Canadian Employment Law 101 for U.S. Legal & HR

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Canadian Employment Law 101 for U.S. Legal & HRJuly 2011

Presented by: Kristin Taylor

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Key differences U.S. vs. Canadian Employment Law:

1. The Fundamental Difference: the employment contract

2. Statutory Requirements (minimum wage, hours of work, protected leaves, vacation pay)

3. Termination Obligations: no “at‐will” employment

4. Human Rights and AODA:

5. Privacy

6. Unions

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1. The Employment Contract

• In Canadian common law jurisdictions, every employee has a “contract” of employment as soon as an employment offer has been accepted.

• Important to note this can be verbal and that written terms may not be valid if new consideration is not offered.

• The employment contract is a compilation of:– express terms from formal agreements, offer letters, policies, plans

and handbooks; and – implied terms from statutes and regulations and common law terms

that are implied by the courts.

• Employers cannot contract out of statutory requirements. Employers can contract out of terms that would be implied by the courts under common law – and are well advised to do so.

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• Duties of confidentiality, fidelity and good faith are implied on the part of employees. Senior, high echelon managers may have fiduciary duties – a heightened duty to avoid conflicts of interest, a duty not to compete unfairly post‐termination – as well.

• Non‐solicitation and non‐competition clauses must be set out in writing as they will not be implied. Non‐competition clauses are only enforced in “exceptional” circumstances – shareholders, senior managers who personify the business to the public. Reasonableness of geography, duration and activity required for both non‐solicitation and non‐competition covenants.

• Employment contracts, like commercial contracts, cannot be terminated without “reasonable notice”, unless a termination provision is included.

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• Benefits to the Employment Contract:– Can contract to limit liability and protect employer’s interests.– Punitive damages awards are rare. Two part test: (a) commission of

an independently actionable wrong (e.g., defamation, conspiracy), and (b) employer’s conduct warrants the condemnation of the court. Awards do not exceed $100,000.

• Disadvantages to the Employment Contract:– Individual termination awards are more expensive.– Plaintiff lawyers look for torts to circumvent the contract. Misconduct

by employer must be egregious though.

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2. Statutory Requirements

• Under Canada’s constitution, jurisdiction over employment law is given to the provinces, except with respect to the federal government and certain industries with national implications (inter‐provincial transportation, banks, telecom companies). Presumption is that employers are regulated by the province in which they are operating.

• Each province has its own web of statutes and regulations that apply – including minimum employment standards; labour relations; human rights; workers’ compensation; health and safety and, in some jurisdictions, pay equity. Certain provinces also have privacy legislation.

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• Employment Standards Minimums –similar to FLSA, but slightly different in each Canadian jurisdiction.

• Any attempt or agreement to contract out of an employment standards minimum is deemed to be void.

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a. Minimum Wage

• $10.25 / hour

• $9.60 / hour for students under 18, if weekly hours are not more than 28 hours or if employed during a school holiday

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b. Leaves of Absence

• Leaves are job‐protected. The employee must be reinstated in the position most recently performed, if it exists. If it does not exist, a comparable position is required. Exception for termination solely for reasons unrelated to the leave.

• Service is deemed to be active, seniority is protected and benefits must continue during these leaves.

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Pregnancy and Parental Leaves

• Birth mothers are entitled to 17 weeks of pregnancy leave and 35 weeks of parental leave that runs consecutively up to 52 weeks in duration.

• Birth fathers and adoptive parents are entitled to 37 weeks of parental / childcare leave.

• Six weeks’ post‐miscarriage or still birth.

• Two weeks’ notice required to take either leave. Two weeks’notice required to change end date of pregnancy leave. Four weeks’ notice required to change end date of parental leave.

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Pregnancy and Parental Leaves

• Employment Insurance provides for 17 weeks of pregnancy benefits and 35 weeks of child care benefits – less a 2 week waiting period. Child care benefits may be split between parents.

• The current rate of E.I. benefits is 55% of earnings to a maximum of $457/week.

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Personal Emergency Leave

• For Ontario employers with 50 or more employees: 10 days per calendar year per employee for – personal injury, illness or medical emergency, or– death, injury, illness, medical emergency or urgent matter relating to

a family member.

• Family member is broadly defined.

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Family Medical Leave

• Up to 8 weeks in a 26 week period to provide care and support to a family member at significant risk of death in the next 26 weeks. EI benefits provided ‐ less a 2 week waiting period.

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Other Leaves of Absence

• Organ Donor Leave – up to 13 weeks, unless medically extended for another 13 weeks.

• Declared Emergency Leave

• Reservist Leave – for deployment with Canadian Forces –unlike other leaves, no entitlement to benefits continuation.

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c. Public Holidays

• Nine in Ontario: New Year’s Day, Family Day (3rd Monday in February), Good Friday, Victoria Day (3rd Monday in May), Canada Day (July 1), Labour Day, Thanksgiving (2nd Monday in October), Christmas and Boxing Day (December 26).

• The Civic Holiday (1st Monday in August) is also commonly provided by employers.

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c. Public Holidays

• Public holiday pay = wages earned in the four work weeks prior to the work week in which the public holiday occurs divided by 20.

• Employees who work the public holiday are entitled to regular pay and a substitute holiday or, if the employee agrees, regular wages + public holiday pay plus premium pay (1.5) for hours worked on the public holiday.

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d. Vacations and Vacation Pay

• Employees accrue vacation time: 2 weeks every 12 months of service and vacation pay. Vacation pay is calculated at the rate of 4% of total wages. Wages is defined as including not just salary, but bonus, commission, incentive pay and any other monetary payment payable by an employer to an employee under a contract of employment.

• Two problems arise with correlating to U.S. practices: (1) wages vs. base salary, and (2) accrual during leaves of paid vs. unpaid time.

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e. Hours of Work and Overtime

• In Ontario, employees cannot work more than (a) 8 hours per day or their regularly scheduled hours and (b) 48 hours per week, without Ministry approval. Ministry approval requires application and the employee’s written agreement.

• Overtime is payable after 44 hours per week at the rate of time and a half.

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3. Termination Obligations

a. Cause: High standard. No notice or payment in lieu thereof required.

b. Term contracts less than one year: no statutory notice required.

c. Termination Without Cause:

i. Statutory: notice or pay and benefits in lieu equal to:– 3 months to 1 year of service 1 week– 1 to less than 3 years’ service 2 weeks– 3 to less than 4 years’ service 3 weeks– 4 to less than 5 years’ service 4 weeks– 5 to less than 6 years’ service 5 weeks– 6 to less than 7 years’ service 6 weeks– 7 to less than 8 years’ service 7 weeks– 8 years’ service or more 8 weeks

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c. Termination Without Causei. Statutory: mass termination obligations where 50 or more employees terminated within any period 4 weeks or less –automatic entitlements + Form 1 filing with MOL

Severance pay = an additional entitlement for employees who have 5 years of service or more and whose employers have an annual Ontario payroll of $2.5M or more. Severance pay equates to an additional week or part thereof per completed year of service or part thereof to a maximum of 26 weeks. Severance pay cannot be worked out and is to be paid as a lump sum, unless the employee agrees otherwise.

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ii. Common law: Courts imply that the term of employment is indefinite and may only be terminated with “reasonable notice”. Reasonable notice invariably exceeds the employment standards minimum. Reasonable notice is a function of:a. ageb. length of servicec. character of employment (position, comp)d. prospects for alternate employmente. if applicable, enticement.

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ii. Common law:

Reasonable notice is based on total compensation – i.e., salary, bonus, commission, stock options, benefits, etc. Unless they have specific Canadian language, the termination dates in bonus and stock option plans are read as meaning the “lawful” termination date – i.e., the end of reasonable notice, not the date on which notice is provided to the employee.

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4. Human Rights Differences

• No over‐arching federal laws. No affirmative action legislation, except for federally‐regulated employers. Each jurisdiction has its own human rights statute that addresses all prohibited grounds of discrimination and provides administrative remedy.

• Grounds under the Ontario Human Rights Code upon which discrimination and harassment are prohibited are as follows: race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, record of offences, maritalstatus, family status and disability.

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• Now have a direct access model. Two forums: – (1) Human Rights Tribunal of Ontario where complaints proceed

directly to mediation and then hearing. No discovery process.– (2) Civil suit IF claiming discrimination or harassment in conjunction

with another cause of action.

• Until 2008, had a cap on damages for mental anguish at $10,000. Now removed and although mental anguish damage awards are creeping up, do not exceed $50,000.

• Punitive damages = atypical. Power = to put person in the position would have been but for the discrimination – i.e., compensatory.

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• Duty to accommodate = to the point of undue hardship, considering health and safety and cost as well as outside sources of funding.

• 3‐step test for determining whether an employer has established, on a balance of probabilities, that a prima facie discriminatory standard is a bona fide occupational requirement (BFOR). 1. it adopted the standard for a purpose rationally connected to the

performance of the job. 2. it adopted the particular standard in an honest and good faith belief that it

was necessary to the fulfilment of that legitimate work‐related purpose. 3. the standard is reasonably necessary to the accomplishment of that legitimate

work‐related purpose – i.e., it is impossible to accommodate without imposing undue hardship upon the employer.

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Definition of Disability:

a. any degree of physical disability, infirmity, malformation or disfigurement that is caused by bodily injury, birth defect or illness and, without limiting the generality of the foregoing, includes diabetes mellitus, epilepsy, a brain injury, any degree of paralysis, amputation, lack of physical co‐ordination, blindness or visual impediment, deafness or hearing impediment, muteness or speech impediment, or physical reliance on a guide dog or other animal or on a wheel chair or other remedial appliance or device,

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b. a condition of mental impairment or a developmental disability,

c. a learning disability or a dysfunction in one or more of the processes involved in understanding or using symbols or spoken language,

d. a mental disorder, or

e. an injury or disability for which benefits were claimed or received under the insurance plan established by the Workplace Safety and Insurance Act, 1997

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• Ever expanding to include:– migraines– addictions: drugs and alcohol, nicotine, pornography (!) – perceived as

well as actual– stress– Obesity

• Pre‐employment testing for drugs or alcohol is prohibited except, in very limited circumstances and for safety‐sensitive positions as part of an overall policy. No automatic withdrawals of offers are allowed, in any event.

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Definition of Age:

• No heightened protections after age 40. Older employees generally are entitled to more notice / severance.

• Since December 2006, mandatory retirement at age 65 has been prohibited.

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Definition of Family Status:

• Employer’s decisions ‐ even if based on legitimate business reasons ‐ can constitute family status discrimination if they interfere with an impacted employee’s “substantial”, parenting obligation.

• The case that set the standard involved a parent with a son with severe behavioural problems that required her care and justified her refusal to adjust her working hours.

• There is a duty to accommodate to the point of undue hardship.

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4. AODA

• Accessibility for Ontarians with Disabilities Act, 2005– Customer service standards = required as of January 1, 2012– Emergency response = required as of January 1, 2012– Employment standards = required as of January 1, 2014

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5. Privacy

• Federally‐regulated employers and employers in British Columbia, Alberta and Quebec have heightened obligations in connection with their collection, use, disclosure and retention of their employees’ “personal” information. For example, consent must be secured to use personal information for any purpose not originally identified, proper safeguards must be in place, etc.

• In Ontario, employees’ personal health information is so protected by statute and the tort of invasion of privacy has been recognized.

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5. Privacy

• Adjudicators have imposed limits on the ability of employers to use surveillance both within and outside the workplace.

• Privacy garners a great deal of media coverage. For example, medical records used on a film set to mimic 9/11 and faxes from a major bank with visa information intended to be sent internally but inadvertently forwarded to a scrap yard in Virginia have grabbed national headlines.

• Employees believe that they have rights, even if they technically don’t.

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6. Unions

• 30.3% of non‐agricultural paid workers are unionized in Canada. Approximately 17% of employees in the private sector in Ontario are unionized. Quebec is the most heavily unionized province, Alberta the least.

• CAW‐Canada is the largest private sector union in Canada followed byUFCW, CEP and Teamsters.

• Ontario unions are “closed‐shops”. Once a union is certified, employees must pay union dues whether or not they are or wish to be members as a condition of employment, except where the employee has a religious objection in which case that employee’s dues are donated to a charity.

• Decertification is difficult and usually only an option in the last three months of the term of a collective agreement.

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6. Unions

How Unions Get Certified ‐ the Process

• Pre‐Application / Union Organizing:

‐ A union requires signatures on membership cards of 40% of the members of its proposed bargaining unit in order to apply for certification to the Ontario Labour Relations Board (OLRB).

• Day 0: Receipt of Application for Certification:

‐ The application for certification is delivered by the union to the employer and to the OLRB. This triggers a working conditions “freeze”. The application for certification identifies the bargaining unit sought as well as where the vote should take place, when the vote should take place, who should act as scrutineer at the ballot box and who should act as the union’s agent at the counting of the ballots.

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6. Unions

• Day 1: Contact from the OLRB:

‐ The OLRB typically contacts the employer on either day 1 or day 2 to advise of its receipt of the application for certification and to require the employer to post the application for certification and a notice to employees identifying that an application has been filed and a vote will be held. The employer then is required to fax a confirmation of posting form back to the OLRB.

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6. Unions

• Day 2: Response to Application for Certification:

‐ The employer must file its formal response to the application for certification with the OLRB by 5:00 p.m. The response identifies challenges to the union’s bargaining unit description, identifies the # of employees in the unit, sets out the employer’s position on where and when the vote should be held and who should be the employer’s representative at the vote and the counting of the ballots. Of particular importance is that the employer is required to provide the voter’s list for both the union’s proposed bargaining unit as well as its own – i.e., name and classification of each employee and if absent from work on Day 0, the expected return to work date.

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6. Unions

• Day 3 or 4: OLRB Decision Ordering the Vote:

‐ The OLRB will release its decision ordering the vote and advising of the date, time and location. In almost all cases, the OLRB defines the voter’s list as broadly as possible. Employees whose entitlement to vote is disputed will have their ballots segregated. The employer must post the OLRB’s decision and notice to employees and to fax confirmation. In the meantime, if there are issues regarding voter status, an OLRB officer will contact counsel in an attempt to resolve these issues as part of the pre‐vote consultation process.

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6. Unions

• Day 5: Vote

‐ A secret ballot vote is conducted by an officer from the Ministry of Labour. 2 scrutineers: one for the union and one for the employer sit on either side of the officer during the vote with the voter’s list.

‐ To vote “yes” is to vote for the union; to vote “no” is to vote for the employer / to remain union‐free. Employees whose status to vote remains in dispute do vote and their ballots are segregated – i.e., placed in a sealed envelope.

‐ At the conclusion of the vote, a worksheet is completed and the non‐segregated ballots typically are counted immediately. The unionrequires 50% plus one of the employees who actually vote to be certified.

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6. Unions

• Post‐vote: Meetings and Hearing

‐ If necessary – i.e., the vote results have not determined the issue – due to outstanding issues such as status disputes or unfair labour practice allegations, these meetings are held in the weeks following the vote.

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6. UnionsEmployee Communication Guidelines:• Threats, intimidation, coercion and promises by employer representatives are prohibited by the Labour Relations Act. The OLRB has the remedial power to automatically certify a union, irrespective of the outcome of the vote, where it finds employer misconduct that it otherwise cannot remedy.

• Employers are able to exercise their right to free speech, as long as it is not found to be threatening or coercive. Employee communication, from an employer, generally addresses the following:‐ Provides information regarding the process and the importance of voting;‐ Stands by its record and treatment of employees without a union;‐ Identifies some of the negative consequences of unionization that the union may not have disclosed such as the cost of dues, strikes, how collective bargaining works – i.e., that nothing is guaranteed, that unions do not preclude layoffs or provide job security;‐ States its preference to deal directly with employees / hope that employees will vote “NO”.

Presented by: Kristin Taylorkristin.taylor@fmc‐law.com

The preceding presentation contains examples of the kinds of issues companies dealing with employment law issues could face.If you are faced with one of these issues, please retain professional assistance as each situation is unique.

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Canadian Employment Law 101 for U.S. Legal & HR