What are labor laws like in Canada?

As an employer, are you confident navigating Canada's complex employment laws? 

Federal and provincial regulations lay out many obligations when it comes to minimum wage, work hours, leaves, termination notices, and more. Failing to understand these intricate guidelines leaves you vulnerable to costly missteps.

This article is a comprehensive guide to Canadian employment law, which secures basic rights for all employees, and Canadian labor laws, which focus on unions and collective bargaining. With these insights, you can respect worker protections while also upholding your obligations as an employer.

Key labor laws in Canada

It's crucial for employers to comply with local labor laws while hiring remotely in Canada. These include laws related to minimum wage, overtime pay, and benefits like health insurance. Non-discrimination and equal employment opportunity regulations also apply here.

It's also important for foreign employers to understand the different types of Canadian workers (full-time versus part-time). This affects how much they need to pay out in wages or other benefits. They must also consider any immigration requirements that federal or provincial governments impose.

Canada's labor laws differ depending on the industry. There are also separate regulations for federally and provincially regulated employees. The former includes occupations in banking, postal services, and air travel with laws that include, among others:

• Canada Labor Code

• Canadian Human Rights Act

• Canada Occupational Health and Safety Regulations

Most Canadians, however, fall under province-specific regulations. Ontario is the province with the largest population and often influences other regions by passing laws that impact all workplaces within its borders. The labor laws with provincial impact 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

Based on these acts, let’s look at the various laws and regulations. 

Recruitment

What does Canadian law say regarding hiring candidates? Let’s take a look. 

Job interviews 

It’s important to understand what constitutes lawful and unlawful questions to ensure that hiring practices are fair. 

Lawful questions

Employers can find out if employees are of legal age to be able to work or can ask if they’re between 18 and 64 years of age. They can also inquire about their qualifications and skills for the job. 

Unlawful questions 

Canadian employers shouldn’t ask newcomers questions about their:

• Health status, particularly regarding disabilities 

• Date of birth

• Gender expression 

• Marital status, family plans, and childcare arrangements  

• Religion or faith

Laws on whether employers in Canada can ask about employees’ work experience in Canada don't always favor employers. Some interpretations of Canadian law could view “Canadian work experience” questions as discriminatory. Additionally, companies should err on the side of caution and ask questions about the field of work instead of the location where the work occurred.

Handling illegal questions 

Candidates have the right to refuse to answer unlawful questions during interviews.

Reference checks 

Employers are advised to follow a structured reference check. This involves a systematic evaluation of a candidate’s previous work performance. 

However, take care not to include questions that aren’t related to the job, like those related to hobbies, social activities, and political beliefs.

Job offers 

Employers can make two types of job offers: permanent or temporary. 

Permanent job offers in Canada represent employment opportunities with no predetermined end date. Before starting work, individuals must obtain a Canadian immigration visa, which will grant them legal residency status.

Temporary job offers have a defined duration, such as six months or a year. Generally, candidates are not allowed to start in these roles until they acquire a Temporary Work Permit (TWP).

Background checks

Unless the question is specifically related to the duties of the job, Canadian employers may not question applicants about their criminal histories. 

Canada has strict policies about criminal records for entry into the country. However, employees who want to emigrate to Canada may have difficulty if they've committed crimes in another country in the past.

Regulations for employees and independent contractors

The Canadian Employment Standards Act (CESA) is relevant to those working in any capacity, be it full-time, part-time, temporary, or permanent. The purpose of this law is to make sure you compensate employees according to basic standards. However, CESA doesn't extend to independent contractors, as they are classified as self-employed. 

The issue is that CESA has very broad definitions of the terms employee, employer, and work. As an example, it states that an employee is someone who receives or is entitled to wages for work done for another. An employer could be a person with control over the employee or responsible for their employment. Work means any labor or services rendered by an employee, whether at home or elsewhere.

To determine if an individual is an employee or self-employed, you can assess the following:

• How much direction and oversight the person receives from their employer

• Whether they run their own organization with their own customers

• Whether there's potential for gain or loss on behalf of the employee

• If the work they perform is integral to the business goals

• If both parties have an ongoing connection

Generally speaking, longer employment periods indicate greater ties between the individual and the employer. It also suggests more employer guidance and control over the tools and materials the worker uses. This implies that the individual is more likely to be classified as an employee. 

Misclassification of employees 

Misclassification occurs when you wrongly categorize an employee as an independent contractor or vice versa. 

Misclassification of Canadian employees and independent contractors can lead to liability for employers under the Workplace Safety and Insurance Board (WSIB).

Read our expert guide to misclassification to learn more about how Remote’s employer of record services can classify your hires correctly and help you comply with Canadian labor laws. 

Rules for contract workers in Canada

There are two types of contract workers in Canada: dependent and independent contractors.

Canadian law recognizes dependent contractors as falling somewhere between employees and independent contractors. It grants these individuals the right to receive proper notice upon termination. Dependent contractors can also benefit from employment standards typically reserved for employees. 

Independent contractors may also have many entitlements similar to employees, depending on their degree of dependence.

Terms and conditions of employment

What are the various laws that govern employment contracts, probation, and flexible work arrangements in Canada? 

Fixed-term contracts 

Although fixed-term agreements do exist in Canada, Remote generally advises against hiring employees for fixed terms. Open-term or indefinite agreements are far more common in Canada, and employers who use fixed-term agreements can face liability. 

Here’s some more information about the different types of fixed-term contracts:

Open-term employment agreements:

• No set end date in the contract

• Employment continues indefinitely until one party ends the relationship

• Require reasonable notice as per common law if terminated without cause

Fixed-term employment agreements:

• Fixed end date for employment

• Automatically end at the end of the term without notice

• Common for temporary, project-based, and seasonal roles

Indefinite employment agreements:

• Employment is indefinite 

• Do not guarantee job security

• Require reasonable notice for termination without cause

Probation

All Canadian provinces allow employers to place employees on probationary periods. During a probationary period, an employer may terminate an employee without notice or severance pay if the relationship doesn’t work out.

The standard probationary period lasts for three months. Some provinces, however, allow for longer probationary periods. New Brunswick allows employers to keep employees on probation for up to six months, while Manitoba limits probationary periods to 30 days.

Flexible work arrangements 

Employees can request ‌a flexible work arrangement after six months of continuous employment. They can ask for a change in their work schedule, their work location, or the number of hours they work.  

Unionization 

Employees in Canada have ‌the right to join trade unions, as per the Canadian Charter of Rights and Freedoms. This right is called ‌freedom of association. 

Unions in Canada aim to reduce ‌workplace disruptions. ​​They act as bargaining agents for worker groups that mostly consist of non-managerial employees. Each jurisdiction has its own rules regarding certification processes. 

Agents hold exclusive rights to negotiate with the employer for all employees within that group, regardless of whether they are members or not. In exchange, the union must represent each employee fairly.

Strikes 

The Canada Labour Code outlines the processes for strikes and lockouts, which are considered legal aspects of ‌collective bargaining agreements. The Code considers any strike or lockout unlawful if it doesn’t meet the former’s provisions. Unions need to give prior notice to the employer and the Minister before initiating a strike. 

Compensation and benefits

Here’s everything you need to know regarding compensation and benefits in Canada:  

Minimum wage

The minimum wage in Canada varies by province. Saskatchewan has the lowest minimum wage at CAD $14, while Nunavut has the highest at CAD $19. These wages are true as of October 2023. But most provinces require minimum wages to be adjusted annually to account for economic factors like inflation.

To view a complete list of minimum wages in Canada by province, view this page.

Overtime

Overtime rates in Canada vary depending on the laws of the province. Most provinces require employers to pay an overtime rate of 150% of the employee’s regular wages.

In Alberta, for example, employers need to pay 150% of normal wages for any time worked after 44 hours in a week or after eight hours in a day. In British Columbia, employees receive 150% pay for the first four hours worked after eight hours in a day, then 200% pay for every hour worked after that point.

Overtime for salaried exempt employees

Often, salaried exempt employees are eligible for overtime pay in Canada. Certain highly skilled professions don't include overtime pay. Doctors and lawyers, for example, aren't guaranteed overtime pay by law. Manager-level employees and above are also not entitled to overtime pay if they are salaried exempt workers.

Vacation time 

​​Employees get a minimum of two weeks of paid vacation per year, with some provinces offering more. Vacation pay starts as soon as the employee is hired. Most provinces have laws around payouts for any accrued vacation time. 

Leaves 

Here are the various types of leave employees can take in Canada: 

• Maternity leave and parental leave: employees who have just had a child get 17 weeks of maternity leave.

• Maternity-related reassignment and leave: pregnant or nursing employees can request the employer to reassign the job, depending on the health of either the employee or their child.

• Leave related to the death or disappearance of a child: employees get 156 weeks of leave.

• Compassionate care leave: employees get 28 weeks of leave if they need to take care of a critically ill family member.

• Personal leave: employees can take five days of personal leave to take care of a family member, fulfill an obligation toward the education of a family member under age 18, or manage other situations as stated by regulations.

• Leave related to critical illness: employees get 37 weeks of leave to care for a child under 18 years of age and 17 weeks of leave to take care of an adult.

• Bereavement leave: employees get 10 days of bereavement leave.

• Medical leave: employees can get 27 weeks off for an illness, organ or tissue donation, or quarantine.

• Leave for court or jury duty: this leave is available for employees who participate in judicial proceedings as witnesses, jurors, or candidates in a jury selection process.

• Leave for victims of family violence: employees can take 10 days of leave as victims of family violence.

• Leave for traditional Aboriginal practices: five days of leave for practices like fishing, hunting, and harvesting are available for Aboriginal employees who have been continuously employed for at least three months.

• Leave for members of the reserve force: employees can take leave after three months of continuous employment if they want to participate in duties set out in regulations around reserve forces.

Payroll and taxes 

In Canada, employees are typically paid every two weeks. 

Major payroll taxes and contributions include the following:

• Employers and employees each contribute 5.95% of pensionable earnings to the Canada Pension Plan, up to an annual maximum of $3,867.

• Employers must contribute to an employment insurance tax, which varies from province to province.

• Income tax rates vary; you can find more information here. 

Pay transparency 

In federally regulated sectors, under the Pay Equity Act, employees can request a pay equity compliance review directly from their employer. This review compares compensation practices across roles to ensure fairness based on gender.

Hours of work 

Let’s now take a look at the standard working hours in Canada and the rules around meal and rest breaks. 

Standard hours 

Standard working hours are eight hours per day (over a 24-hour period) and 40 hours per week (from midnight on Saturday to midnight on the following Saturday). A full day off must be given each week. 

Superintendents, managers, lawyers, medical doctors, architects, and engineers are exempt from these work hours. Their hours are based on the nature of their occupation and business needs. 

Meal/rest breaks

Provincial and federal laws cover rest periods, meal breaks, days off, and eating times for employees. All regions of Canada require that workers get a minimum rest period or day off. Most places also offer breaks after a certain number of working hours.

For example, in Ontario, employees must get a 30-minute break after working for five consecutive hours. No law mandates coffee breaks.

Many exceptions and special cases can affect when breaks or rest periods can happen and how long they can be. Emergencies, averaging agreements, and other unique accords matter, too.

Usually, employers don't pay for rest periods, breaks, or meal times. But they might have to pay if employees must stay at their workstations during those times.

Drug and alcohol testing

Employers in Canada may not ask prospective employees to take a drug test as a condition of employment in most cases. According to the jurisprudence of alcohol and drug testing, employers need to keep in mind two things: 

• Protecting individual human rights as well as privacy

• Ensuring safety for both employees and those around them

Random drug testing in safety-critical roles is possible in Canada, but it has limitations. Employers can test after clear incidents of drug or alcohol abuse or in response to a safety concern. They can also test employees who return from rehabilitation treatment. However, testing must be justified and balanced with employee privacy.

Are employees in Canada allowed to use marijuana?

Marijuana is legal in Canada for recreational use at the federal level. Employees in Canada generally may use marijuana on their own time. But companies can forbid the use of marijuana on company grounds or during work hours. Employees suspected to be working under the influence may be terminated. In most workplaces, employers treat marijuana use the same way they treat alcohol use.

Employee records

Emerging privacy legislation around the world, including legislation in Canada, gives consumers and employees more control over their own data. However, federal law requires employers in Canada to maintain all records of individual employees for at least 36 months after termination. Remote encourages and practices a 48-month retention period to guarantee compliance in every province.

Workplace rights 

Here are some workplace rights Canadian employees have.

Privacy rights 

In Canada, employees have privacy rights for fair handling of personal information in the workplace. These vary from province to province, but two important laws you should know about are as follows:

• The Privacy Act, which covers employee information for federal government workplaces

• The Personal Information Protection and Electronic Documents Act (PIPEDA), which applies to employee information in federal businesses like banks

Privacy legislation in Canada mandates that employers collect, preserve, safeguard, access, and disclose personal information with employee consent, subject to reasonable limits. 

There are seven guiding principles for obtaining meaningful consent. Privacy obligations apply to current, prospective, and former employees. 

Employers must collect only information that the organization identifies as necessary. And employees have the right to know how that information is being used. They can also challenge the data’s completeness and accuracy.

Employee monitoring 

Employee monitoring includes checking for employees’ presence at work, tracking their productivity, and verifying the correct use of networks. 

Employee monitoring ‌should be specific, appropriate, and targeted, and employers must be transparent about the data. They should explain the purpose, nature, and extent of the monitoring.

Human rights

What human rights protections does Canada provide for employees?

Discrimination

In Canada, federal and provincial laws protect individuals from discrimination in the workplace. These regulations cover characteristics such as race, gender, age, religion, and more. 

Additionally, federal works and undertakings must comply with employment equity legislation, which seeks to provide opportunities for:

• Women

• Indigenous people

• Those with disabilities

• Ethnic minorities

Sexual harassment

Canadian law provides all employees with protection from sexual harassment. As such, employers must take a proactive stance by creating safe and inclusive work environments. To achieve this, they should:

• Develop and clearly communicate workplace policies: these policies should outline expected behavior and clearly inform employees of their rights if they experience harassment or discrimination.

• Maintain confidentiality: employers may not disclose the identity of a complainant or specific details of the allegation except in legally mandated situations.

When notified of harassment in the workplace, employers have a legal obligation to take action.

Disability 

In Canada, various laws and regulations protect employees with disabilities to ensure equal opportunities in the workplace. These vary from province to province. For example, in Ontario, Canadian employers have a legal duty to provide reasonable accommodation for employees with disabilities under human rights legislation. 

Employers must make adjustments to enable disabled persons to perform their jobs effectively as long as it doesn't cause undue hardship. Accommodations can involve flexible schedules, ergonomic furniture, assistive technologies, and modified duties.

Discipline and termination

Different provinces enforce different standards for employee termination requirements. Outside probationary periods, employers can only terminate employees for legally recognized, valid reasons. 

Canadian laws generally encourage employers to train and accommodate underperforming employees as an alternative to termination.

In all provinces, employers must provide either a minimum amount of notice or the same time period’s amount of pay to employees being terminated. Notice periods vary based on a variety of factors, including age, length of employment, and the market for the employee’s skills.

At-will employment

​​Does at-will employment exist in Canada? The concept of at-will employment doesn't exist in Canada. Rules vary by province, but in general, Canadian employers have more obligations to employees than US employers do.

Just cause for termination 

In the Canadian legal system, two arrangements are usually allowed for ending an employment relationship: with cause or without cause through the provision of reasonable notice of termination or pay in lieu of notice. 

Causes for dismissal can involve incompetence, insubordination, conflict of interest, theft, or dishonesty, among other recognized kinds of misconduct. 

In cases where an employee is fired for cause, there's no obligation to provide a warning or any form of payment at termination.

Pay in lieu of notice if there is no cause for dismissal

If the reason for termination is downsizing or reorganization, then the employer needs to prescribe a minimum period(s) of notice or pay in lieu of notice. This depends on the employee’s tenure and tends to peak at an amount equal to eight weeks' pay.

Employers may also have to provide more notice or pay in lieu of notice if there is a prior written agreement or to avoid litigation. In case of disagreement about the amount of notice, courts might end up deciding what would be considered a reasonable notice period. 

Termination pay and severance

In the federal sector and Ontario, staff let go without cause have certain entitlements, where severance payments may be due from their employer. These severance payments can never take the form of a notice period.

If an employee has served for one year or more continuously, then they should receive either two days’ wages at their normal pay rate for each year they have been employed or five days’ wages, whichever is the greater amount.

In Ontario, there are also criteria dependent on employees' years of service solely when either:

• the employer’s global payroll exceeds CAD 2.5 million; or

• the employer fires 50 or more employees within a six-month period due to permanent suspension of all or a part of business activities

In these cases, severance is calculated by multiplying the regular weekly salary by the length of employment (prorated for incomplete years) up to a 26-week limit.

Occupational health and safety 

Canadian occupational health and safety laws safeguard workers against job-related hazards by outlining the responsibilities of employers, supervisors, and employees. While the specific details may vary across provinces, all jurisdictions mandate basic elements to maintain safe workplaces. 

Employer responsibilities

• Set up a joint health and safety committee or have workers pick a representative.

• Take all reasonable precautions to ensure a safe workplace.

• Provide protective gear and train workers on how to use it.

• Report all critical injuries to the Occupational Health and Safety Department right away.

Train all employees on safely handling hazardous substances and emergencies.

Worker rights

• Refuse to perform unsafe work.

• Join in health and safety activities through the workplace committee or as a representative.

• Know about potential workplace dangers.

Worker responsibilities

• Follow occupational health and safety laws.

• Use protective gear as the employer requires.

• Report workplace hazards.

Worker’s compensation legislation 

In Canada, there's no private insurance related to workers' compensation. Instead, legislation and systems overseen by government bodies or authorities manage it.

Legislated regimes such as workers' compensation programs offer a public, no-fault solution to provide benefits for job-related injuries or diseases. Through these systems, staff members receive aid from the program but can't file any sort of legal action against their employer. 

Employers pay premiums for this coverage. Prices depend mainly on the size of the payroll, type of industry, and past claim record.

The fast, simple, and compliant way to hire in Canada 

Canada is a hub for top talent across various fields. But it can be a complex country for international hiring due to its diverse labor landscape (having multiple provinces with varying regulations).

When hiring remote employees in Canada, companies need to own their own legal entity in the country or obtain assistance from an employer of record (EOR) service provider. 

Partnering with an EOR simplifies the process of hiring and paying employees in Canada and the rest of the world. It also helps maintain compliance with local Canadian labor laws. This lets you focus on attracting, onboarding, and retaining the best remote workers in Canada worry-free.

Remote is the best-in-class global employment partner. G2 recognizes Remote as #1 in multi-country payroll. We understand global labor laws, so you don't have to worry about compliance when hiring employees remotely. 

If you want to get an idea of how much it costs to hire a full-time employee in Canada, check out our free employee cost calculator. 

For more information on how Remote can help you hire and pay remote employees in Canada in compliance with local labor laws, visit our Canada Country Explorer.

Or sign up for a demo, and we can answer any questions you have.