10 common employment law myths

Supporting Consult Carswell and Carswell Custom Handbooks, my team gets a lot of questions from customers, prospects and colleagues relating to employment law. In fact, we probably get more compliance-related questions than any other area.

These questions, along with pretty extensive reading I’ve done and conversations I’ve had with HR professionals and employment lawyers, form the basis of a list of the 10 most commonly held misconceptions about employment law on the part of HR professionals, as well as entrepreneurs, line managers and people who have HR responsibilities, such as controllers or office managers, particularly in smaller organizations. These misconceptions are as follows:

If case law is not from my province, it doesn’t apply to me: Employment law decisions from across the country are cited by the courts in every province and are considered and applied by judges when rendering their decisions, even when considering cases from other jurisdictions.

While it is true that, technically, a court in one province is not obliged to follow a decision from another province, especially a decision of a lower court, a court is very likely to follow a relevant case from another jurisdiction, especially if there is no other pertinent authority to follow in that court’s home province. A decision from out-of-province is also more likely to be followed if a judge is not able to distinguish the case or otherwise rule it somehow does not apply, or if a decision was an appeal court decision (and especially if the appeal went all the way to the Supreme Court of Canada).

Any change to an employee’s job will amount to constructive dismissal: Constructive dismissal is a unilateral change to the fundamental terms of an employment contract, whether the contract is written, verbal or a combination of both. Constructively dismissed employees have the option of treating a contract as being at an end and suing for wrongful dismissal damages.

Possible examples of changes that could be considered fundamental include major changes to an employee’s compensation package, demotions, changes in reporting relationships or job titles, forced relocations, changes in hours of work, suspensions, temporary layoffs or even highly poisoned work environments. It is important to remember, however, that only changes that are fundamental in nature will amount to constructive dismissal. A very minor change to a flexible benefits plan from one year to the next, for example, is unlikely to amount to constructive dismissal.

When terminating someone, it is only necessary to look at employment standards legislation for guidance: Many employers make the mistake of thinking that, as long as they have complied with termination provisions in the relevant employment standards legislation, they have met their legal obligations. This is not the case, since employers are also bound by the common law.

Particularly in the area of wrongful dismissal, the common law courts frequently award much greater damages than would be available under employment standards legislation. In fact, employment standards function only at a bare minimum in terms of the notice period that must be provided to an employee on termination of employment.

Going through the courts, only the most junior, unskilled employees earning remuneration at or near the minimum wage would normally be limited to the provision of notice on termination in accordance with employment standards legislation. However, if an employee chooses to pursue a statutory remedy through the relevant ministry of labour, she would be unable to recover damages for reasonable notice under the common law, regardless of the character of the individual’s employment or length of service. Common law remedies are only available through the courts.

Pay equity is a dead issue: Many employers, especially in Ontario, mistakenly believe pay equity is a dead issue as it has now been about 20 years since organizations first had to comply with the Pay Equity Act and, frankly, we’ve heard little about it since. (Although Quebec’s pay equity laws are back in the news, thanks to an end-of-year deadline for compliance. See page 1, “Clock ticking on pay equity.”) Many employers are unaware they are required to maintain pay equity and there are no time limits for making a complaint under the act. Potential liabilities can, therefore, be huge.

Pay equity is usually defined as equal pay for work of equal value. While all jurisdictions have legislation requiring employers to pay men and women the same rates for the same work, pay equity legislation actually goes a step further by requiring employers to place a value on the types of work typically performed by both women and men within an organization. Not all jurisdictions have pay equity legislation and only Ontario, Quebec and the federal sector have pay equity legislation that applies to private sector employers.

It isn’t necessary to understand case law — what’s really important is employment legislation: We come across the misconception quite frequently, especially among smaller organizations, that an understanding of case law is somehow just a “nice-to-have.” While no one is expecting a small business owner (or even most HR professionals) to have the same level of understanding of the intricacies of employment cases as a lawyer, or to memorize the names and facts of hundreds of cases, there are many areas of employment law that are governed by the common law.

The common law, also referred to as judge-made or case law, is an important source of labour and employment law in Canada, particularly outside Quebec. In the common law tradition, judges are empowered to actually make law, as opposed to simply interpreting it, especially in areas where no legislation exists, by laying down specific principles for other judges and lawyers to follow in the future.

At least a high-level understanding of the basic principles of areas governed by the common law, such as wrongful dismissal, employment contracts and employment-related torts, is therefore beneficial, both for HR professionals and small business owners.

By classifying someone as a manager, we don’t have to pay her overtime: Although eligibility for overtime pay under Canadian employment standards legislation varies across jurisdictions, the distinction is primarily between managerial and non-managerial employees, with true supervisors and managers (not necessarily someone with the title of “manager”) not having to be paid overtime.

Many employers believe by classifying a person as a “manager,” the employee is automatically exempt from being paid overtime. Some organizations overuse the title “manager.” If someone is managing accounts, for example, or is managing programs, and if she has no people management responsibilities, the organization would probably not have a valid argument the employee is really a manager. A similar tactic is when an organization implements a policy stipulating anyone over a certain grade or band level is automatically a “manager” and, therefore, exempt from being paid overtime.

Employment policies only have to be compliant in the jurisdiction where a head office is located: Some employers seem to forget they have employees located in other provinces. If your organization operates in more than one jurisdiction, you need to have policies that are compliant with employment legislation in all the jurisdictions in which you operate.

There are several options in dealing with this multi-jurisdictional issue:

• Have very generic policies that make reference to the governing legislation where applicable.

• Ensure all policies meet the minimum requirements in all of the relevant jurisdictions (this can be tricky to do).

• Spell out in your handbook the requirements for each jurisdiction.

• Have separate handbooks for each jurisdiction.

• Have a handbook covering the “primary jurisdiction” you operate within, with explanations that governing legislation in other jurisdictions takes precedence where applicable, or details pertaining to the application of specific policies in other provinces are available from the HR department.

Whether our business is federally or provincially incorporated determines whether we are federally or provincially regulated: About 90 per cent of employees in Canada are subject to provincial regulation of employment. That is because most commercial and industrial activities come under the jurisdiction of the provinces. Employees who work for federally regulated employers are subject to federal employment legislation, whereas employees who work in provincially regulated industries are subject to provincial employment legislation.

While employers that are corporations can be incorporated either federally or provincially, this does not determine whether an employer is subject to federal or provincial regulation with respect to employment-related matters. One way to determine whether an employer is subject to federal or provincial legislation is to examine the relevant portions of the Constitution, much of which is contained within the Constitution Acts, 1867 to 1982. If the federal government has jurisdiction over something under the Constitution, it is safe to assume employers in that sector are federally regulated.

Some examples of federally regulated industries are the federal government itself, banks, airlines, telecommunications, interprovincial trucking and railways. Most other employers are provincially regulated.

American employment law principles such as at-will employment apply in Canada: At times, executives of large American or multinational corporations simply treat Canada as an extension of the United States and assume concepts such as at-will employment apply here. Employment at-will is essentially an American doctrine that provides, in the absence of specific provisions to the contrary in a contract of employment, either party (the employer or the employee) can end the employment relationship for almost any reason, or for no reason at all, without providing any notice or compensation.

This is not the case in Canada, where the provision of reasonable notice on termination is generally required. Many American executives have been unaware of this fact in the past, sometimes even seeking to conduct mass layoffs for Canadian operations without providing the laid-off employees with any notice or pay in lieu, much to the frustration of Canadian HR professionals who often try to explain to these U.S. executives such terminations are not legal.

We can contract out of the provisions of the Employment Standards Act: Every jurisdiction in Canada has enacted employment standards legislation. This legislation functions as a basic “floor of rights” for all employees in areas such as minimum wage, payment of wages, overtime, vacation entitlement, statutory holidays, leaves of absence, termination notice, group terminations, layoff and recall, successor rights and the minimum age of employment. While there are a few exceptions, employers and employees are generally not permitted to contract out of employment standards provisions, either through collective bargaining or through individual contracts of employment, even if employees agree to do so in writing.

For example, employers can limit the amount of notice provided on termination (or pay in lieu of notice) through the use of carefully worded termination clauses inserted in individual contracts of employment at the time of hire. Such notice periods are normally upheld by the courts. However, the notice provided to an employee cannot go below the minimums set out in employment standards legislation — otherwise the termination clause is null and void.

Brian Kreissl is the managing editor of Consult Carswell, a Canadian HR work solution that delivers best practices, legal compliance, news, articles and a suite of ready-to-use tools in one easy to use online service. For more information, visit www.consultcarswell.com.