Chambers Global 2025 Practice Guide: Employment – Canada Chapter

1. Employment Terms

1.1 Employee Status

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 various other sectors that make up part of Canada's national infrastructure.

Labour and employment legislation across Canada does not generally differentiate between blue- 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 relation to specific industries or for specific types of employees.

By way of 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 (eg, tourism).

1.2 Employment Contracts Definite and Indefinite Contracts

Contracts of employment may be for a definite or indefinite term.

Employees hired on a definite, or fixed-term, employment basis 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 later in this section, may be avoided in certain circumstances by hiring on a definite-term basis if the term is well defined. An employee hired on a definiteterm 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 likely be entitled to damages equivalent to the amount the employee was entitled to earn during 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.

Courts in Canada have found that a series of definiteterm contracts leads to a conclusion that the employment relationship has become indefinite. Accordingly, a series of renewals of 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 where employees are 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.

Termination

Importantly, unlike the USA, Canada does not allow for "at will" employment. 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 contracts to limit the amount of reasonable notice to be provided upon termination. Such clauses are subject to strict analysis in some jurisdictions, whereas 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, fresh consideration would be required for the contract to be valid.

1.3 Working Hours

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 work and those who perform parttime 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. In Alberta and Ontario, overtime begins at 44 hours a week, however, it begins at 48 hours a week in Nova Scotia and Prince Edward Island. Some categories of employees can be excluded from the application of overtime rules – for example, managerial personnel or, 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 purpose of determining entitlement to overtime pay.

1.4 Compensation

Each jurisdiction in Canada, including the federal jurisdiction, 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. If a provincial minimum wage rate exceeds the federal wage rate, employers must pay the higher of the two.

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 (see 7.2 Notice Periods). 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.

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, etc.

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.

Equal Pay

Various federal and provincial governments have enacted pay equity legislation to achieve equal pay for work of equal value. Federally regulated public and private sector employers with ten or more employees must develop a pay equity plan to address genderbased pay inequities as of September 2024. Provincially, pay equity is legally required in separate pay equity legislation for the public sector in Manitoba, Nova Scotia, New Brunswick and Prince Edward Island and for the public and certain private sectors in Quebec and Ontario.

1.5 Other Employment Terms

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.

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 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 amended to add a tenth paid holiday, designated as the National Day for Truth and Reconciliation, starting in 2021 for employees in the federally regulated sector. Shortly after the federal government created this paid holiday, British Columbia, Prince Edward Island, Manitoba, Yukon and the Northwest Territories followed suit in recognising the National Day for Truth and Reconciliation as a paid holiday provincially. 

Required Leaves

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 leave, jury duty leave, organ donation leave, family obligations leave, emergency personal leave and family care-giver leave for seriously ill family members.

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-mentioned leaves vary by jurisdiction.

As a general rule, employment standards statutes do not require paid leaves of absence. However, amendments to the federal Canada Labour Code, the Prince Edward Island Employment Standards Act, the Ontario Employment Standards Act, 2000, and the British Columbia Employment Standards Act have created exceptions to this general rule. Other government-provided payments may, however, be available to those on leaves of absence. By way of 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.

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 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 nonpublic, 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.

Employee Liability

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 harm caused to third parties by actions committed by employees in the course of discharging their employment duties, 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 incurring vicarious liability for an employer – for actions causing harm to third parties that are not sufficiently connected to their employment or are committed outside 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. By way of 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 convicted supervisory employees of criminal negligence for deaths and injuries resulting from non-compliance with workplace safety legislation. 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.

2. Restrictive Covenants

2.1 Non-Competes

Generally, Canadian 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. However, Ontario legislation – effective as of October 2021 – has prohibited employers from entering into non-competition clauses with the vast majority of employees, with narrow exceptions in the context of certain sales of business and for certain executive employees.

During employment, non-competition 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.

2.2 Non-Solicits

Employers can restrict a former employee's postemployment 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 (ie, six months to 12 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 12 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.

3. Data Privacy

3.1 Data Privacy Law and Employment

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 the following ten basic principles regarding the collection, use or disclosure of employees' personal information:

• accountability;
• identifying purposes;
• consent;
• limiting collection;
• limiting use, disclosure and retention;
• accuracy;
• safeguards;
• openness;
• individual access; and
• challenging compliance.

Alberta, Quebec, and British Columbia have enacted similar legislation that applies to employees and employers in those provinces. If an individual believes their privacy rights have been violated, a complaint can be filed with the provincial or federal privacy commissioner.

In June 2022, the federal government proposed the Digital Charter Implementation Act 2022 (Bill C-27), which – if passed – would have modernised Canada's current federal framework for the protection of personal information in the private sector and introduce new rules for the development and deployment of AI. However, as of 6 January 2025, Bill C-27 was terminated following the prorogation of Parliament until 24 March 2025.

General Principles

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, at the time the information is collected, 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, Ontario's Employment Standards Act, 2000 requires that employers with 25 or more employees on 1 January of any year have a written policy in place with regard to electronic monitoring of employees by March 1st of that year. Courts and adjudicators in all Canadian jurisdictions are increasingly attentive to privacyrelated concerns and have begun using common law principles to hold employers and other parties liable for violations of privacy rights.

4. Foreign Workers

4.1 Limitations on Foreign Workers

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.

4.2 Registration Requirements for Foreign Workers

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 least – will not detract from employment opportunities. Thereafter, an immigration officer may issue a work permit for a specific period of time.

Exemptions

There are a number of exemptions to the requirement for a work permit and special rules applicable to certain industries (eg, agriculture) or particular work positions (eg, live-in care-givers). 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 Canada, Mexico and the USA.

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 government of British Columbia began a public registry of employers who are registered to hire foreign workers. The registry applies to most employers (including individuals) who hire foreign workers, such as those hired under the Seasonal Agriculture Worker Program, the Home Child Care Provider or Home Support Worker pilot, and other programmes that require a Labour Market Impact Assessment. An employer does not need to register if they are an excluded employer – including those who currently employ foreign workers and do not intend to hire more workers – or if they only hire foreign workers under the Provincial Nominee Program or the International Mobility Program. In addition, employers hiring temporary foreign workers as domestic workers (eg, workers who provide services such as childcare, cooking and cleaning in a private home) are required to register the worker with the government of British Columbia within 30 days of hiring them.

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Originally published by Chambers And Partners.

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.