurisdictions, in all cases the notice requirement increases according to an employee’s length of service.
The common law (and civil law in Quebec) prescribes a supplemental "reasonable" notice period, which is typically well in excess of the statutory notice entitlements required by provincial and federal legislation. What constitutes reasonable notice is determined on a case-by-case basis having regard to the employee’s length of service, age, position and the availability of similar employment. Common law notice periods typically fall within a general range depending on the nature of employment and the terminated employee’s characteristics. The reasonable notice entitlement for a long-service employee can be as high as around 24 months.
In Ontario and at the federal level, employment standards legislation creates an entitlement to severance pay for eligible employees. Severance pay is intended to recognise and reward long-term employees for their years of service. Severance pay is not the same as notice of termination, or pay in lieu thereof, and will be in addition to any notice or pay in lieu thereof to which the employee is entitled.
In Ontario, employment standards legislation provides that an employee who has worked for the employer for five or more years is entitled to severance pay if the employer has a payroll of at least CAD2.5 million or has severed the employment of 50 or more employees within a six-month period due to a total or partial closure of the business. The amount of severance pay is calculated by multiplying the employee’s regular weekly wage by the number of years of employment. The maximum amount of severance pay required to be paid in Ontario is 26 weeks.
Employers are not required to seek government advice or approval for implementing a dismissal or mass layoff. However, as noted above, employment standards legislation in most jurisdictions requires that advance written notice be provided to an applicable government authority prior to implementation of a mass layoff. Such notice provides the local government with the opportunity to offer employees various forms of support, if warranted.
At common law (and civil law in Quebec), an employee may only be terminated without notice, or pay in lieu thereof, if just cause (or serious reason) is established. While there is no definition of “just cause” at common or “serious reason” at civil law, courts will generally find just cause where an employee’s misconduct causes a breakdown in the employment relationship and amounts to a repudiation of a fundamental term of the employment contract. Acts of misconduct such as theft, fraud, disobedience and serious breaches of employer rules or policies will often be found to amount to just cause. By contrast, termination for poor performance will rarely amount to just cause.
Determining Just Cause
The determination of whether an employer does, in fact, have just cause is a fact-based analysis and is determined on a case-by-case basis having regard to the misconduct at issue as well as consideration of mitigating factors such as lengthy service. Canadian courts require a contextual approach and the application of the principle of "proportionality" in any determination of cause. Courts will generally examine the nature and circumstances of any misconduct to determine whether an effective balance was struck between the severity of the employee’s misconduct and the employer’s imposed sanction of termination. Generally, serious misconduct is required and a single incident of misconduct or mistake will not give rise to cause for termination of employment.
Statutory Mechanisms to Challenge Termination
In addition to civil actions before the courts, employees may resort to statutory mechanisms to challenge an employer’s termination. Statutory claims may be subject to a higher standard for assessing just cause. For example, Ontario legislation mandates that an employer must prove “wilful” misconduct, disobedience, or neglect of duty that is not trivial and has not been condoned by the employer to establish just cause for termination. Such a determination is always dependent on the factual circumstances of the particular case. In most cases, serious and deliberate misconduct is required and carelessness or inadvertent misconduct will not give rise to cause for termination of employment.
Evidence Required for Termination
As noted above, in virtually all unionised workplaces, employees can only be terminated where just cause exists. A similarly high standard exists for the termination of a non-unionised employee.
In most cases, a court will require evidence that an employee was provided with warnings to improve their conduct or performance to find that the employer had just cause to terminate the employment relationship. Employees must also be provided with a reasonable time to improve and, in some circumstances, assistance from the employer to that end. In exceptional circumstances of a serious single incident, termination for cause may be upheld without prior warnings.
Courts will also consider whether an employer has investigated the alleged misconduct and provided the employee with an opportunity to explain. Finally, courts will not generally allow an employer to rely on conduct that it has previously condoned to establish just cause.
Upon termination for cause, employers should advise employees of the reasons for termination and record those reasons in the termination letter. If challenged, employers will generally be required to prove each reason relied upon before an adjudicator will find just cause for termination. Canadian courts have held that it is an implied term of an employment contract that an employer may terminate an employee for cause without any notice. As a result, an employer will not be required to provide an employee with notice of termination or pay in lieu of notice where the employer asserts just cause for termination.
Civil Actions and Statutory Claims
In most jurisdictions, non-unionised employees may challenge a termination for cause by commencing either a civil action or a claim provided for through a statutory mechanism.
In civil actions, employees will claim that the employer did not have just cause to terminate their employment without notice and, as such, that they were wrongfully dismissed. Employees will seek damages for the notice that would have been required if the employer had terminated the employee without asserting just cause. The employer bears the onus of proving cause for termination.
By contrast, in a statutory claim, an employee will generally only be entitled to receive their minimum statutory entitlements if just cause is not established. As mentioned above, in some jurisdictions, such as Quebec, an employee credited with two years of uninterrupted service could also be reinstated in their employment and compensated for any lost wages if the employer does not meet its burden of proving that the termination was made for just cause.
In unionised workplaces, employees must resort to grievance arbitration. If an employer is unable to establish just cause, the employee will, in most instances, be reinstated and compensated for any lost wages.
It is permissible for employment contracts in Canada to contain express termination clauses that govern the parties’ rights and obligations on termination. These clauses may be agreed to either prior to or after the termination of the employment relationship. Contractual termination clauses are legally enforceable so long as the provisions do not violate mandatory statutory minimums, including notice periods or pay in lieu of notice requirements. In that regard, it is of note that in a recent decision of the Ontario Court of Appeal, the Court found that an unenforceable “for cause” termination clause that violated the Employment Standards Act, 2000 invalidated the contract, resulting in the awarding of common law damages rather than the limited termination entitlements provided for in the contract.
In Quebec, however, civil law provides that an employee may not renounce in advance their right to obtain an indemnity where insufficient notice of termination is given. Therefore, a court would not be bound by a contractual termination clause that would have been agreed at the beginning of the employment relationship and where – given the given nature of the employment, the specific circumstances in which it is carried on and the duration of the period of work – the termination notice previously agreed upon has become unreasonable.
Contractual termination clauses often include “full and final” releases. Under such a release, an employee relinquishes all legal claims against the employer related to their employment in exchange for some form of consideration from the employer (typically, a defined payment(s)). Obtaining a release from an employee upon termination does not guarantee that an employee will not commence a future claim against an employer. Rather, the validity of any release signed by an employee who subsequently commences a wrongful dismissal action (or other claim related to their employment) is a determination to be made by an adjudicator.
A release may specifically limit an employee’s entitlement to reasonable notice and expressly set out the required period of notice or payment to be made in lieu thereof. A release will only be found to be enforceable if the employer provides the employee with more than their minimum entitlement under employment standards legislation. As individuals cannot release their statutory rights, it is important that releases are carefully drafted.
Under the criminal laws applicable across all Canadian jurisdictions, it is a criminal offence for an employer to discipline, demote, terminate or adversely affect employment with the intent to compel an employee to abstain from providing information to law enforcement authorities respecting an offence that the employee believes has been or is being committed by the employer, or to retaliate against an employee for making such a disclosure. Other specific “whistle-blower” legislation has been introduced to protect public sector employees and those who report corporate breaches of securities laws.
Various laws prohibit employer “reprisals” against an employee for specific reasons, including
For example, workplace health and safety legislation prohibits employers from dismissing or disciplining, imposing a penalty upon, or intimidating or coercing an employee because the employee has raised a health and safety concern.
Similarly, human rights legislation prohibits employers from reprisals against an employee for making a human rights complaint, as discussed in 8.2 Anti-discrimination Issues. Many large employers in Canada have established confidential hotlines or similar mechanisms that allow an employee to make internal complaints. Employees may also have the option of directing their complaint to a responsible government authority within the particular jurisdiction, many of which have online mechanisms in place to receive complaints.
Furthermore, legislation governing the unionised employment relationship generally protects employees against reprisals for exercising legal rights in connection with a union and collective bargaining. Union officers or representatives, also commonly referred to as union stewards, enjoy enhanced protections in this respect.
When acting in their official capacity, such representatives are often provided more leeway to refuse to follow management instructions and openly oppose management in the course of their duties. Union representatives are, however, not permitted to make false or malicious statements, or engage in harassing or violent behaviour towards management or other workplace parties.
The Workplace Harassment and Violence Prevention Regulations under the Canada Labour Code became effective 1 January 2021. The Regulations require federally-regulated employers to develop a prevention policy with respect to workplace violence and harassment, including sexual harassment and sexual violence. This includes an assessment of risk factors, training that will be provided to employees, resolution processes for employees who witness or experience workplace harassment or violence, among various other requirements.
Where an employee believes that their employer has violated one of the rights described in this chapter, the employee may pursue a statutory or common (or civil) law remedy, depending on the jurisdiction and specific right or entitlement at issue. Arguably the most common type of claim is a civil claim for “wrongful dismissal,” in which the employee alleges that the former employer did not provide sufficient reasonable notice of termination under the common law.
In a civil wrongful dismissal claim, the onus is on the employer to prove cause for termination. It is generally accepted to be a difficult onus to discharge.
If the employer is unable to establish just cause or point to a valid contractual termination clause that specifically limits the employee’s entitlements on termination, then the employee’s wrongful dismissal claim will succeed.
Where an employee has made a successful wrongful dismissal claim, the courts are required to determine the amount of reasonable notice that the dismissed employee should have received. The list of factors the court will rely upon in making this determination vary, but often include the characteristics of the former employment, the length of service of the employee, the employee’s age and their re-employment prospects when considering the experience, training and qualification of the particular employee.
While there is no cap on damages awarded to successful employees in wrongful dismissal claims, the range of common (or civil) law notice periods is typically between a few weeks and 24 months. Recently, courts have awarded periods in excess of 24 months in a few exceptional cases involving very long-service employees.
In determining the quantum of damages to be awarded in a wrongful dismissal claim, Canadian courts primarily focus on lost wages and benefits. The value of damages will reflect the value of the employee’s salary, bonus, healthcare benefits and other associated entitlements an employee would have received but for their wrongful termination. The Supreme Court of Canada has clarified that employees may be entitled to a bonus or payment under incentive compensation plans despite no longer being employed, and found that clear language is required to oust the common law presumption that such payments apply during the reasonable notice period.
Additionally, and unlike statutory notice, dismissed employees claiming reasonable notice through a civil action have a "duty to mitigate" the damages resulting from their dismissal by actively searching for new employment. A court will deduct from a damages award any earnings gained through alternative employment subsequent to the wrongful dismissal and during the reasonable notice period. In British Columbia, if an employee has received CERB payments, these payments may be deducted from damages for wrongful dismissal to avoid a situation where an employee is put in a better economic position than they would otherwise be. Where an employee fails to seek alternate employment after their wrongful dismissal, the court may reduce the damages award accordingly.
Damages for emotional distress or punitive damages are rare, but may be awarded where the employer’s conduct was of such an egregious or malicious nature that it warrants judicial sanction. However, the Supreme Court of Canada has repeatedly stated that punitive damages should be awarded with restraint.
Each jurisdiction in Canada has enacted human rights legislation that protects employees from discrimination on a variety of grounds. Typical protected grounds include race, ancestry, place of origin, colour, ethnic origin, creed/religion, citizenship, sex, sexual orientation, age, record of offences, marital status, family status and disability. Numerous jurisdictions have human rights legislation which include protection on the grounds of gender identity and gender expression.
Human rights legislation protects an individual in all aspects of the workplace environment and employment relationship, including job applications, recruitment, training, transfers, promotions, dismissal and layoffs.
In all jurisdictions, human rights legislation permits an employer to use the defence of bona fide occupational requirement. The defence allows an employer to argue that a discriminatory requirement, qualification or factor of employment is reasonable and appropriate given the nature of the employment or essential duties of the position in question. Whether a specific job requirement constitutes a bona fide occupation requirement is a determination to be made by an adjudicator.
Burden of Proof
The burden of proof rests with an employee to establish, on a balance of probabilities, that an employer discriminated against them on the basis of a protected ground. The employee must show a prima facie case – that there is a connection between the negative treatment and a protected ground of discrimination. An employee must only prove that the protected ground was a factor (ie, not that it was the sole or primary factor) in the negative treatment to discharge this burden. The discharge of the burden possessed by an employee will be impacted by the nature of the discrimination that is claimed. For example, when claiming direct discrimination (eg, intentional), an employee must prove that a protected ground was a factor in an employer adopting a rule or practice. When claiming indirect discrimination (eg, adverse impact discrimination) an employee must prove that a requirement, factor or qualification resulted in an adverse impact on the basis of a protected ground.
If discrimination is proven on a direct or indirect basis, the burden of proof shifts to the employer to defend its conduct based on a statutory exemption or by proving that the negative treatment was not in any way related to a protected ground.
The types of remedies available to statutorily enacted employment and human rights tribunals generally tend to be broader than those available in a civil action. As an example, the Ontario Human Rights Tribunal has the ability to award financial compensation, non-financial remedies and public interest remedies. Non-financial remedies may include reinstatement, an offer of employment, a letter of reference as well as a letter of assurance of future compliance with human rights legislation. Public interest remedies are intended to be an educational tool and to prevent similar future discrimination from occurring. Public interest remedies may include ordering an employer to develop non-discriminatory policies and procedures, as well as implementing mandatory education and training programs in the workplace.
In recent years, some human rights adjudicators have awarded significant damages for violations of human rights. In a 2021 decision, the British Columbia Human Rights Tribunal awarded significant damages of approximately CAD176,000 for injury to dignity, feelings and self-respect, in addition to over CAD700,000 in compensation for lost wages. This decision acts as a reminder to employers of the increasing and significant potential liability for breaches of human rights legislation.
Human rights tribunals generally do not award lawyer’s fees or costs to the successful party, with many lacking the authority to do so.
Many employment disputes in Canada are dealt with by the numerous federal and provincial tribunals established to deal with specific employment issues. As an example, human rights complaints initiated by an employee against their employer are typically dealt with by the human rights tribunal or commission in the province where the employment relationship exists. It is possible for an employee or employer to apply for a judicial review of a tribunal decision to the superior court in each jurisdiction.
The provincial superior court in each province also has jurisdiction over wrongful dismissal claims and other employment-related disputes that relate to a breach of a common law (or, in Quebec, civil law) right, such as the requirement to provide reasonable notice of termination.
Class actions in the employment law context are permissible in Canada. Indeed, over the course of the last decade, there has been a significant increase in the use of class actions as a means of reducing the individual costs of employment litigation. Class actions in the employment context have included mass wrongful dismissal claims, retirement benefits claims, employment discrimination claims and, perhaps most frequently, claims related to the breach of employment standards legislation.
In the non-unionised context, Canadian courts are generally willing to uphold the terms of a pre-dispute arbitration agreement. In most cases, a court will engage in a deferential approach to the jurisdiction of arbitrators, including by finding that a challenge to the validity of a pre-dispute arbitration clause should be determined at first instance by the arbitrator. The courts will be more inclined to scrutinise pre-dispute arbitration agreements where there is an obvious inequality in bargaining positions or where the invocation of the arbitration agreement would be oppressive or amount to an illegal contracting out of an employment standard.
In the unionised setting, disputes between a union and the employer are almost always dealt with through arbitration. Collective agreements typically specify the arbitral procedure to be engaged in between the parties.
The general rule across Canada is that the successful party in a civil lawsuit will be entitled to at least a portion of their lawyer’s fees or costs to compensate for the time and expense of bringing or defending a legal proceeding. It is rare that any successful party, whether an employer or employee, will be entitled to the full amount of legal fees incurred in a proceeding.
Costs awards, which can include both legal fees and general expenses associated with litigation in some jurisdictions, may typically represent between 40 and 50% of the actual amount of money expended by the successful party. However, a greater proportion, or the entirety of legal fees, may infrequently be awarded in cases where the conduct of the opposing party in the legal proceeding is considered to be egregious or reprehensible.
Some Canadian jurisdictions have special rules regarding costs to encourage settlement between parties. In Ontario and British Columbia, for example, if an employee rejects an employer’s written offer to settle a wrongful dismissal claim, and the employee receives a judgment at trial that is no more favourable than the terms of the employer’s rejected offer to settle, the employer may be entitled to recover their legal costs at a significantly higher rate than would typically be awarded.
In contrast, most tribunals that deal with employment matters do not have the authority to award the successful party costs.