The information contained in this document is provided for general information purposes only and does not constitute legal or other professional advice, nor does accessing this information create a lawyer-client relationship. This document is current as of January 2023 and applies only to the provincial jurisdictions expressly indicated. Information about the law is checked for legal accuracy as at the date the document is prepared but may become outdated as laws or policies change. For clarification or for legal or other professional assistance please contact any Canadian ELA member firm or Thorsteinssons LLP.
Introduction
One of the lasting impacts of the COVID-19 pandemic on the Canadian workplace will likely be the change in how, and where, employees work. Many organizations have embraced hybrid and fully remote work arrangements as the “new normal”. Organizations are also increasingly comfortable with having remote workers living in jurisdictions other than that of the “home office”.
While this flexibility can be an attractive option for both employers and employees, having remote workers who reside in other jurisdictions may impose additional legal obligations on an employer. In many situations, an employer may be required to comply with provincial employment and labour legislation in another jurisdiction if they have even one employee who works remotely in another province.
This guide is intended to provide a practical overview of the employment and labour-related requirements in each provincial jurisdiction if an employer has remote workers residing in that province, even where the employer has no office or other corporate presence in that location. It also reviews some of the tax and contractual considerations. This guide does not apply to employees temporarily performing work in another jurisdiction (as other rules may apply in these circumstances) or to international jurisdictional transfers.
Please note this is an overview only and is not legal advice. For more information on how remote work may impact on your organization, reach out to any member of the Canadian Employment Law Alliance team.
| Alberta | Chantel T. Kassongo, K.C. (Employment)
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| British Columbia | Gregory J. Heywood (Employment)
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| Manitoba | Jeff Palamar (Employment)
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| New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island | Nancy F. Barteaux, K.C. (Employment)
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| Ontario | Erin Kuzz (Employment) |
| Quebec | Marc Benoit (Employment)
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| Saskatchewan | George A. Green (Employment)
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For assistance with tax-related issues associated with remote employees, please reach out to Thorsteinssons LLP.
| Toronto Office | Kyle B. Lamothe |
| Vancouver Office | Ian Humphries |
OCCUPATIONAL HEALTH AND SAFETY
| Alberta | An employer with no corporate presence in the province is still required to comply with the Occupational Health and Safety Act if it has one or more workers permanently working in Alberta. This will apply even if the worker works from home.
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| British Columbia | An employer with no corporate presence in the province is still required to comply with the Workers Compensation Act and the Occupational Health and Safety Regulation under that Act if it has one or more workers permanently working in British Columbia.
This will apply even if the worker works from home. In addition, if the worker is employed through a work-from-home arrangement, the employer must:
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| Manitoba | An employer with no corporate presence in the province is still required to comply with the Workplace Safety and Health Act and the Workplace Safety and Health Regulations if it has one or more workers permanently working in Manitoba. This will apply even if the worker works from home.
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| New Brunswick | An employer with no corporate presence in the province is still required to comply with the Workers Compensation Act and the Occupational Health and Safety Act if it has one or more workers permanently working in New Brunswick. While there is a limited exception for work performed at a private home, it does not seem as though this would extend to remote work arrangements. It is more likely the legislation will apply even if the worker works from home.
In addition, if the worker is employed through a work-from-home arrangement, the employer must establish a code of practice that addresses working remotely and by oneself. The code must ensure, so far as reasonably practicable, the health and safety of a worker who works alone at any time at a place of employment (including their home) from risks arising out of, or connected with, the work assigned. It must contain specific prescribed information.
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| Newfoundland and Labrador | An employer with no corporate presence in the province is still required to comply with the Occupational Health and Safety Act if it has one or more workers permanently working in Newfoundland and Labrador. This will apply even if the worker works from home.
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| Nova Scotia | An employer with no corporate presence in the province is still required to comply with the Occupational Health and Safety Act if it has one or more workers permanently working in Nova Scotia. This will apply even if the worker works from home.
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| Ontario | An employer with no corporate presence in the province is still required to comply with the Occupational Health and Safety Act if it has one or more workers permanently working in Ontario.
However, if the worker is performing work from a private residence (i.e., is working from home) the legislation will not apply.
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| Prince Edward Island | An employer with no corporate presence in the province is still required to comply with the Occupational Health and Safety Act if it has one or more workers permanently working in Prince Edward Island. This will apply even if the worker works from home.
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| Quebec | An employer with no corporate presence in the province is still required to comply with the Act respecting occupational health and safety if it has one or more workers working in Quebec. This will apply even if the worker works from home.
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| Saskatchewan | An employer with no corporate presence in the province is still required to comply with the Occupational Health and Safety Regulations under the Saskatchewan Employment Act if it has one or more workers permanently working in Saskatchewan. This will apply even if the worker works from home. |
WORKERS’ COMPENSATION
| Alberta | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workers’ Compensation Act if it will have an employee who lives in Alberta performing work in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| British Columbia | An employer with no corporate presence in the province is still required to have coverage through WorkSafe BC if it will have an employee who lives in British Columbia performing work in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| Manitoba | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workers’ Compensation Act if it will have an employee who lives in Manitoba performing work in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| New Brusnwick | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workers Compensation Act if it has three or more employees employed at the same time in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| Newfoundland and Labrador | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workers’ Compensation Act if it will have an employee who lives in Newfoundland and Labrador performing work in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| Nova Scotia | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workers’ Compensation Act if it will have an employee who lives in Nova Scotia performing work in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| Ontario | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workplace Safety and Insurance Act if it will have an employee who lives in Ontario performing work in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| Prince Edward Island | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workers’ Compensation Act if it will have an employee who lives in Prince Edward Island performing work in the province.
Certain industries are exempt from mandatory coverage. Examples include:
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| Quebec | The Act respecting industrial accidents and occupational diseases does not apply if an employer does not have an establishment in Quebec, unless the CNESST has reached an agreement to that effect with another government.
Although not mandatory, some employers located outside of Quebec decide to register with the CNESST when they have employees working remotely from Quebec. |
| Saskatchewan | An employer with no corporate presence in the province is still required to have coverage pursuant to the Workers’ Compensation Act if it will have an employee who lives in Saskatchewan performing work in the province.
Certain industries are exempt from mandatory coverage:
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EMPLOYMENT STANDARDS
The applicable provincial jurisdiction for a remote worker will be the province in which a remote worker permanently lives and works. Accordingly, an employer is required to comply with the employment standards legislation of that province, even if the business has no corporate presence in the jurisdiction.
The employment standards legislation in each province will address common topics, such as overtime, vacation, statutory/public holidays, termination entitlements, leaves of absence, etc. These standards vary among the provinces and are not outlined in full below. In addition, there are certain provinces that have specific requirements that are distinct from most (and, in some cases, all) of the other provinces.
The chart below sets out some of the unique requirements of the various provincial employment standards legislation, as well as the overtime threshold for each province.
Note: Every province will have specific industries and/or positions that are exempt from overtime.
| Alberta | Overtime: An employee is entitled to overtime after 8 hours per day or 44 hours per week. An employer and employee can agree to overtime banking and overtime averaging, subject to the specific statutory requirements.
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| British Columbia | Overtime: An employee is entitled to overtime after 8 hours per day or 40 hours per week. An overtime averaging agreement can be used with the agreement of the employer and employee but is subject to specific statutory requirements.
Paid Sick Leave: After 90 consecutive days of employment, an employee is entitled to up to 5 days of paid sick leave per year for any personal illness or injury in addition to up to 3 days of unpaid leave. |
| Manitoba | Overtime: An employee is entitled to overtime after 8 hours per day or 40 hours per week. An employer and employee can agree to overtime banking and overtime averaging, subject to the specific statutory requirements.
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| New Brunswick | Overtime: An employee is entitled overtime (calculated on the minimum wage) after they have worked 44 hours in a week.
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| Newfoundland and Labrador | Overtime: An employee is entitled overtime (calculated on the minimum wage) after they have worked 40 hours in a week. An employer and employee can agree to overtime banking, subject to the specific statutory requirements.
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| Nova Scotia | Overtime: An employee is entitled overtime after they have worked 48 hours in a week.
Termination Entitlements: An employee cannot be suspended or discharged without cause after they have ten years of service and can be reinstated if they are wrongfully dismissed. |
| Ontario | Overtime: An employee is entitled to overtime after they have worked 44 hours per week. An employer and employee can agree to overtime banking and overtime averaging, subject to the specific statutory requirements.
Minimum wage: An employee who meets the definition of “homeworker” is entitled to a separate minimum wage that is higher than the general minimum wage. A “homeworker” is defined as “an individual who performs work for compensation in premises occupied by the individual primarily as residential quarters but does not include an independent contractor”.
Severance Pay: If the employer has a payroll of 2.5 million or more (inside or outside of Ontario), an employee with five or more years of service is entitled to severance pay in addition to their entitlement to notice of termination (or termination pay). Severance pay amounts to one week per year of service, prorated for any partial year, to a maximum of 26 weeks’ wages.
Electronic Monitoring Policy: An employer with more than 25 employees in Ontario is required to have an Electronic Monitoring Policy.
Disconnect from Work Policy: An employer with more than 25 employees in Ontario is required to have a Disconnect from Work Policy. |
| Prince Edward Isaland |
Overtime: An employee is entitled overtime after they have worked 48 hours in a week.
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| Quebec | Overtime: An employee is entitled to overtime after 40 hours per week. An employer and employee can agree to overtime banking, subject to the specific statutory requirements.
Termination Entitlements: An employer may only unilaterally terminate the employment of an employee with two or more years of uninterrupted service for good and sufficient cause and, among several available remedies, an employee can be reinstated if they are wrongfully dismissed.
Contractual Entitlements: Pursuant to the Civil Code of Quebec a clause in an employment contract that provides for specific notice of termination or compensation in lieu cannot be invoked against an employee because what constitutes reasonable notice must be evaluated at the moment of termination. As such, contractual termination language cannot be used to reduce an employee’s reasonable notice entitlement.
French Language: Pursuant to the Charter of the French Language, every employer must respect the worker’s right to carry on his activities in French. This means that employees may require that all documentation and communication be drawn up in French. That said, regardless of a specific request, there must now necessarily be a French version of an employment contract before the parties can agree to sign a version in another language. |
| Saskatchewan | Overtime: An employee is entitled to overtime after 8 hours per day (if the employee works a five-day schedule or 10 hours if the employee works a four-day schedule or 40 hours per week.
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ADDITIONAL EMPLOYMENT-RELATED LEGISLATION
Certain provincial jurisdictions have additional employment-related legislation with which an employer must comply if it has any remote worker who permanently lives and works in the province, even if there is no corporate presence. An overview of the applicable additional statues is set out below.
| Alberta | Personal Information Protection Act
Alberta Human Rights Act
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| British Columbia | Personal Information Protection Act
Human Rights Code
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| Manitoba | Human Rights Code
Accessibility for Manitobans Act
Personal Investigations Act
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| New Brunswick | New Brunswick Human Rights Act
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| Newfoundland and Labrador | Human Rights Act
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| Nova Scotia | Nova Scotia Human Rights Act
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| Ontario | Pay Equity Act
Accessibility for Ontarians With Disabilities Act
Human Rights Code
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| Prince Edward Island | Human Rights Act
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| Quebec | The Act respecting the protection of personal information in the private sector
The Charter of the French Language
The Charter of human rights and freedoms
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| Saskatchewan | Saskatchewan Human Rights Code
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EMPLOYMENT AGREEMENT CONSIDERATIONS
If an employee commences employment in a province where the employer does not otherwise have operations, an employer will generally prepare the employment agreement to comply, from the outset, with the laws of that provincial jurisdiction, particularly as they relate to termination entitlements. However, in certain cases, an employee may have an employment agreement in place at the time they move to a remote work arrangement in another province. The question then arises as to whether that employment contract and its terms continue to apply to the employee. This becomes particularly important if the employee has their employment terminated.
There are many factors a court may consider to determine if an employment agreement entered into continues to apply to the employee, despite relocation. These include whether there is a term of the employment agreement that expressly sets out the governing law (for example, a provision that states the agreement will be governed by the laws of Manitoba) and, even if there is, whether there is a “sufficient connection” to the jurisdiction selected to support the application of that law. Further, if there are public policy reasons why the laws of the selected jurisdiction ought not apply then this may result in a court rejecting its application. This could include the selection of a jurisdiction that would result in a contracting out of provincial employment standards, occupational health, or other legislation (for example, if a Canadian entity attempted to have the laws of Delaware apply to an employment relationship in British Columbia).
For these reasons, an employer that hires an employee in another jurisdiction or has an employee permanently transfer to another jurisdiction is well-advised to consult with experienced employment counsel to determine if a new (or amended) employment agreement is required to accurately reflect the new work arrangements and the appropriate termination entitlements.
TAX IMPLICATIONS ASSOCIATED WITH REMOTE WORKERS
When a remote worker travels and works in different provinces, an employer must consider the potential impact of the arrangement on the company’s tax liability, compliance obligations, and withholding and remittance obligations for employee remuneration.
Provincial corporate and health tax implications
Having employees work remotely in different provinces can affect the tax the employer pays, its access to specific provincial tax benefits, and its filing obligations in different provinces.
Canadian resident corporations are subject to separate income taxes levied by the federal government and the provinces. While the federal portion of income tax is the same for all corporations, the income attributable to each province is subject to varying rates. Canadian- resident corporations are generally subject to tax on active business income at combined federal and provincial tax rates ranging from 23% (Alberta) to 31% (Prince Edward Island). Canadian- controlled private corporations may be eligible for the small business deduction on active business income up to a limit, for combined federal and provincial tax rates ranging from 9% (Manitoba, Saskatchewan) to 12.2% (Ontario, Quebec). Provinces also have different tax calculation rules and provide incentives and tax credits that apply only to income attributable to the province.
While all provinces legislate their corporate tax regimes and rates, the Canada Revenue Agency (“CRA”) administers corporate provincial tax for each province except Quebec and Alberta.
Corporations file an annual return with the CRA for the federal portion and activities in all provinces other than Quebec or Alberta. Separate provincial returns may also need to be filed in Quebec or Alberta if the corporation has activities in those jurisdictions.
A corporation’s active business income may be taxable in any given province if the corporation has a permanent establishment (“PE”) in that province. Whether a corporation has a PE in a particular province is a question of fact, determined under the detailed legislation and deeming rule framework in the Income Tax Act (Canada) (“ITA”) and the Income Tax Regulations (“ITR”).
As remote work has become significantly more common, concern has arisen that a home office could constitute a PE in a province where an employer did not otherwise have a PE. The answer in any particular case depends on the work location, the employee’s authority to act on behalf of the employer, and the extent of the employer’s other operations in the province. The CRA recently stated that it may not consider an employee working from a home office in another province to constitute a PE of the employer, provided that the employer does not otherwise carry on business in that province. While helpful, this CRA statement does not replace the need to seek tax advice for any particular situation.
Where a corporation has a PE in multiple provinces, its taxable income is allocated among the provinces. The ITA and ITR provide rules for allocating provincial income, but these do not address all situations, particularly in a modern and changing world. The CRA has developed administrative positions on issues that could apply to various situations. However, as with all CRA interpretations, the guidance is not legally binding and is subject to change.
The formula for allocating taxable income among the provinces considers the employer’s salaries, wages and gross revenue in each jurisdiction. Therefore, the salary of an employee working remotely in another province (either temporarily, periodically, or permanently) where the employer otherwise has a PE, could factor into the employer’s allocation of income to each province for provincial tax purposes. Tracking and allocating profits and payroll to different provinces is an administrative burden on employers. If the CRA or provincial tax authorities disagree with the allocation, they may reassess the employer for tax, interest and penalties.
Separate from corporate tax, certain provinces (Ontario, British Columbia, Quebec, Manitoba and Newfoundland and Labrador) impose provincial health and education taxes on employers. The rates and calculation bases for each of these taxes are governed by provincial legislation, and remote workers can affect an employer’s liability.
Provincial withholding and social security implications
Employers must withhold the appropriate federal and provincial taxes from an employee’s remuneration and remit to the appropriate taxation authorities. If an employer fails to withhold appropriate amounts, it may be subject to penalties.
An employer’s obligation to withhold amounts for provincial taxes from remuneration is calculated differently than its obligation to pay provincial corporate taxes on its profits. An employer is to deduct amounts from remuneration following the individual income tax rates of the province in which the employee reports for work at an employer’s establishment. Suppose an employee is not required to report to any particular place of business of the employer. In that case, the employer calculates withholding based on the province from which it pays the employee’s remuneration.
On the other hand, the employee’s income tax liability for a year depends on the employee’s province of residence at the end of the year. The personal marginal tax brackets and rates in each province vary considerably. A remote worker who resides in a province other than the province from which the employer pays their salary may ultimately owe more or less tax than was withheld and remitted on their behalf.
Having too much or too little tax withheld and remitted can create cash flow issues or surprises when an employee files their annual tax returns. To mitigate these effects, an employee can request that additional tax be deducted and remitted on their behalf or may apply to the CRA for authorization allowing the employer to reduce the amount deducted and remitted on their behalf.
Employers are also responsible for deducting Canada Pension Plan contributions from employees to the government-sponsored retirement income program for all provinces except Quebec, where Quebec Pension Plan (“QPP”) contributions are collected. Employers operating in and with remote employees inside and outside the province of Quebec must consider the interactions between the two plans. In certain instances, an employee may contribute to the QPP, but never benefit from the plan.
International implications
A non-resident employer engaging a remote worker in Canada can create many complex tax liability, compliance, and withholding issues for the employer. A full description of the issues of cross-border workers is beyond the scope of this publication, but a summary follows.
In Canada, a corporation is taxed based on its residency status. Resident corporations are taxed on their worldwide income. In contrast, non-resident corporations are taxed only on certain Canadian-sourced income, such as income from a business carried on in Canada. A double tax treaty may ultimately relieve a non-resident corporation from tax liability to Canada but not eliminate a filing obligation. Depending on the employer’s operations in Canada, the employee’s authority to act on the employer’s behalf, the physical location where the employee works, and other factors, a remote worker may or may not result in the employer being subject to Canadian tax.
Regardless of whether the employer is subject to tax in Canada, a foreign employer must comply with Canadian income tax withholding and remittance rules on remuneration paid to employees in Canada. A foreign employer may also have Canadian social security contribution requirements and other employer-related tax obligations when engaging Canadian employees.
Complying with these obligations can be cumbersome and costly, but failure to comply can result in penalties.
The information contained in this document is provided for general information purposes only and does not constitute legal or other professional advice, nor does accessing this information create a lawyer-client relationship. This document is current as of January 2023 and applies only to such laws of Canada as expressly indicated. Information about the law is checked for legal accuracy as at the date the document is prepared but may become outdated as laws or policies change. For clarification or for legal or other professional assistance please contact the law firm identified in this document.