Memo to America: It’s different up North
Sorry tale of IQT Solutions underscores differences in Canadian, U.S. employment standards
Jul 21, 2011
By Todd Humber
When IQT Solutions locked the doors on its call centres in Ontario and Quebec, throwing about 1,200 workers out of a job, it looked like a case of an American employer not understanding the nuances of Canadian employment law.
The workers, in Oshawa, Ont., Laval, Que., and Trois Rivieres, Que., didn’t get any notice. There was no severance, no vacation pay, not even a last paycheque — nothing.
There were media reports and speculation the abrupt closing was done so the company could flee to Tennessee, where it announced plans to hire 900 workers buoyed by a US$1.6 million grant from the City of Nashville.
As the dust settled, it turned out to be the story of a failed company. The company was bankrupt. There would be no move to Nashville.
But it serves as a reminder of the sometimes vast differences in employment law between Canada and its southern neighbour.
A good friend of mine who is an employment lawyer in Toronto told me a story a few years about a case she was working on. It involved a worker in Canada, hired by an American firm, who was let go without cause and without notice. The American bosses pretty much laughed when the lawsuit was filed, but that laughter soon turned to dismay and disbelief as a Canadian court awarded the fired worker hundreds of thousands of dollars in damages and notice. They couldn’t believe it.
That’s because, in many U.S. states, “at-will employment” still rules the land. According to an explanation on the state of Tenneesee’s website: “Generally, this means that an employer may legally hire, fire, suspend or discipline any employee at any time and for any reason — good or bad — or for no reason at all.”
In Canada, employers may salivate at the idea of at-will employment, but the reality is employers here have to prove just cause to fire a worker, and courts have deliberately set that bar very high. If you want to terminate a worker, you better have a very good reason that you can back up with facts. If not, you’re on the hook for severance and reasonable notice of termination. There are also legislative provisions to deal with shutting down a company.
IQT Solutions could likely get away with the stunt it pulled on its Canadian workforce south of the border. Though, Nashville Mayor Karl Dean, to his credit, wasn’t pleased at the way the Canadian workers were treated and threatened to pull the promised US$1.6 million grant if a good explanation wasn’t forthcoming — though it was a moot point when it turned out the company had in fact gone belly up.
Some U.S. employers, overwhelmed by the differences in Canadian employment standards legislation, take a different tact. In 2005, I wrote a story about NASCAR Speedpark expanding to the Toronto area, the first time it had opened up a location outside the United States.
It had a seasoned HR department handling services for a workforce in the U.S. that was 4,000 strong.
But when they started to crack the books open on Ontario’s employment standards legislation, they got a little wary, said Jeff Rowles, accounting manager for the parent company of NASCAR Speedpark.
When he told his HR team in South Carolina they were considering outsourcing the entire HR function for the Toronto park, their eyes lit up like Christmas trees, he said.
“They said, ‘We don’t have to do the HR for Canada?’ They were very excited to hear about the possibility of outsourcing and not having to do that for themselves,” said Rowles. “We have felt like we have been able to effectively and efficiently handle HR in the U.S., but it was a bit of a scare going outside the country and dealing with laws we weren’t familiar with.”
That may be the smart route for American firms to go, particularly if their Canadian operations are relatively small and they have no experience dealing with Canadian employment standards legislation.
Todd Humber is the managing editor of Canadian HR Reporter, the national journal of human resources management. He can be reached at firstname.lastname@example.org.
Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber