Growing Businesses Expanding from US to Canada

HR Risk Hot Spots
With the residue of the recession finally starting to wash away, 2014 brings about new opportunities for organizational growth. Companies that are successful in their home countries and are looking for growth naturally consider international expansion as the next big step. For US companies looking to expand over international borders, Canada typically seems like the most comfortable and natural first step. There are many similarities between the two Countries sharing familiar markets as well as political and economic ties that make the daunting step of international expansion seem a little easier and less intimidating.

Nonetheless, companies looking to take this step should be fully prepared in every aspect of their business. Human Resources is one of those areas where you need to tread carefully or you can get yourself into a lot of hot water and fast. You would be surprised to know how different some Canadian policies, procedures and employment legislation are from their US counterparts.

Canadian employment is subject to the provincial Employment Standards Act which outlines the minimum standards employees have a right to. Not adhering to these standards can bring about costly litigation risks for employers. Legislative jurisdiction over employment and labour in Canada is divided between Federal and Provincial governments. In addition to that they are all subject to common law considerations.

If you are a US company looking to expand or are operating a location in Canada, you may want to consider the following risk hot spots!

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Termination of Employment

There is no employment at will in Canada. Terminations can be legislative landmines if not properly managed. Employers are required to give employees statutory notice of termination or pay in lieu, and may be required to give additional notice/pay in lieu under common law or a contract as well as severance if requirements are met. The minimums will also vary by province.

• Ex. Terminating an employee with 10 years’ service could cost anywhere from 8-52 weeks base salary depending on several additional factors such as age, position, and province.

Consideration

Employment terms in the US are generally subject to modification at will without prior notice. In Canada you must provide consideration for modifications of substance to the employment terms. Further to that, adverse changes to the terms and conditions of a Canadian employees employment can only be made with reasonable notice.

Legislative Compliance

Both Canada and the US have legislative compliance that must be adhered to, which if ignored, can consequently result in severe fines. Below are some examples:

• Pay Equity – For example, in Quebec, failure to produce a report can cost between $1000 and $15000 for small companies 10- 50 employees and retroactive adjustments for pay equity can be made for up to 9 years totalling thousands of dollars more. In other provinces, it can go back up to 1982.
• AODA -In Ontario, not having Accessibility policies and procedures in place can render companies paying fines of up to $50,000 per day.
• Bill 168 (workplace violence and harassment) non-compliance could result in a Ministry of Labour inspector issuing you or your business a significant fine of up to $25,000 per individual person and/or up to 12 months imprisonment and up to $500,000 for a corporation.
• Occupational Health and Safety Act fines for non-compliance can also result in fines of up to $25,000 per individual person and/or up to 12 months imprisonment and up to $500,000 for a corporation.

Disability

In both Countries, employers have a duty to accommodate employee’s with disabilities. In Canada, however, an employer has the obligation to accommodate a disability until undue hardship on the organization.

• Drug and alcohol addictions are considered disabilities in both countries, however, drug and alcohol testing are restricted in Canada unless proven to be bona fide occupational requirement.

Restrictive Covenants

Canadian courts will not modify restrictive covenants like the US courts may. A covenant that is too broad will be struck out completely. In addition, any ambiguous wording in contracts will almost always results in a ruling in favour of the employee.

Whether you are considering taking that next step, or you already have an existing office in Canada, make sure you are aware of Canadian human resource practices. Identify critical areas you need to be aware of in order to avoid risk.

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