Employment Agreements Ease Canadian Labor Compliance

Anticipating differences between American and Canadian labor laws and ensuring Canadian employees have formal employment agreements will greatly aid compliance for businesses in and entering Canada, an employment attorney said May 12.

Jordan Rodney, vice president of HR at MaxPeople and founder of Rodney Employment Law, emphasized the fact that many more employees are entitled to overtime in Canada than in the US as one of the differences between the two countries’ laws. “Unless you’re a manager, like a true manager, or unless you’re a rare exemption under the legislation of each province, you’re entitled to overtime,” Rodney said. “It doesn’t matter if you’re salaried, you’re hourly, you’re entitled to overtime,” he added.

Matters such as “human rights,” or nondiscrimination laws, and labor relations are jurisdictional issues in Canada but covered by federal laws in the US, Rodney said. Each jurisdiction has its own minimum employment standards as well, he said.

All businesses are also required to have health and safety policies, even if an employer’s only workers in Canada are remote, and all provinces now have accessibility legislation, Rodney said as part of an overview of legislation and policies employers are required to comply with or provide. Rodney recommends that businesses entering Canada have a compliance handbook that recognizes the fundamental differences between Canadian and US laws. “There are fines if you don’t do it, and this is really simple stuff,” he said, referring to these compliance measures.

Rodney spoke at the 2026 Payroll Congress in Nashville, Tennessee.

Employee misclassification is a “a big issue” in Canada, as misclassifying employees as independent contractors results in having to pay both taxes to the Canada Revenue Agency and entitlements under jurisdictional wage-hour laws, Rodney said.

Canada also has a hybrid status known as a dependent contractor, falling between employees and independent contractors, Rodney said. Dependent contractors are independent businesses that receive most of their income from a single source. Like employees, dependent contractors are entitled to notice of termination, he said.

Rodney emphasized that employees should have “clear and unambiguous” employment agreements that are regularly reviewed. “You have to make sure these are signed before the person starts,” he said.

A well-written, enforceable employment agreement will decrease the chance that an employer will have to settle a demand from an employee for unpaid entitlements at a higher cost than what is provided in an agreement, Rodney said.

“When you leave here, this is something that you should be talking to your Canadian counterparts about, because this will save you a considerable amount of money down the road,” Rodney said of employment agreements.

Managing terminations is another important part of Canadian labor relations, Rodney said, mentioning that all jurisdictions require minimum termination pay, which is pay that is given in lieu of a notice of termination. However, this is distinct from severance pay, which is generally not required, he said. As an example, Ontario requires employers with a gross global payroll of at least C$2.5 million (US$1,824,750) to pay severance pay based on length of service, Rodney said.

Resignations require both an intent to resign and a corresponding action, Rodney said. An employer can sue for wrongful resignation when an employee fails to give proper notice, but in practice it is rarely done because there are not required notice periods in labor laws, he said. Additionally, every jurisdiction requires employers to continue terminated employees’ benefits for defined periods of time, he said.

Canada also has the concept of “constructive dismissal,” in which an employer is considered to have effectively terminated an employee if it unilaterally changes a core provision of an employment agreement such as hours of work, location, or duties, Rodney said. “It’s a fact-based analysis, and the best way to protect against this is to give the employee a lot of different options,” he said.