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Employment contracts and policies in Canada

Contract terms in Canada

Fixed-term contracts in Canada

Contract extensions in Canada

Working hours in Canada

Remote work in Canada

Tailored employment contracts in 100+ countries

Employment contracts in Canada

Every country has its own rules and requirements when it comes to employment contracts. For example, in many countries, it’s mandatory to provide employees with written agreements. In others, verbal contracts are acceptable and legally binding. Some countries also require contracts to be concluded in the local language, while others have no statutory language requirements as long as both parties understand the terms of the agreement.

Employment contracts in Canada serve as the foundation of the employer-employee relationship, outlining essential terms such as job responsibilities, compensation, working hours, and termination conditions. While not legally mandated, written contracts are highly recommended to ensure clarity and mitigate potential disputes. These agreements must comply with federal or provincial employment standards, depending on the jurisdiction, and can be tailored to include additional terms beyond the statutory minimums.

This section will provide comprehensive insights into employment contracts in Canada. We’ll explore the mandatory and optional terms to include, delve into the nuances of fixed-term contracts, and examine regulations concerning working hours, overtime, and remote work arrangements. Whether you’re an employer drafting contracts or an employee reviewing one, this guide aims to equip you with the necessary knowledge to effectively navigate employment contracts in Canada.

Employment contracts and policies in Canada

Every country has its own rules and requirements concerning employment contracts — here’s what you need to know as an employer in Canada.

Written employment contracts in Canada

Written contracts are not required by law in Canada. Employment relationships can be established through verbal contracts or even implied through conduct. However, having a written contract is highly recommended since it provides clarity on the terms and conditions of employment and can help prevent disputes. If there is no written agreement in place, statutory and common law terms are implied.

Probationary periods in Canada

A probationary period allows both the employer and employee to test out the employment relationship before fully committing. Probationary periods are permissible in Canada, as long as they are explicitly stated in the employment contract. In most jurisdictions, probationary periods are limited to three months. During this time, the employer may terminate an employee without being required to provide statutory notice or pay in lieu. However, the employee can still allege discrimination if they feel the reason for termination was unfair.

Third-party approval for employment contracts in Canada

Unlike in some other countries, there is generally no requirement to lodge or file employment contracts with a third party or obtain approval from a specific body in Canada. However, employers in Ontario may be required to file certain compliance documents under accessibility legislation.

Employment policies in Canada

Employers in Canada may be required to have certain policies in place depending on the jurisdiction they operate from and the size of their organisation. These might include:

Health and safety policies: In most provinces, employers are required to have a written health and safety policy outlining procedures for hazard identification, risk assessment, and incident reporting. For example, in Ontario, this is mandatory for all employers with six or more employees.
Workplace harassment and violence prevention policies: These policies define harassment and violence, establish reporting procedures, and outline preventive and resolution measures. Federally regulated employers must implement such policies under the Canada Labour Code, while requirements for other employers vary by jurisdiction.
Disconnecting from work policies: In Ontario, employers with 25 or more employees must have a written policy addressing the right to disconnect. This policy should clarify expectations around avoiding work-related communications outside regular working hours.
Electronic monitoring policies: Also in Ontario, employers with 25 or more employees are required to have a written policy describing their electronic monitoring practices. This includes detailing the methods used and the reasons for collecting employee data.
Accessibility policies: Under the Accessible Canada Act, federally regulated organisations must create and publish accessibility plans to identify, eliminate, and prevent barriers for people with disabilities.
Privacy policies: Employers should clearly communicate how they collect, use, and protect employees’ personal information. Provinces such as Alberta, British Columbia, and Quebec have their own privacy laws that apply to employee data.

Contract terms in Canada

Employment contracts in Canada can be concluded on an indefinite, fixed-term, full-time, or part-time basis. Unlike in some other countries, employers are generally permitted to treat employees in each of these categories differently based on their status. However, basic employment standards apply to all employees.

Mandatory employment terms in Canada

A written employment contract in Canada should generally include at least the following information:

Name and address of both parties.
Job title and responsibilities.
Compensation and benefits.
Work hours and location.
Vacation and leave entitlements.
Conditions for termination.
Probationary period.

Canadian employers are generally free to negotiate specific terms with their employees. However, they must comply with both federal and provincial legislation, which sets minimum standards for things like minimum wages, hours of work, overtime pay, and leave.

Additional contract terms in Canada

In addition to the basic information provided above, employers in Canada can choose to include the following clauses in their contracts:

Confidentiality clause: Obligates the employee to keep proprietary information confidential during and after employment.
Non-competition clause: Restricts the employee from working with competitors for a certain period after leaving the company; enforceability varies and must be reasonable in scope.
Non-solicitation clause: Prevents the employee from soliciting clients or employees of the former employer for a specified time after departure.
Intellectual property agreement: Clarifies ownership of any intellectual property created by the employee during their tenure.

Fixed-term contracts in Canada

Employers in Canada can use fixed-term contracts to engage workers for short periods. For example, they’re often used to cover maternity leave or provide assistance on a specific project. In Canada, a fixed-term employee may be referred to as a ‘specified period employee’.

Limitations on fixed-term contracts in Canada

Canadian employment law is founded on the principle of freedom of contract, which means that there are no limits on the duration of fixed-term contracts. However, employees may be considered permanently employed if they are engaged on multiple successive fixed-term contracts. This is also the case if they continue to work after the contract end-date with the consent of the employer. In this case, the employee will be entitled to full employment rights.

Other types of fixed-term contracts in Canada

Canadian employment law also provides for different types of contracts that have a specified end date, including:

Casual: Casual employment refers to work that is irregular, infrequent, or unpredictable, often on an as-needed basis without guaranteed hours. These positions are typically used to address unforeseen or urgent operational needs and do not confer the same benefits or job security as permanent roles.
Student: Student employment refers to short-term job opportunities for students enrolled in educational institutions. It is often facilitated through programs like the Federal Student Work Experience Program (FSWEP), which allows students to gain work experience while completing their studies.
Seasonal: Seasonal employment involves jobs that are dependent on specific times of the year or seasonal demand, concluding once the peak period ends. Examples include roles in agriculture, tourism, and construction. Specific rules apply to seasonal work under Canadian employment law.

Contract extensions in Canada

Fixed-term contracts are typically used for engagements of a short-term nature. However, employees may sometimes need to extend them to meet their business needs. Read on to learn what you need to know about fixed-term contract extensions in Canada.

Ending a fixed-term contract in Canada

Under Canadian employment law, employees are generally entitled to notice of termination or pay in lieu of notice if their employer ends their employment contract. However, employers don’t need to give notice or pay in lieu if the contract includes a specific end date and the work is ending on that date.

That said, employers do need to give notice if they want to end an employee’s fixed-term employment before the term is reached. Fixed-term employment contracts should include a termination clause outlining the notice to be provided, which must be in line with statutory requirements.

Contract extensions in Canada

In some circumstances, employers may want to continue their relationship with an employee after their contract expires. In this case, they can extend or renew the agreement. It’s important to note that if the employee simply continues to work after the expiry of their contract (without a new contract in place), they may be considered permanently employed.

Unlike in some other countries, there is no specific limit on the number of times a fixed-term contract can be renewed or extended in Canada. However, repeatedly renewing a contract is not recommended, especially without an objective reason. Canadian courts have previously determined that employees who have worked under multiple successive fixed-term contracts are effectively employed on a permanent basis. This means these employees can be granted full employment rights, including the right to notice or termination or payment in lieu of notice.

Working hours in Canada

Standard working hours in Canada are 40 hours per week, with a standard workday of eight hours. This may vary depending on the province or territory as well as any collective bargaining agreement that applies. Flexible working arrangements, including compressed hours, are becoming increasingly common as an employee benefit in Canada.

Maximum working hours in Canada

Employees in federally regulated workplaces in Canada are limited to working 48 hours per week, including overtime. However, this maximum can be exceeded under certain circumstances, such as:

Under an excess hour permit: The employer can apply for this permit if extra work is necessary due to exceptional circumstances. They must apply at least 60 days in advance.
When overtime is necessary for emergency work: In this case, the employer must submit a report including the nature of the emergency, the number of employees working additional hours and how many hours they worked.
Under an averaging plan: This is when an employee’s work schedule varies from one week to another. In this case, they may exceed the normal maximum of 48 hours in a given week but must not exceed it on average over two weeks.
Under a modified work schedule: This is an arrangement that allows employees to work outside the standard hours of work. For example, they may work compressed work weeks or flexible hours. If an employee has a modified work schedule, their standard hours of work should not exceed 40 hours per week on average over any period of two weeks. They must also not work more than 48 hours per week on average over the same period (including overtime).

There are specific regulations setting out exemptions and modifications to maximum hours legislation for employees in various industries, including trucking, shipping, railways, and broadcasting.

Overtime in Canada

Overtime regulations in Canada vary by jurisdiction, but generally any work above the standard 40 hours per week is considered overtime. Employers must compensate employees for working overtime. Again, specific compensation rates vary but are typically at least 1.5x the employee’s usual wages.

Alternatively, employers may compensate employees for overtime with additional time off, which should also be granted at the rate of 1.5 hours of leave for every hour of overtime worked. This must be agreed in writing between the employee and the employer.

Employees in Canada have the right to refuse overtime in certain circumstances. For example, they may refuse to work extra hours if they need to fulfil responsibilities related to the health or care of a family member.

Breaks and rest periods in Canada

Employees in federally regulated workplaces in Canada are entitled to a break of at least 30 minutes for every five consecutive hours of work. If the employer requires the employee to be at their disposal during their break, it must be paid. Employees are also entitled to a rest period of at least eight hours between shifts.

Regional working hours regulations in Canada

The above rules apply specifically to federally regulated workplaces in Canada. These include sectors like air transportation, banking, and telecommunications. However, workers in other industries, including retail, hospitality, manufacturing, and construction, are not covered by these rules. Instead, their employers must abide by provincial or territorial regulations.

While the rules are typically very similar, there are some differences. For example:

In British Columbia, employees must have at least 32 consecutive hours free from work each week.
In Alberta, the daily limit is generally 12 hours per day unless an exception applies.
In Ontario, overtime is paid after 44 hours of work in a week, at a rate of 1.5x the employee’s regular wages.
In British Columbia, overtime is paid at 1.5x regular wages after eight hours in a day and 2x regular wages after 12 hours in a day.

Employers in Canada should consult the specific employment standards legislation of the relevant province or territory to ensure compliance with local regulations.

Remote work in Canada

Remote work has become more popular over the past few years in many countries — and Canada is no exception. In Canada, remote work is governed by a combination of federal and provincial/territorial legislation. Read on for what you need to know.

Federal remote work regulations in Canada

In federally regulated sectors including banking, telecommunications, and interprovincial transportation, the Canada Labour Code provides the framework for employment standards, including provisions applicable to remote work.

Under this legislation, employees with at least six months of service have the right to request flexible work arrangements, which can include remote work. Employers are obligated to consider these requests and can only refuse them on specific business-related grounds. Additionally, employers must ensure the health and safety of their remote workers. This includes assessing remote work environments and providing employees with guidance to mitigate risks.

Provincial and territorial remote work regulations in Canada

Employers in provincially or territorially regulated sectors must abide by the specific rules that apply in their jurisdiction. Generally speaking, this includes putting in place measures to ensure the health and safety of remote workers. The province of Ontario has also enacted legislation requiring employers to develop policies to allow employees to disconnect outside of work hours.

Determining the province of employment for remote workers in Canada

For tax and payroll purposes, it’s important for Canadian employers to be clear on the province where their employees work — even when they are working remotely. The Canada Revenue Agency has established special guidelines to help employers with this question as of January 2024. These determinations can get quite complicated, but the basic premise is that, if a full-time remote work agreement exists, the province of employment is considered to be the province where the employee is ‘attached’ to an establishment of the employer.

Tailored employment contracts in 100+ countries

Like all countries, Canada has its own rules and regulations when it comes to employment contracts — and non-compliance could land your company in hot water.

Thankfully, our team is experienced in drawing up tailored, compliant contracts in Canada (and more than 100 countries worldwide). That means that, when you work with us, you won’t need to waste time worrying about whether you’ve got it right. Instead, you can focus on what matters: your business

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