Employers should be wary of differences between Canada, U.S. legal systems

Federal and state laws play a big part in employment law south of the border
By Stewart Saxe and Brian Arbetter
|Canadian HR Reporter|Last Updated: 01/05/2010

Canadian and American employment laws may appear similar but there are numerous traps waiting for Canadian organizations that have employees located south of the border.

Canada has a fairly simple system to inform employers as to whether they are governed by federal or provincial law. Once that has been determined, it remains true for virtually all aspects of the relationship, from union rights to health and safety laws.

In the United States, federal law sets minimums and has a much greater role than is the case in Canada. State laws, however, are frequently involved and, depending on the issue, often provide greater entitlements than the federal law.

The following are some of the most common challenges experienced by Canadian employers with employees in the U.S.

Termination of employment

It is generally easier to terminate non-union employees in the U.S. The starting point is called “at-will employment,” which means employees work subject to the will of an employer and can be fired without reason or notice.

However, fewer than 20 states have left the at-will approach unmodified. Further federal law prohibits unlawful reasons for termination, such as discrimination, harassment and retaliation.

Most states have public policy laws that prohibit any form of employment action based on discrimination reasons not covered by federal law (such as sexual orientation), as well as acts based on conduct that is contrary to other laws of that state.

One unusual law for Canadians is a federal law prohibiting discrimination based on an employee being 40 years old or older. As in all documentation cases, the reason for terminating that particular employee must be justified.

Hours of work and overtime

One of the most litigated areas in U.S. employment law is disputes over how many hours a person was at work and whether she was exempt from overtime legislation.

Many of the hours-at-work cases regard “donning and doffing,” an old English title applied to the issue of time spent getting ready for and leaving work, doing such things as putting on and removing work clothing.

As in Canada, many companies require employees to get ready for work before the start of paid time, and to return to a locker only after the completion of paid time.

While such disputes may only concern 10 minutes a day, if the claim is made by a large number of employees for a long period of time, it can add up. Federal wage laws include liquidated damages provisions, so even minor violations tend to get doubled.

An even bigger trend in wage litigation concerns the classification of workers as independent contractors. Employers may do this to avoid certain federal wage laws and tax requirements but the approach has proven risky — many large, well-known, public companies have lost multimillion-dollar cases over misclassifying employees this way.

In the U.S., class-action lawsuits are also much more common. These claims are made for hundreds and even thousands of employees in one single action. Further, the claimants’ lawyers agree to a contingency fee where they only are paid if they win. Such victories regularly occur by way of settlement, although those cases that proceed to trial often go before a jury, a process that can be very employee-friendly.

Many minimum employment laws, such as hours of work and overtime rules, do not apply to exempt employees, such as managers. Such exemptions exist in all Canadian jurisdictions as well, however, the line between these groups of employees is different in the U.S. than in Canada.

U.S. issues

Union representation rights are receiving extensive legislative review in the U.S. The federal government is considering moving the process from being vote-based (the more common approach in Canada) to being primarily card-based (as in some provinces and once the case everywhere in Canada).

The U.S. workforce, especially in the private sector, is much less unionized than in Canada. However, if taking over a unionized operation and planning changes, a union can have a strong say. U.S. labour law gives a union the right to bargain over significant changes during the term of a collective agreement. Canadian labour law does not.

Even if not unionized, business operators considering major changes must be aware of the Worker Adjustment and Retraining Notification Act, which imposes notice requirements on employers engaging in significant closures or layoffs.

The current health-care debate in the U.S. could also have significant ramifications in the workplace. In the absence of Canadian-style universal health care, U.S. employer health-care plans are more frequently cafeteria-type plans as the package variables can be much more extensive.

Canadian operations considering the implementation of compensation and benefit programs in the U.S. that are similar to Canadian packages must give careful consideration to the design of the health-care programs to provide for the vast differences in public programs.

Most importantly, Canadian organizations can’t afford to make assumptions about U.S. laws. It’s a different country, with a different legal system. All the basics, such as holidays, entitlements to leaves, vacation entitlements and privacy laws, must be checked.

Brian Arbetter is a partner at the Chicago office of Baker & McKenzie and regularly represents Canadian companies doing business in the United States. He can be reached at brian.s.arbetter@bakernet.com. Stewart Saxe is a partner at Baker & McKenzie in Toronto, specializing in labour law. He can be reached at stewart.d.saxe@bakernet.com.

Add Comment

  • *
  • *
  • *
  • *