Canada: 5 Basics Every Startup & Growing Business Should Know About Employment Law

Last Updated: April 10 2019
Article by McInnes Cooper Labour And Employment Team

Growing a business takes people. In early days, many startups have just one "employee": the founder. At some point, the founder might retain the services of independent contractors to perform certain services. And eventually, many startups and growing businesses hire employees and become, for the first time, an employer. But creating an employer-employee relationship carries consequences: the law grants "employees" certain benefits and protections – and imposes on employers certain obligations and liabilities. There's a lot to know about being an employer. Here are five employment law basics to get you started.

1. Know and comply with employment standards laws, but remember: they're just minimums.

Every employer should get a copy of the employment standards laws that apply to them, read them and keep them handy for reference. Every province has employment standards laws and there is a federal law that applies to federally-regulated employers (which is different than federally-incorporated employers, and includes: banks; marine shipping, ferry and port services; airports and airlines; railway and road transportation that involves crossing provincial or international borders; telephone and cable systems; and radio and television broadcasting). Employment standards laws are generally comprised of a statute in addition to one or more regulations, and are typically called employment or labour standards acts or codes. For example:

Employment conditions. Employment standards laws apply to most non-unionized employees and set minimum standards for certain employment conditions. The employment conditions the law covers vary between provinces for provincially-regulated employers, and federally for federally-regulated employers, but common ones include minimum wages, hours of work, public holidays, vacation time and pay, and termination notice. They also often set out restrictions, such as on the employment of children, or on the ability to terminate employees that have reached a specified amount of service (as in N.S.). And they typically mandate certain employee leave entitlements, including for maternity and parental, sick, bereavement and, most recently in some provinces such as New Brunswick, domestic violence, leave.

Enforcement. A government agency, division or department is generally charged with enforcing the laws, investigating potential violations of the laws, providing information to employers and employees, and resolving employee complaints about violations. An employer can call the relevant governmental agency with questions, but it's important that employers understand that the agency's response isn't legal advice nor a defence to a complaint or employment lawsuit.

Just the minimum. It's also extremely important that employers remember that the laws only set the minimum requirements: an employee could be entitled to more under the terms of an employment contract or at "common law" (the law that results from judges' decisions). For example, the laws typically establish the minimum termination notice to which an employee is entitled. However, the common law generally presumes an employee is entitled to "reasonable notice": an individual assessment that's based on a range of relevant factors (like the employee's age, years of service, education, training and experience) that's often greater than the minimum set out in the employment standards law.

2. You have an employment contract with every employee – so put it in writing.

Every employer has an employment contract with every employee – even when there's "nothing in writing". The issue when it's not in writing, however, is ascertaining the terms of that contract. And that can lead to disagreements, lawsuits and expense – many of which can be avoided by putting the employment contract in writing.

Written contracts. A well-drafted and implemented written employment contract can be instrumental to avoiding and resolving disputes during or at the end of the employment relationship, saving the employer time and money (and no small amount of stress). But since courts carefully scrutinize employment contracts and interpret any ambiguity in an employee's favour, it's good practice to have legal counsel draft them.

Terms. A standard form employment agreement is useful, and there are some terms that should be in just about every employment contract. But employers should always review the employment contract (ideally with legal counsel) and, if required, customize it to the circumstances.

Timing. It's also important that the terms of the employment contract be set at the time of hiring – not after. An employer can't unilaterally impose new employment conditions that fundamentally change the employment relationship during the employment relationship without giving the employee either sufficient prior notice or consideration (something of value in exchange). If it doesn't, the employer could face a wrongful dismissal lawsuit.

 3. You need to accommodate employees' human rights.

As with employment standards laws, every province has human rights laws (variously called human rights acts or codes), and there is a federal human rights law that applies to federally-regulated employers. For example:

No discrimination. Human rights laws apply to all employees, both non-unionized and unionized. And all universally prohibit employers from discriminating, either directly or indirectly (often called "adverse effect discrimination", meaning a particular policy, rule or practice appears neutral on its face but has a discriminatory impact), against their employees in employment (which includes in hiring, promoting and terminating) based on certain personal characteristics set out in the applicable law. These protected characteristics vary depending on the applicable law, but generally include age, colour, creed, physical disability, mental disability, ethnic or national origin, family status, gender expression, gender identity, marital status, political belief, race, religion, sex (which includes sexual harassment, if it's not separately named), sexual orientation, and source of income of any individual or class of individuals.

Duty to accommodate. Human rights laws also impose an obligation on employers to accommodate their employees' membership in a group with a protected personal characteristic: a legal duty to take steps to ensure a workplace condition doesn't have a discriminatory effect on an employee, if it can do so without 'undue hardship'. Undue hardship is a high standard that depends on several factors, including: financial cost; disruption of a collective agreement; problems of morale of other employees; interchangeability of the work force and facilities; the size of the employer's operation; and safety concerns. Employers often find it a challenge to understand and to satisfy their duty to accommodate, and failure to do so is a regular source of human rights complaints against employers.

Enforcement. Human rights commissions are generally charged with enforcing human rights laws, investigating potential violations, providing information to employers and employees, and resolving employee complaints about violations. If a complaint isn't resolved, there may be a hearing before, and ultimately a decision by, a human rights tribunal. Human rights tribunal hearings can be less formal than a trial in a court. However, human rights tribunals typically have more options when it comes to the type of orders they can make to remedy discrimination. Courts are essentially limited to ordering monetary compensation to a victim, but human rights tribunals are often also empowered to make other orders against employers, such as training, policy implementation or revision, and reinstatement of an employee whose employment was terminated – a power that's significant, and not frequently exerted in some provinces, but still available.

 4. Every employer – even "white collar" ones – needs to take workplace health & safety seriously.

Provincial and federal occupational health and safety laws apply to all "employers" and "employees" – not just those in "high risk" sectors like construction or oil and gas, for example. Occupational health and safety laws are generally comprised of a statute and often numerous regulations, though the name and specific contents of each law vary by province (or federally). For example:

A "safe" workplace. Occupational health and safety laws universally impose a general duty on employers to provide a safe workplace for all their employees. This includes ensuring a work environment free from harassment and violence, including sexual harassment and bullying . While many consider this to be included in the general obligation to provide a safe workplace, governments that haven't already done so are increasingly imposing specific obligations in relation to workplace violence and harassment. For example, as of April 1, 2019, employers of New Brunswick employees face new obligations to assess and mitigate the risks of workplace violence and harassment – and liability exposure under occupational health and safety laws for failing to do so. And the Newfoundland and Labrador government recently announced that effective January 1, 2020, N.L. employers will also face new obligations to address workplace harassment and worker-on-worker violence. Employers must also warn employees about hazards, such as safety hazards in the operation of machinery and physical hazards such as cold or heat and ergonomic hazards, and provide adequate training. In turn, employees have the right to refuse dangerous work. Occupational health and safety laws also typically impose a duty on employers to investigate and deal with employee complaints.

Personal liability exposure. Corporations have occupational health and safety obligations and risk corporate liability for violating them – but corporate directors, officers and supervisors share many of those health and safety obligations and liability risks personally. Those risks include personal liability under occupational health and safety laws and criminal laws, and resulting personal exposure to fines and even jail time. So everyone, and particularly directors, officers and supervisors, need to take occupational health and safety seriously.

Enforcement. Each province (and federally) charges a department or agency to administer and enforce its occupational health and safety laws, as well as to educate employers and employees on their rights and obligations under those laws. Most make a large amount of information available to employers.

5. Record-keeping is critical.

The issue for employers is often not what happened or what was done, but what it can prove happened or was done. When an employer faces an employment-related lawsuit, a complaint or an investigation under employment standards laws, human rights laws, occupational health and safety laws, or otherwise, its records are critical to its ability to respond with proof of what it did.

Document, document, document. Ideally, employers will document everything. This includes, for example: training initiatives, policy and procedure reviews of all kinds whether that training or review is mandated by law or not; employee performance discussions and evaluations, both formal and informal; and discipline meetings, including making notes of verbal warnings.

Legal compliance. In addition, various employment-related laws require employers to make certain records. For example, employment standards laws could require, depending on the applicable law, that employers make records of an employee's: name and address; date of birth; social insurance number; start date; hours worked (such as daily and/or weekly); wages and deductions for each pay period; details of vacation and vacation pay; certificates respecting leaves of absence; and dates of suspensions, layoffs and dismissal. Occupational health and safety laws often require employers to make training records, among others. And laws often require employers to keep certain records for a specific period of time.

Record production. Similarly, employment-related laws typically require employers to produce those records to certain members of the government departments or agencies charged with enforcing those laws. So it's key not only to keep the records, but to be able to find them when you need them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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