In the U.S. a Professional Employment Organization (PEO) takes on the role of the employer for many companies who want to mitigate that type of risk. When a U.S. company looks to expand into Canada, the availability of this type of service is limited and the risk to the U.S. company is great as they try to get through the landmines of Canadian employment compliance. Here at The Payroll Edge we get many phone calls from U.S. companies wanting to expand their workforce across the border but are not familiar with Canadian law enough to take on the role of the employer successfully. Being one of the only outsourced payroll and HR providers in Canada that will take on the responsibility of being the employer, we often hear 'you're exactly what we are looking for'.
This article on Lexology.com is a great example of the difference between the two countries when it comes to employment;
Doing business in Canada: some key differences in employment and labo(u)r law in Canada and U.S.
"Strange all this difference should be Twixt Tweedledum and Tweedledee."
Canada and the United States resemble each other closely: to the global family, the two are close cousins, if not siblings, sharing political and economic ties as well as similar laws in many areas. However, quite apart from our distinct spelling traditions, the course of political, social, and economic history in Canada and the U.S. has resulted in employment and labour relations that are rather different. These important differences are relevant to the significant flow of cross-border business, generally from south to north.
Any American company contemplating or carrying on business in Canada should be aware of the following key differences when it comes to the hiring, managing and termination of employees in Canada.
1. Regulatory Regimes
American legislative jurisdiction over employment and labour is for the most part shared among three levels of government: federal, state and local, with considerable overlap. At first blush, the overlapping jurisdictions seem quite complicated.
By contrast, legislative jurisdiction over employment and labour in Canada is simply divided between the provincial and federal governments, with each distinct in its own sphere. A significant majority of employers fall under provincial jurisdiction, with the federal government having jurisdiction over certain limited specific federal undertakings, including inter-provincial transportation, telecommunications and banking. There is no overlap between the two. Approximately 85-90% of Canadian employees work in provincially-regulated employment.
Employment and labour law at either provincial or federal levels is also governed by the common law in Canada, and, in the case of Québec, which is a civil law jurisdiction, the common law as codified in the Civil Code of Québec.
2. Minimum Employment Standards
Freedom of contract is largely attenuated in employment and labour relations by prescriptive legislation aimed at redressing the imbalance of bargaining power between employers and employees. Both federal and provincial statutes have been enacted that mandate certain minimum standards and entitlements for employees. Enforced by administrative tribunals, every employer must comply with these standards, or face possible penal sanctions for their breach. There is no contracting out of these minimum standards.
Under these statutes, employees are guaranteed certain minimal entitlements, including minimum wages, hours of work, overtime pay, vacations and vacation pay, statutory holidays, pregnancy and parental leave, and significantly, notice of termination of employment, or pay in lieu, and in some cases, additional severance pay. There are also provisions, aimed at protecting jobs, that are triggered in the event of the sale of a business.
Significantly, the American categories of "exempt" and "non exempt" employees are not applicable in Canada. Salaried employees, as opposed to those on wages, are typically exempt from overtime pay in the U.S. There is no such distinction anywhere in Canada. Except for true executive or managerial employees in Canada, all other employees are entitled to overtime pay. Determining whether someone is truly a manager or an executive is based on an analysis of their actual job duties.