As remote work is becoming the norm and businesses are expanding their reach across borders, it is important for employers to understand employment laws in different jurisdictions in which they operate. This was the leading theme of ADP Canada Co. (“ADP”) and Spring Law’s webinar, which focused on understanding the differences in cross-border employment laws between Canada and the United States (“U.S.”). ADP legal counsel, Caitlin Hurren and ADP Inc. legal counsel, Meryl Gutterman joined Spring Law Labour and Employment lawyer Lexa Cutler to examine key areas where employment law varies between Canada and the U.S.
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Terminations in Canada vs. the U.S.
A prominent area of discussion was the process of termination in Canada compared to the U.S. In Canada, employment is largely governed by provincial or territorial law, and employment contracts are highly recommended. Employee contracts must be signed before the employee starts work to be enforceable. If no contract is signed, the law assumes an implied contract based on common law or statutory standards.
A major difference in Canada is the absence of the at-will employment doctrine. In Canada, employers can only terminate employees for just cause, such as severe misconduct or poor performance justifying immediate dismissal or provide employees reasonable notice of termination or pay in lieu of notice.
Numerous federal, state and local laws govern employment in the U.S. In addition to federal law, many state and local jurisdictions have enacted laws that cover similar situations in the employment context, and some of these laws offer greater employee protections or apply to employers with fewer employees or in specific industries. Typically, where these laws conflict, the law most generous to the employee applies.
In the U.S., most employment is considered at-will, which generally means that except for certain exceptions such as an implied contract or public policy, employers can terminate employees at any time, for any reason, as long as the reason is a lawful one (e.g., based on discrimination or retaliation). This doctrine is recognized in all states, except Montana. Absent an at-will-employment relationship, an employer may have to establish "just cause" to terminate an employee. The exceptions to at-will employment vary by state. For instance, an implied contract is often considered an exception to at-will employment. Implied contracts can be created by oral or written statements or actions and conduct that imply future employment for a definite or indefinite period.
Employers should consult legal counsel with questions concerning their specific employment situation.
Employment standards: Minimum wage
Another point of discussion was employment standards, particularly minimum wage in Canada and the U.S. In Canada, minimum wage varies between provinces, currently ranging from $15 to $19 per hour. Additionally, overtime rules differ, and they often require premium pay after 40 hours of work in a week, with certain exemptions for managerial roles.
On the other hand, the U.S. federal minimum wage is set at $7.25 per hour, with many states implementing higher local minimums. Under the Fair Labor Standards Act (FLSA), overtime must be compensated at 1.5 times the regular rate for non-exempt employees who work over 40 hours a work week.
Benefits and leaves
The discussion also covered the substantial differences in benefits and leave entitlements. In Canada, the public healthcare system alleviates the need for employers to provide health insurance, although many opt to offer extended health benefits. Statutory leaves are extensive in Canada and vary by province. Employees are entitled to maternity, paternal, and sick leave as mandated by law. These leaves are job-protected, meaning employees must be allowed to return to their jobs or a comparable position after the leave. These job-protected leaves are often supplemented by federal Employment Insurance.
Many employers offer employee benefits in the U.S. to attract and retain talent. Health insurance is often provided as part of employment benefits. Under the Affordable Care Act (ACA), employers with 50 or more full-time and full-time equivalent employees must offer health coverage to their full-time employees (defined as those who work on average 30 or more hours per week) and their dependents. Covered employers that fail to offer health coverage as required, may be subject to a penalty.
The federal Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid leave for qualified family and medical reasons, including childbirth, adoption, or serious illness. The FMLA covers employers with 50 or more employees, but several states have enacted their own family and medical leave laws, some of which apply to employers with fewer employees. In addition, a number of states have paid sick leave laws, pregnancy leave laws, voting leave, domestic violence leave, and laws that entitle employees to take leave for any reason laws.
Legal frameworks: Discrimination and harassment
Discrimination and harassment laws also illustrate contrasts between Canada and the U.S. In Canada, anti-discrimination laws are governed by local Human Rights Codes and the Canadian Human Rights Act (for federally regulated industries). Each jurisdiction in Canada has its own human rights legislation, either called the human rights code or human rights act of that jurisdiction - other than in Quebec, where it’s called the Charter of Human Rights and Freedoms. These pieces of legislation protect employees against discrimination based on various grounds and impose a duty to accommodate on employees.
The U.S. has a complex framework of federal, state and local laws that prohibit discrimination, harassment and retaliation in all aspects of employment. The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws prohibiting employers from discriminating against applicants and employees on the basis of certain protected characteristics, such as their race, colour, national origin, age, religion, sex, disability and genetic information. Title VII prohibits workplace discrimination based on race, colour, religion, sex, or national origin. Additionally, other federal laws like the Americans with Disabilities Act (ADA) and the Age Discrimination in Employment Act of 1967 (ADEA) provide further protections. Employers are required to provide reasonable accommodations for employees with disabilities unless doing so would impose an undue hardship. Many state laws offer additional protections, and some states require more stringent anti-harassment training.
Best practices for cross-border employers
To navigate these intricate legal landscapes, cross-border employers should implement dual-compliant policies. Employers should develop and implement policies that reflect the highest standard of law in both Canada and the U.S. laws.
Employers should establish clear communication, consistent documentation, and ongoing training to help manage legal risks. Employers may consider collaborating with professionals who specialize in cross-border HR and payroll issues and consult local legal counsel to ensure compliance with evolving laws in both countries.
The insights shared during this webinar shed light on the complex interplay of employment laws across Canada and the U.S. As businesses expand their operations globally, they should be mindful of these differences to maintain compliance and foster an equitable workplace for all employees.
Dive deeper into cross-border employment law by watching our Cross-Border Workplaces: Canada vs. U.S. Employment Law webinar.
This guide is intended to be used as a starting point in analyzing the complexities of cross-border employment and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
