As tensions rise between the United States and Canada (and other countries), many American businesses are reevaluating their global strategies.
The evolving U.S. trade policy, marked by tariffs, export restrictions, and geopolitical uncertainty, has pushed companies to seek more stable and accessible markets. Enter Canada: a relatively politically stable, resource-rich, and business-friendly country with a skilled workforce and strong legal framework.
Canada’s proximity, economic alignment, and cultural compatibility with the U.S. make it a natural choice for expansion or relocation. It is not surprising that, with the U.S. entangled in trade wars and regulatory uncertainty, more companies are exploring the Canadian market as a smart alternative.
If you are among those considering this strategic move, here is what you need to know about employment law in Canada before building your workforce.
Top Ten Employment Law Considerations in Canada
- Location, Location, Location
Where your employees physically work matters a great deal in Canada. Most employment standards are governed by provincial law, meaning that your business must comply with the regulations of the province where each employee works, even if they work remotely. A team spread across multiple provinces could result in your company being subject to multiple employment standards regimes simultaneously.
- Federal vs. Provincial Jurisdiction
While most sectors are provincially regulated, certain industries—such as airlines, railways, telecommunications, and banks—fall under federal jurisdiction. This distinction matters: federally regulated workers are governed by the Canada Labour Code (CLC) rather than a provincial statute like Ontario’s Employment Standards Act (ESA).
For instance, an Ontario-based grocery store falls under the ESA, while a cross-border trucking company is federally regulated. Knowing which legal framework applies is essential, especially since the rules differ significantly. A major example: under federal law, dismissals must generally be for just cause, whereas provincial employees can be let go without cause with sufficient notice or pay.
If you are operating in Quebec, be aware that it follows Civil law, unlike the rest of Canada’s common law system. Legal advice from Quebec-licensed counsel is a must.
- Minimum Employment Standards
Each province has its own employment standards legislation that sets the baseline for:
- Minimum wage
- Overtime and hours of work
- Vacation and holiday pay
- Job-protected leaves (parental, sick, etc.)
- Termination and severance
These standards are not optional; they are enforceable by provincial employment ministries and form the floor—not the ceiling—of employee rights.
- Unionization and Labour Relations
The term “labour law” in Canada usually refers to unionized workplaces. Union activity is protected by law, and there are tight timelines governing the certification process. In Ontario, for example, employers have only two days to respond to a union application.
While unionized workplaces must still comply with basic employment standards, collective agreements typically go further. Failing to understand union dynamics can lead to serious legal complications.
- Broader Legal Obligations
Canadian employers are also bound by legislation covering:
- Human rights (non-discrimination, harassment protections)
- Occupational health and safety
- Workers’ compensation for job-related injuries
- Employment Insurance (EI) administration
These laws often overlap and can affect everything from hiring practices to termination settlements. For example, when settling claims, it’s common to clarify that the employee assumes any obligation to repay EI benefits caused by the settlement.
- Common Law vs. Statutory Entitlements
Even with statutory minimums, Canadian courts recognize common law rights, especially regarding termination. Unless a contract explicitly limits termination pay to statutory minimums, employees are often entitled to much more.
A terminated executive with four years of service might legally be owed only four weeks’ pay under the ESA—but could receive 6 to 10 months’ pay under common law if the contract does not properly limit it. This distinction is a major risk factor for foreign employers unfamiliar with Canadian employment law.
- Employment Contracts Matter
Contracts are crucial, but must comply with Canadian law to be enforceable. Common mistakes include:
- Using overly complicated or unclear language
- Misclassifying employees as independent contractors
- Violating statutory minimums, rendering entire agreements invalid
- Tax Withholding and Reporting
Foreign companies must meet Canadian payroll compliance obligations, including:
- Deducting federal and provincial taxes
- Withholding EI and Canada Pension Plan (CPP) contributions
- Remitting those deductions to the Canada Revenue Agency (CRA)
Cross-border financial flows must also be disclosed properly. Tax lawyers can help you navigate complex scenarios, especially if you’re paying workers across borders or dealing with equity compensation.
- Public Sector and Regulated Industries
Government workers and employees in fields like education, healthcare, police, and emergency services are subject to additional regulations and union agreements. These jobs often involve specialized legislation like the Public Service of Ontario Act or the Federal Public Sector Labour Relations Act.
Hiring in these areas requires extra due diligence due to their complex governance structures.
- Professional Regulation and Liability
If your workforce includes regulated professionals—doctors, lawyers, nurses, engineers, accountants, etc.—you may bear vicarious liability if they act negligently.
These professionals are governed by regulatory bodies and must carry professional liability insurance. Your company may also need to ensure regulatory compliance and maintain appropriate risk controls to avoid liability in civil or disciplinary proceedings.
Final Thoughts
Canada offers a highly attractive environment for U.S. companies looking to diversify and stabilize their international operations. But the country’s employment laws are nuanced and can vary significantly by jurisdiction and sector.
While the learning curve may seem steep, proper planning—and the guidance of qualified employment counsel—can help international employers thrive in Canada’s dynamic and legally robust market. Ready to Expand Into Canada? We Can Help.