Undeniably, small business owners across the country are the backbone of Canada’s economy, contributing significantly to the country’s economic prosperity. According to Innovation, Science and Economic Development Canada, small businesses employ more than 8 million Canadians or roughly 70% of Canada’s total private labour force. That’s a staggering number, but it also comes with a multitude of challenges, including labour law complexities. Navigating Canada’s labour laws can be fraught with jurisdictional obstacles and subtle nuances, leaving many small business owners pondering compliance. Part III of Canada’s labour laws regulate the rights, restrictions, and obligations of employers and non-unionized workers in Canada. While these federal labour laws cover all employees working in Canada, they are primarily focused on federally regulated employees (railways, transportation, broadcasting, etc.). A whopping 85 to 90% of Canadian employees fall under provincial labour laws. In other words – both federal and provincial governments have the power to create labour and employment laws that could impact your obligations as an employer. Which laws apply all comes down to your industry type and the region your business operates within.
Employment standards are similar within each province, but be aware – there are differences specific to each region. The overarching goal, however, is to protect both employee and employer rights in the workplace. These laws also level the playing field for all employers requiring all to meet the minimum rights defined by each region. Because these laws influence how you operate your small business, here is an overview of the five most common employment standards:
1. Hours of Work
Across the board, the standard work hours are 8 hours in a day and 40 hours in a week (or 7.5 hours a day and 37.5 hours a week), to a maximum of 48 hours in any given week. During these hours, employees are entitled to a 15-minute break in the morning and another in the afternoon. There is a little flexibility if an employee agrees to work more than these hours to meet the needs of your business and will be properly compensated. Best to verify how or if flexibility applies within your province.
2. Minimum Wage & Overtime
Employees across Canada are entitled to be paid the minimum wage per hour. Although each province sets its own minimum wage, generally it differs for employees 18 or older and students (those under 16 years of age). When it comes to overtime pay, the usual rate in every Canadian province is 1.5 times the hourly rate of the employee. Generally, overtime pay commences after the employee exceeds 40 hours per week. In some provinces, employees can take time off as compensation for overtime worked instead of pay.
3. Annual Vacation & Public Holidays
When an employee has been with an employer for 12 months, they are entitled to receive two weeks of paid vacation. The number of paid vacation days typically increases with the number of years an employee works for you. This is a general standard but there are some provincial differences. When it comes to public and statutory holidays, employees are entitled to have time off on that day. Some provinces allow employees to take time off for the holiday on a different (agreed upon) day if they work the holiday. If an employee is required to work on the holiday, they are entitled to receive a premium on top of their daily wage.
4. Leaves of Absence
Employees are entitled to request and take several types of job-protected work leaves for personal reasons, life events, or unusual circumstances. These leaves of absence can be paid or unpaid depending on the length of the leave or the arrangement. Common reasons for requesting a leave of absence include pregnancy/maternity leaves, illness, or bereavement. In light of the recent COVID-19 pandemic, all provinces and territories have amended the rules associated with leave entitlements, adding public health emergency leave. With this type of leave, employees under medical investigation, supervision or treatment, subject to isolation or other measures that prevent them from working or those providing care and support to a family member, including childcare due to school or daycare closures are entitled to unpaid leaves of absence without fear of job loss.
5. Termination Notice & Pay
Canadian employment laws protect employees from being laid off or dismissed without proper notice or compensation. When terminating an employee, you need to give them written notice, termination pay instead of notice or a combination of both. An employee is obligated to work until the end date specified on the notice. The amount of notice or pay received will depend on how long an employee has been with you. Every termination will undergo a process and should be based on applicable law.
You also need to keep records of each employee. Canada’s Ministry of Labour employment standards officer, as well as provincial labour boards, expect employers to have documented records on each employee. Whether maintained by you or an authorized representative (payroll company or accountant), they need to be readily available. Violations of the Employment Standards Act can result in monetary penalties or worse – jail time. As a small business owner, you’ll also need to abide by several other laws and regulations that govern employment in Canada, such as the Occupational Health and Safety Act, the Employment Equity Act and the Human Rights Act. Further compounding the complexities associated with Canada’s labour laws is the fact that they are constantly changing. While there is plenty of information available, it’s always best to seek professional advice to ensure you stay on the right side of Canada’s employment laws.