When a company is based in one province, but an employee occasionally works in another, tax lines can get blurry
What province has employment standards jurisdiction in this situation?
Brent is an Ontario resident. His employer is incorporated under the Canada Corporations Act and carries on business in most provinces across Canada. The employer is provincially regulated, for employment standards purposes.
Brent normally works out of the employer’s Ottawa office, even though his employment responsibilities often take him all across the country. Over a two day period, Brent is at the employer’s Vancouver office on one day and, on that day, works 10 hours, finishing at midnight. The next day, he is back at work at the Vancouver office, starting at 9 a.m.
In British Columbia, the daily threshold for overtime is eight hours. In Ontario, employees must have 11 clear hours between shifts. Under the constitution, the basis for provincial jurisdiction over employment standards is the exclusive provincial jurisdiction over property and civil rights, “in the province.”
So in which province is Brent’s employment on those two days? In other words, which of the B.C. or Ontario employment standards apply to that work?
If the B.C. employment standards apply, Brent may be entitled to overtime for the two hours worked in excess of eight on the first day. If the Ontario employment standards apply, Brent has not had enough time off between the shifts worked on these two days.
Literally, of course, the employment falls within B.C.’s physical boundaries, so there is a strong argument that the B.C. employment standards apply. However, the Ontario government also claims employment standards jurisdiction over employment outside Ontario, where this is a continuation of employment inside the province. And this claim is supported by court decisions that allow provincial law to apply outside the province if this is incidental to activities within the province (See Global Securities Corp. v. British Columbia (Securities Commission), 2000 SCC 21,  1 SCR 494).
We could ask the same question about the province of employment. The federal Income Tax Regulations define, in part, the province of employment as the location of the employer’s permanent establishment at which employees report for work. Since Brent reported to work at his employer’s establishment in Vancouver, is B.C. the province of employment for the related employment income? In other words, is the employer required to split the pay period into two parts, and tax one part using B.C. as the province of employment and the other using Ontario?
In previous years, the CRA provided guidance on this point. In T4001, Employer’s Guide, the version released at the 2010 year-end for use in 2011, the CRA said that, where an employee reported to work in more than once province in a pay period, the province of employment should be the one in which the majority of work was done or, failing that, in the last province in which the employee reported to work at an employer’s permanent establishment. This guidance only appeared in that particular version of the guide.
Generally, in Canada the understanding is the province of employment doesn’t change just because an employee might from time to time perform services in other provinces, territories or countries.
A similar understanding applies to employment standards jurisdiction. In other words, most employers would apply the employment standards requirements from the employee’s “home” jurisdiction even if work occasionally spills over into other jurisdictions.
However, it’s not clear what the limits on these understandings are. For example, if an employee spends at least an entire pay period reporting to an employer’s permanent establishment in another province, a strict reading of the rules require that this situation trigger a change in the province of employment, at least for source deduction and reporting purposes.
Given the above, what should employers do when employees report to work at permanent establishments in more than one province within a single pay period?
The best advice is probably that given by the CRA in the Employer’s Guide for 2011: Report all employment income against the province where the employee most often reported to work or in the last province in the period in which the employee reported to work.
But, however you handle this situation, the most important message for employers is the need for clear policies on how to recognize which province of employment, and which employment standards, apply.
These policies should be included, when necessary, in the terms and conditions of employment, whether these are individual contracts of employment or collective agreements.
This is akin to provisions often seen in commercial contracts, where the parties agree on which province’s laws will apply to regulating any disagreements related to the contract.
Alan McEwen is a payroll consultant and freelance writer with 20 years’ experience in all aspects of the industry. He can be reached at email@example.com, (905) 401-4052 or visit www.alanrmcewen.com for more information.