Canadian employment and labor laws: Complete guide for employers

Canadian labor and employment laws can be a maze of regulations and nuances. If you’re headquartered outside Canada, you need to account for differences in labor laws between countries. But your Canadian compliance work gets even trickier when managing workers across provinces and territories—since all 13 of them set different employee rights and labor standards.

So how do you navigate through the morass of federal, provincial, and common law mandates to keep track of the most important Canadian labor rules? This guide will highlight the basics so you can tap Canada’s talent pool with confidence.

Canadian employment laws by province

The majority of Canadian employers are governed by labor laws specific to their province. In every province, except for Quebec, both statutory and common law regulate employment relationships. 

Statutory laws refer to laws and regulations enacted by legislative bodies such as the Parliament of Canada or provincial legislatures. On the other hand, common law is based on legal precedent, where past rulings influence the outcomes of future cases. 

Quebec operates under a different system, with the Civil Code of Québec serving as a primary legal framework for labor laws.

As Canada's most populous province, Ontario is an example of a region with complex labor legislation. Key laws include:

• Employment Standards Act
• Ontario Human Rights Code
• Labour Relations Act
• Workplace Safety and Insurance Act
• Workplace Safety and Insurance Board
• Occupational Health and Safety Act

10 key Canadian employment laws

These are the key labor laws in Canada employers must comply with to provide adequate work conditions for their workforce.

1. At-will employment doesn’t exist in Canada

In Canada, you can only terminate an employee without notice (or pay in lieu of notice) for “just cause,” which has a high burden of proof and is reserved for cases of serious misconduct. If you want to dismiss an employee without cause, you have to adhere to provincial notice periods or pay the employee out.

2. Employees and contractors classification

Proper classification of workers as employees, independent contractors, or dependent contractors is critical to ensure legal compliance and avoid penalties. 

Under the Canadian labor laws:

Employees work exclusively under the direct supervision of an employer, typically for an indefinite period, and are entitled to benefits, such as vacation pay and employment insurance.

Independent contractors, on the other hand, are self-employed, work autonomously for a fixed period, and are not entitled to benefits. 

Dependent contractors are self-employed, like independent contractors, but rely on one client for the majority or all of their work. They occupy a middle ground, and get some entitlements, such as a termination notice, similar to employees.

Misclassifying workers can lead to significant legal and financial consequences. Employers may face fines, orders to pay back wages, penalties for violating retroactive pay laws, and reputational damage, potentially costing millions.

3. Canada's anti-discrimination legislation

Federal and provincial laws protect Canadians from discriminatory hiring practices. The Canadian Human Rights Act outlaws hiring on the basis of race, age, sexual orientation, and gender in federal jurisdictions. Most provinces also set their own protections. British Columbia, for instance, prohibits discrimination based on criminal convictions unrelated to employment.

4. Industries like banking, telecommunications, and transportation have special rules

The laws in the Canada Labour Code only apply to federal government workers and private sector jobs that span provincial borders, like banking, telecommunications, and transportation. This accounts for less than about 10% of the Canadian workforce, with the remainder covered by provincial employment laws and other national legislation. Canada has labor relations boards across all its jurisdictions.

5. Most Canadian workers have the right to unionize

Workers have a right to freedom of association, which allows any worker who isn't in a management position to form trade unions without fearing reprisal from an employer. Through collective bargaining, the employer and union create a collective agreement that establishes new work conditions. Employees have a right to strike during negotiations.

6. Benefits for Canadian employees

All Canadian employees are entitled to statutory benefits, and each province has its own Employment Standards Act, which sets minimum working conditions.

All full-time Canadian employees are entitled to the following statutory benefits:

• Pension plan
• Employment insurance (which covers parental leave)
• Vacation entitlements (which vary depending on the year of service)
• Public holidays
• Unpaid sick leave

Statutory minimums for these entitlements vary depending on the province. British Columbia employees, for instance, get five days of paid sick leave per year after three months' work, while Ontario employees get three unpaid days per year.

Most employees are also entitled to workers' compensation insurance, with premiums set by provincial boards and paid out by employers. Some employees are exempt from this entitlement (Ontario doesn't require it for law firms, for instance).

All Canadian workers are covered by government health insurance plans, and employers can offer supplementary coverage through private providers.

7. Non-disclosure agreements (NDAs) regulations

NDAs can protect a company’s proprietary information so long as they are reasonable, specific, and within the public interest (i.e. not used to cover up criminal behavior). These agreements can be included as a confidentiality clause in Canadian employment contracts.

8. Workplace health and safety standards

Most Canadian businesses have some form of occupational health and safety regulations. Employees under the Labour Code need to be notified of workplace hazards and have access to health and safety representatives. 

Canadian employees are protected from harassment. Employers are mandated to act if notified of any sexual misconduct and must protect a complainant’s anonymity.

9. Legislation on employee’s personal information

Canada has a federal Personal Information Protection and Electronic Documents Act (PIPEDA) that regulates the collection and use of sensitive data from private sector employees’ data. Alberta, British Columbia, and Québec have similar provincial privacy legislation. 

These rules mandate getting an employee’s consent before collecting any personal information, only collecting necessary data, and acquiring it legally.

10. Pay transparency for federally regulated workforces

In an effort to promote fair pay for women, minority groups, and persons with disabilities, the Employment Equity Act now requires federally regulated employers to report salary data, aiming to identify and address any wage gaps among demographics. Additionally, Prince Edward Island recently introduced legislation mandating salary ranges to be included in public job postings.

Minimum wages in Canada

Minimum wages in Canada vary by province and depend on the inflation rates. Each province and territory sets its minimum wage independently, reflecting local economic conditions. Additionally, the federal minimum wage, which ranges from CAD 14.00 to CAD 16.75, applies to employees working in federally regulated sectors, such as transportation, banking, and telecommunications.  

The minimum hourly wage on the provincial and territorial level for 2024 is:

What are the overtime laws in Canada?

Standard working hours in Canada are usually  8 hours per day or 40 hours a week. Employees are entitled to at least one day off per week, and rest periods and breaks during a work day may apply depending on provincial regulations. 

When an employee works beyond a standard workweek, they are entitled to overtime compensation, which can be provided in two forms:

• Overtime pay: 1.5 times the employee's regular hourly wage for every overtime hour worked rate for every overtime hour world
• Paid time off: Equivalent to 1.5 times the overtime hours worked (i.e. 4 hours of overtime work equals 6 hours of paid time off)

However, provinces have different rules for when overtime pay kicks in. While most provinces set 40 hours as the standard work week, workers in Alberta and Ontario aren't eligible for overtime until 44 hours of work, while Nova Scotia and Prince Edward Island set 48 hours as the threshold.

There are also variations in whether overtime kicks in per day or in aggregate. For example, in British Columbia, you get overtime after eight hours worked in a day, while in Ontario, you wouldn't get any until after you surpass the 44-hour workweek.

Another important consideration: overtime regulations do not apply to some workforces, which varies across provinces and territories. In some regions, entire sectors may be exempt, while specific roles, such as executives and managers, may be exempt in others.

For instance, Manitoba’s employment standards outline the criteria for overtime exemption. The rules say: "Employees who substantially control their hours of work and earn more than twice the average industrial wage may be exempt from the hours of work and overtime provisions."

Canadian employment laws for termination

While terminating employees might be far from your mind, it’s important to be aware of Canada’s termination laws before building out your team.

At-will employment isn’t recognized in Canada, and there are two ways an employee can be involuntarily terminated:

Termination of employment without cause: A Canadian employee is entitled to written notice of the employer’s intention to terminate their employment or pay in lieu of notice. The length of the required notice period is defined by each province and depends on how long the employee has worked for the company; see the breakdown of mandatory notice periods and termination pay for Canadian employees in our guide.

Federally regulated workers are entitled to two weeks' advance notice and get two days' severance pay per year they've worked. Ontario is the only other jurisdiction that mandates severance pay. 

While the Employment Standards Act (ESA) outlines the severance pay minimum in Ontario, some employees may be entitled to Common Law severance pay, higher than the ESA minimum. 

Under the ESA, eligible employees are entitled to one week of pay per year of work, up to 26 weeks. Common Law says that employees' severance pay depends on factors such as length of service, age, position, and difficulty of finding a new job. Thus, the severance amount may exceed the ESA minimum and reach up to two years' pay.

Employment contracts typically outline severance entitlements, containing clauses that limit severance pay to ESA minimums. Contracts that don't comply with ESA regulations may not be enforceable, allowing an employee to receive a full severance pay defined by common law. 

Termination of employment with cause: If employment is terminated with just cause, then no notice or pay in lieu of notice is required. The onus is on the employer to show just cause, which is reserved for severe cases of misconduct including theft, fraud, or violence. Since just cause is difficult to prove in Canada, employers should ensure they have strong evidence of any serious breach of conduct before letting an employee go without the minimum required advance written of termination.

In Canada, “layoffs” are periods where struggling companies don’t pay or give work to employees, but provide them the opportunity to get reinstated back to a normal employment relationship if the company can get normal business operations back up and running.

Hire and onboard Canadian employees with Rippling

If you're hiring employees, independent contractors, or remote workers in Canada, you need Rippling.

Rippling allows you to manage HR, IT, and Finance in one unified system. We make it easy to onboard, manage, and pay employees and contractors around the world—in a single system that helps keep you compliant with local employment laws and regulations.

FAQs on Canadian employment laws

What is the legal age for working in Canada?

The legal age to work in Canada varies between provinces and territories, but it is typically between 14 and 16 years old. In Ontario, for instance, it is 14 for most jobs. Young workers, like other employees in the province, are entitled to minimum wage ($17.20 per hour), up to three days of unpaid sick leave, and holiday pay each calendar year. 

Can companies drug test employees in Canada?

In Canada, most employers cannot require employees to participate in random drug testing, as such a request is often considered a violation of privacy. For instance, the Ontario Human Right Code prohibits employers from discriminating against employees "due to drug or alcohol dependence or abuse as a disability."

While workplace safety concerns are not an automatic justification for random drug testing, employers may request it for employees in safety-sensitive positions where an incident or accident could cause severe damage or loss of life. 

Whatever the reasons, drug testing policies should be clearly communicated and consistent with applicable labor and human rights laws.

What are the CLC and CHRA?

The CLC (Canada Labour Code) and CHRA (Canadian Human Rights Act) are two pieces of federal legislation that govern employment and human rights in Canada. 

• CLC (Canada Labour Code) covers working hours, minimum wage, workplace safety, and workplace dispute resolution for employers and employees in federally regulated sectors, such as banking, transportation, and telecommunication. 
• CHRA (Canadian Human Rights Act) prohibits workplace discrimination based on protected characteristics such as gender, age, sexual orientation, nationality, marital status, etc The act protects employees in federally regulated sectors and ensures equal rights and opportunities for all employees and job applicants.

This blog is based on information available to Rippling as of November 18, 2024.

Rippling and its affiliates do not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.