5 Basics Every Employer Should Know About Employment Law
Published:
April 8, 2019
Author(s):
Updated September 6, 2024.
Growing a business takes people. In early days, many companies have just one “employee”: the owner or founder. At some point, that founder might retain the services of independent contractors to perform certain services. And eventually, many startups and growing businesses hire employees and become, for the first time, an employer. But there’s a lot to know about being an employer. Here are five employment law basics to get you started.
1. Understand the Legal Relationship
Creating an employer-employee relationship carries consequences. The law treats the employment relationship as a unique one. The Supreme Court of Canada observed in its 1987 decision in Reference Re Public Service Employee Relations Act (Alberta), “[w]ork is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society. A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.”. In addition to special statutory protections, courts view employees as vulnerable and the bargaining power between them and their employer as unequal. As a result of this view, the law grants “employees” certain benefits and protections – and imposes on employers certain legal obligations and liabilities.
Employees. Employees in Canada (and the U.S.) get certain benefits and protections not afforded to independent contractors. For example, the protection of employment standards legislation (including vacation time, minimum wages, overtime and minimum termination notice), the right to collect Employment Insurance, the protections of occupational health and safety and worker’s compensation legislation, certain additional protections under human rights legislation and the right to reasonable notice on termination (absent an enforceable contractual termination clause).
Employers. Employers have corresponding legal obligations and liabilities to employees, like making and remitting source deductions like income tax and Employment Insurance, making Canada Pension Plan contribution, the risk of vicarious liability for employees’ conduct in the course of their employment and the duty of good faith and fair dealing in the manner of termination.
Characterization as an employee or independent contractor has always been important. The legal test has never been a “bright line” one. But the growth of the “sharing” or “gig” economy has blurred the lines considerably, and it’s now easier than ever to characterize a worker as an employee instead of independent contractor.
2. You have an employment contract with every employee – so put it in writing.
Every employer has an employment contract with every employee – even when there’s “nothing in writing”. The issue when it’s not in writing, however, is ascertaining the terms of that contract. And that can lead to disagreements, lawsuits and expense – many of which can be avoided by putting the employment contract in writing.
Written contracts. A well-drafted and implemented written employment contract can be instrumental to avoiding and resolving disputes during or at the end of the employment relationship, saving the employer time and money (and no small amount of stress). But since courts carefully scrutinize employment contracts and interpret any ambiguity in an employee’s favour, it’s good practice to have legal counsel draft them.
Terms. A standard form employment agreement is useful, and there are some terms that should be in just about every employment contract. But employers should always review the employment contract (ideally with legal counsel) and, if required, customize it to the circumstances.
Timing. It’s also important that the terms of the employment contract be set at the time of hiring or before the worker is given a promotion or transfer – not after. An employer can’t unilaterally impose new employment conditions that fundamentally change the employment relationship during the employment relationship without giving the employee either sufficient prior notice or consideration (something of new value in exchange). If it doesn’t, then the employer could face a wrongful dismissal lawsuit.
3. Comply With Employment-Related Legislation
Familiarize yourself with legislative obligations. To help, access resources published by government authorities and reputable legal sources and payroll and human resources companies. But remember: these are not legal advice. If you have specific questions, seek legal counsel. Here are five of the key employment-related statutes that impact the employer – employee relationship:
Employment Standards Legislation. Employment standards laws apply to most employees and set minimum standards for certain employment conditions. Common ones include minimum wages, hours of work, public holidays, vacation time and pay, and termination notice. They also often set out restrictions, such as on the employment of children, or on the ability to terminate employees that have reached a specified amount of service (as in N.S.). And they typically mandate certain employee leave entitlements, including for maternity and parental, sick, bereavement and, most recently in some provinces such as New Brunswick, domestic violence, leave. It’s also extremely important that employers remember that the laws only set the minimum requirements: an employee could be entitled to more under the terms of an employment contract or at “common law” (the law that results from judges’ decisions). For example, the laws typically establish the minimum termination notice to which an employee is entitled. However, the common law generally presumes an employee is entitled to “reasonable notice”: an individual assessment that’s based on a range of relevant factors (like the employee’s age, years of service, education, training and experience) that’s often greater than the minimum set out in the employment standards law.
Human Rights Legislation. Human rights laws apply to all employees, non-unionized and unionized. All prohibit employers from discriminating, directly or indirectly (a.k.a. “adverse effect discrimination”, meaning a particular policy, rule or practice appears neutral on its face but has a discriminatory impact), against their employees in employment (which includes in hiring, promoting and terminating) based on certain protected personal characteristics. These characteristics vary depending on the applicable law, but generally include age, colour, creed, physical disability, mental disability, ethnic or national origin, family status, gender expression, gender identity, marital status, political belief, race, religion, sex (which includes sexual harassment, if it’s not separately named), sexual orientation, and source of income of any individual or class of individuals. Human rights laws also impose an obligation on employers to accommodate their employees’ membership in a group with a protected personal characteristic: a legal duty to take steps to ensure a workplace condition doesn’t have a discriminatory effect on an employee, if it can do so without ‘undue hardship’. Undue hardship is a high standard that depends on several factors, including: financial cost; disruption of a collective agreement; problems of morale of other employees; interchangeability of the work force and facilities; the size of the employer’s operation; and safety concerns. Employers often find it a challenge to understand and to satisfy their duty to accommodate, and failure to do so is a regular source of human rights complaints against employers.
Occupational Health & Safety Legislation. Provincial and federal occupational health and safety laws apply to all “employers” and “employees” – not just those in “high risk” sectors like construction or oil and gas, for example. Occupational health and safety laws are generally comprised of a statute and often numerous regulations, though the name and specific contents of each law vary by province (or federally). Occupational health and safety laws universally impose a general duty on employers to provide a safe workplace for all their employees. This includes ensuring a work environment free from harassment and violence, including sexual harassment and bullying While many consider this to be included in the general obligation to provide a safe workplace, governments that haven’t already done so are increasingly imposing specific obligations in relation to workplace violence and harassment. Employers must also warn employees about hazards, such as safety hazards in the operation of machinery and physical hazards such as cold or heat and ergonomic hazards, and provide adequate training. In turn, employees have the right to refuse dangerous work. Occupational health and safety laws also typically impose a duty on employers to investigate and deal with employee complaints. Corporations have occupational health and safety obligations and risk corporate liability for violating them – but corporate directors, officers and supervisors share many of those health and safety obligations and liability risks personally. Those risks include personal liability under occupational health and safety laws and criminal laws and resulting personal exposure to fines and even jail time. So, everyone, and particularly directors, officers and supervisors, need to take occupational health and safety seriously.
Privacy Legislation. Federal and, in some provinces provincial, privacy legislation regulates and restricts employers’ ability to collect, use and disclose employee personal information in contexts such as employee monitoring and surveillance. They also regulate employers’ use of Artificial Intelligence (AI) in certain circumstances, in particular, employment-related decision-making processes such as recruiting and applicant screening.
Labour Relations Legislation. Federal and provincial legislation across Canada regulates employer and employer rights and obligations in the context of unionized workplaces, from the unionization process, through the grievance and arbitration process, through to employment termination.
4. Record-Keeping is Critical
The issue for employers is often not what happened or what was done, but what it can prove happened or was done. When an employer faces an employment-related lawsuit, a complaint or an investigation under employment standards laws, human rights laws, occupational health and safety laws, or otherwise, its records are critical to its ability to respond with proof of what it did.
Document, document, document. Ideally, employers will document everything. This includes, for example: training initiatives, policy and procedure reviews of all kinds whether that training or review is mandated by law or not; employee performance discussions and evaluations, both formal and informal; and discipline meetings, including making notes of verbal warnings.
Legal Compliance. In addition, various employment-related laws require employers to make certain records. For example, employment standards laws could require, depending on the applicable law, that employers make records of an employee’s: name and address; date of birth; social insurance number; start date; hours worked (such as daily and/or weekly); wages and deductions for each pay period; details of vacation and vacation pay; certificates respecting leaves of absence; and dates of suspensions, layoffs and dismissal. Occupational health and safety laws often require employers to make training records, among others. And laws often require employers to keep certain records for a specific period of time.
Record Production. Similarly, employment-related laws typically require employers to produce those records to certain members of the government departments or agencies charged with enforcing those laws. So it’s key not only to keep the records, but to be able to find them when you need them.
5. Access Dedicated Legal & HR Services
There are certain times when you should obtain legal or human resource support. These include when:
- Your workforce is spread out over multiple provinces, territories, or countries.
- You’re hiring new employees.
- You’re contemplating disciplining or terminating the employment of an employee.
- Your workforce is unionizing.
Please contact your McInnes Cooper lawyer or any member of the Labour & Employment Law Team @ McInnes Cooper to discuss the legal basics of employment law or any employment law issue.
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