What Manufacturers Need to Know About Employment Law in Canada

By Stephen Shore March 7, 2019
What Manufacturers Need to Know About Employment Law in Canada

​Manufacturers in Canada face a labor and employment environment that is much more employee- and union-friendly than the United States, so a sophisticated manufacturing employer that is educated, strategic and proactive about managing its plant can have a competitive business advantage. Here are just a few of the rules manufacturers need to know when doing business in Canada.

Provincial Jurisdiction

When determining legal obligations in Canada, location matters.

Unlike in the U.S., where the National Labor Relations Act applies coast to coast, labor law in Canada is within the jurisdiction of the provinces. Provinces are subnational jurisdictions similar to U.S. states. Each province has its own set of labor, employment, health and safety, and human rights laws. Accordingly, the location of an operation will largely determine which labor and employment statutes apply. This can mean stark differences in rules governing the minimum wage and hours of work, for example, or on how unions can form.

No At-Will Employment

The concept of at-will employment does not exist in Canada. Employers are entitled to dismiss employees for any nondiscriminatory reason, but they must provide reasonable advance notice of termination of employment or pay in lieu of notice. There is no fixed formula for how much time is "reasonable," and it is generally left to the courts to decide. However, a rule of thumb for adequate notice is approximately three to five weeks per completed year of service, although this is subject to many exceptions. The length of the notice period is dictated by various factors, such as the employee's age, length of service and job classification, and the availability of other employment.

Employers can use written employment agreements to define what constitutes reasonable notice, but these contracts must comply with minimum notice periods established by provincial statutes. Notably, the reasonable notice that a court awards typically is substantially higher than the statutory minimum, so a prudent employer will ensure that it has written employment agreements for all employees that define the amount to be paid on termination.

Higher Union Density

Unionization rates in Canada are substantially higher than those in the U.S. For example, the overall private-sector unionization rate in Canada is approximately 16 percent—well above the U.S. private-sector unionization rate of 6.4 percent. And, according to Statistics Canada, Canada's national statistical agency, 24.7 percent of employees working in the manufacturing sector are employed in unionized workplaces.

The trade union certification process in Canada is—in a word—quick.

Once a trade union files an application for certification, a union representation vote may be held as soon as three days later—and that's if employees are lucky enough to get a vote. Some provinces, such as Quebec and New Brunswick, allow for card-based certification, which eliminates the opportunity for employees to express their wishes through a certification vote. Card-based certification may occur if more than a certain percentage of employees in a proposed bargaining unit have signed union cards and the cards are submitted to the labor board. In such cases, there is no campaign and no chance for employees to change their minds. Once the union has the cards, certification is automatic.

When a company in Canada becomes unionized, the union gains the exclusive right to representation and the collection of union dues for all employees in a bargaining unit, similar to unions in the U.S. Canada, however, does not have any right-to-work laws, and employees in a unionized workplace have no choice but to have a paying relationship with the union.

[SHRM members-only HR Q&A: What is a right-to-work state?]

Occupational Health and Safety Laws

Canadian provinces have robust occupational health and safety laws. Each provincial occupational health and safety statute sets out the rights and obligations of employers, supervisors and workers.

Typically, every plant needs a written occupational health and safety policy setting out the employer's commitment to the employees' protection. Employers with a certain number of workers, defined by each province, must create joint occupational health and safety committees consisting of workers and management members.

Most provinces now require employers to create written policies regarding violence and harassment in the workplace.

Drug Testing

Workplace drug and alcohol testing can be justified only in narrow circumstances in Canada. Pre-employment testing is widely prohibited in Canada. Random testing is extremely rare. Generally, to have the right to use random drug tests, an employer must show that all other methods of controlling a drug and alcohol problem in the workplace have been unsuccessful.

Drug and alcohol testing that has no demonstrated relationship to job safety and performance or that occurs when there has been no evidence of enhanced safety risks in the workplace is likely illegal and considered a violation of human rights law.

The only circumstances in which an employer can confidently rely on drug testing are following a safety accident or near-miss, or when the employer has reasonable cause to believe an employee may be impaired at work.

Learn About the Local Culture

Canada presents a great opportunity for many global manufacturers because of its highly skilled workforce, favorable exchange rates and proximity to the U.S. But manufacturers may face challenges presented by high energy costs, emerging restrictions on the free flow of goods and a labor-friendly regulatory climate.

Successfully navigating these challenges requires a solid understanding of local culture and practices, as well as the foresight and flexibility to adapt U.S. or global policies to fit the local footprint. The issues discussed in this article represent just the tip of the iceberg for manufacturers doing business in Canada. However, employers that successfully manage Canadian operations often find themselves with a strategically important and profitable enterprise.

Stephen Shore is an attorney with Ogletree Deakins in Toronto.



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