Why Canadians Get Fewer Vacation Days

Overview: General information on labor law in Canada

by lawyer Sven Walker, [email protected],
Tel. +1 416 369-7848

Principles of Labor Law in Canada

Every Canadian based entrepreneur should be familiar with their own rights and obligations as well as the rights and obligations of their employees. The following explanations give a brief overview of the aspects that an entrepreneur should take into account when employing workers, whereby this summary refers exclusively to non-unionized employment relationships.


Legal foundations of Canadian labor law

Canada is a state made up of ten provinces and three territories. For this reason, the legislative competence is divided between the federal government and the provinces or territories. In contrast to the system of labor law in German-speaking countries, which is mainly regulated by federal law, the regulatory competence with regard to the employment relationships presented here in Canada lies mainly with the provinces and territories. In principle, the labor law of the individual provinces and territories results from a combination of legislation (legislation) and the principles of Canadian judicial law (common law). Due to the influence of French codification law, the province of Quebec is an exception to this system. In the overview described here, however, the main focus is on the Canadian common law system.


The employment contract in Canada

The specific employment relationship is basically based on an individual, oral or written contract. It is recommended to conclude employment contracts in writing, as in the event of a dispute the competent court will determine the content of the contract due to the lack of written form. In order, on the one hand, to counteract a determination or interpretation of the contractual agreement by the court and, on the other hand, to ensure any legal enforceability, the content of the contract should also be specified as precisely as possible and in accordance with the statutory provisions. This also applies in the event that a contractual agreement has already been concluded with an employee outside Canada. Foreign workers are also subject to Canadian labor law, provided that they start work in Canada. It is therefore necessary to conclude another employment contract that complies with Canadian regulations.

Furthermore, all relevant documents that are inextricably linked to the employment relationship, such as agreements on social benefits (benefits), Employee handbooks, information regarding share subscription rights, etc., must be attached to the employment contract as an attachment (s) at the time of signing.


Mandatory legal regulations in Canada regarding the rights and obligations of the parties to the employment contract

In principle, the parties can freely regulate the mutual rights and obligations in the employment contract, whereby the contractual agreement must comply with the statutory minimum standards in the respective province in the event of any other nullity. A further improvement in the employee's position is of course possible.

In Ontario, for example, this is the case Employment Standards Act, 2000 (ESA) establish the principles that an employment contract must comply with. Agreements that deviate from this are only valid in the sense of the above statements if they exceed the legally standardized minimum standards in favor of the employee. The law regulates in particular working hours, vacation, overtime, minimum wages, remuneration for public holidays, maternity leave and parental leave, notice periods and severance payments in the event of termination of the employment relationship.


Termination of a temporary contract in Canada

In the absence of an express or implied extension of a fixed-term contract, the relevant employment relationship will automatically be terminated after the period has elapsed, without the need for an explicit notice of termination. The employee is therefore not entitled to severance pay in such cases. If a fixed-term employment relationship is extended several times by an employer, in the event of a legal dispute this has the consequence that this “chain contract” is viewed as an open-ended service contract. In the interests of the employee, the court can therefore oblige the employer to comply with a reasonable period of notice and / or to pay a corresponding severance payment. It should be noted, however, that fixed-term employment contracts are in any case uncommon in Canada and are therefore an exception.


Termination of a permanent employment contract in Canada

An open-ended employment relationship can be terminated by ordinary or extraordinary notice. Unless there is a so-called "good reason" (termination "with cause") exists which justifies extraordinary termination, the employer is obliged to comply with a corresponding notice period. This regulation is intended to enable or facilitate the job search for the employee concerned until the employment relationship is actually terminated. The employer is free to continue to employ the employee until the period of notice has expired. However, the latter can also ask the employee to leave the workplace immediately. If the employer opts for the latter option, he is obliged to provide the employee with a severance payment (pay in lieu of notice), the amount of which corresponds to the employee's income (including wages and benefits) during the "notice period" (reasonable period of notice) must correspond.

The minimum duration of the notice period is either contractually or legally regulated by the respective provisions of the Canadian provinces and territories, the length of the period being based on the specific length of service of the employee. The ESA of the province of Ontario, for example, provides a notice period (or a corresponding severance payment) of 1 to a maximum of 8 weeks (for employees who have been with their employer for more than 8 years). Notwithstanding these provisions of the ESA, the employee can still bring an action against the agreed notice period in certain cases, provided that the period corresponds to the point of view of the common law is to be regarded as "not appropriate".

Taking into account the age of the employee, his position in the company, the length of employment, the level of income, the state of health and the likelihood of an equivalent position in another company, judges' law grants a period of notice of 2 to 4 weeks for each year of work that goes beyond the statutory provisions in the company. The maximum limit for long-term employees is 18 to 24 months.

The setting of the notice period or the amount of the severance payment according to the principles just outlined by the court can therefore lead to a considerable financial burden for the employer, so that the relevant agreements must be incorporated into the written employment contract, whereby the minimum legal requirements set out above must be met .

If there is a “valid reason” that justifies an immediate termination of the employment relationship, the employer is exempt from granting a notice period and from making a severance payment. However, the term “valid reason” is to be interpreted restrictively, so that an immediate termination of the employment relationship with simultaneous loss of entitlement for the employee will only be justified in “extreme cases”. Occasional misconduct on the part of the employee is also rarely able to justify termination without notice. In any case, theft, serious breach of trust, deliberate disobedience, physical assault or sexual harassment are to be regarded as “important reasons”. Incompetence can also be an important reason, although this must go beyond the mere "unsatisfactory job performance". The employer's economic motives do not constitute an important reason that could justify an extraordinary termination.


Subsequent amendment of the employment contract in Canada

During an ongoing employment relationship, it is possible, if necessary, to adapt contractual provisions to the changed circumstances, whereby it is recommended that change options are specified in the employment contract. Furthermore, any changes to the contract should be made in writing, identified as such and attached to the original contract. While the employer is entitled to make minor, operational changes unilaterally at any time, he must make intended fundamental changes (fundamental changes) which have a negative impact on the employee's position, such as a change in the task, the terms of employment or the remuneration, which the employee should be aware of and discuss with him as soon as possible. Furthermore, the employer is obliged to provide adequate consideration (additional consideration) for such changes. These include, for example, promotions, stock options, wage increases or special payments. If the employer makes disadvantageous changes to the employment contract unilaterally and without providing a corresponding consideration, the employee is entitled, among other things, to bring an action against the employer for unjustified termination without notice. In addition, it can be assumed that the court will declare the contractual changes made unilaterally by the employer null and void.


Working hours and overtime in Canada

In principle, the normal working time is 40 hours / week. The contracting parties can deviate from this and agree to longer working hours, although this requires that the employer submits the necessary documents to the employee and the (labor) ministry. In principle, regardless of whether the employee is full-time or part-time, student or casual worker, there is a right to remuneration for overtime worked. In Ontario, employees from the 45th hour per week are entitled to remuneration for the overtime worked, with each overtime being compensated at 150% of the agreed hourly wage.

Corresponding provisions often provide for special regulations for special branches of industry and occupational groups. According to the ESA of the province of Ontario, for example, managing directors and department heads have no legal right to compensation for overtime worked.


Public Holidays in Canada

  • New Year
  • Good Friday (except Quebec)
  • Victoria Day (last Monday before May 24th, unless May 24th itself falls on a Monday; except New Brunswick, Nova Scotia and Prince Edward Island)
  • Canada Day (July 1st)
  • Labor Day (1st Monday in September)
  • Thanksgiving (2nd Monday in October; excluding New Brunswick, Nova Scotia, Newfoundland, and Prince Edward Island)
  • Christmas Day (December 25th)

In addition, there are other legally standardized holidays in the individual provinces and territories.



In this regard, it is also recommended that appropriate regulations be agreed in the written employment contract. For example, a distinction should be made between paid and unpaid leave. However, the freedom of contract is also limited in this context by the standardization of mandatory statutory minimum standards. For example, in accordance with the ESA, an employee in Ontario has a holiday entitlement of 2 weeks from an employment period of 12 months, whereby the remuneration is 2% of the annual gross salary per holiday week.


Validity of basic legal norms

In addition to the relevant labor law standards, employers are obliged to comply with and secure basic legal guarantees for their employees. Above all, the prohibition of discrimination is unreservedly valid, so that the employer is obliged to treat all employees equally, including future employees. Therefore, any discrimination, for example on the basis of race, religion, origin, nationality, skin color, ethnic origin, nationality, gender, sexual orientation, age, police clearance certificate, marital status, family relationships or prohibited without exception because of a handicap of the employee. Furthermore, the employer is obliged to counteract any harassment of employees in the workplace. In addition, the employer is obliged to take the needs of a disabled employee into account, provided this is proportionate to the interests of the employer. Alcohol or drug addicts are also considered disabled employees in this sense, which is why the employer is expected to meet their needs, which can be traced back to their disability, to an appropriate extent. This includes, in particular, the granting of vacation, any modification of the employee's duties, as well as access to various aids that serve to maintain the employee's ability to work.


Occupational Health and Safety in Canada

The employer is obliged to create a safe working environment. This means, on the one hand, making the appropriate safety equipment available and, on the other hand, if certain conditions are met, setting up an advisory board for occupational health and safety at work, which monitors compliance with safety regulations, determines the safety standards at the workplace and, if necessary, issues recommendations in this regard. Employees are entitled to refuse to carry out dangerous work. This also applies to work that endangers other employees. According to the one applicable in Ontario Occupational Health and Safety Act the violation of the (protective) provisions contained therein by natural persons is threatened with a fine of up to $ 25,000.00 and / or with imprisonment of up to one year. The penalty for violating these regulations by a company is up to $ 500,000.00.


Workers' compensation

If an employee is unable to work due to an accident or illness, he or she is to be granted a so-called "sickness benefit" instead of wages in accordance with the relevant statutory provisions (workers' compensation system). In principle, the employer is obliged to participate in the as soon as possible after employing the first full-time or part-time employee workers' compensation system to register. In some provinces, however, employers whose employees only carry out "low-risk" activities (e.g. office work) are not obliged to workers' compensation system to participate. Registration means that employees cannot bring legal action against employers in connection with an accident or illness at work. However, the right to receive sick pay remains unaffected by any registration. The amount of the fund premium to be paid by the employer depends on the branch of industry to which the employer belongs or on its field of activity.


Final remark

As just shown, the labor law matter is not least due to the large number of its legal bases (legislation, common law, Federal law or legislation of the individual provinces and territories) is extremely complex. For this reason, every entrepreneur, especially with regard to the far-reaching importance of this area of ​​law for every employer, should seek in-depth legal advice when starting his business activity or have any contracts drawn up by an experienced lawyer.


Processing status: April 2015