What are my responsibilities as an employer?

From payroll deductions to references, find out what your company needs to provide to its employees

14-minute read

Many entrepreneurs don’t start their business with the goal of becoming an employer. They’re likely more focused on and passionate about their product or service and are eager to see it flourish. But even small businesses need employees to achieve growth.

Statistics Canada reports that businesses with 99 employees or less comprised 98% of all employer businesses in Canada in 2022. That’s a lot of businesses hiring and managing employees.

Employment lawyer Esi Codjoe says many businesses need to improve their understanding of their obligations to employees. As a partner at Turnpenney Milne LLP, specializing in both labour and employment, and human rights law, she conducts workplace investigations, and reviews and assessments, and mediates workplace disputes. She says this type of costly work could be avoided if employers were more aware of what was legally expected of them.

What legislation should employers know about?

According to Codjoe, there are three main statutes with which all Canadian employers should be familiar.

1. Minimum standards legislation

Each province and territory has its own set of employment standards that outline what they are obligated to do for their employees.

Canadian labour standard by province and territories:

Some sectors are regulated by the federal government, which means they are subject to Canada Labour Standards Regulations. Codjoe says it’s important to identify the legislation that businesses in your sector must follow.

“If you’re an SME, you’re probably provincially regulated. Federally regulated sectors include telecommunications, transportation, mining and nuclear power.”

Whether you’re subject to provincial or federal legislation, you have certain responsibilities as an employer for meeting the basic needs, which are set out in law. These will vary across jurisdictions, but they include things like minimum wage, hours of work and entitlement to things like rest periods, vacation and leave.

“This legislation says, ‘This is the line, and you can’t go below it. You’re free to go above, but not below,’” Codjoe says.

“All employers should be familiar with the minimum standards legislation that applies to them. Most governments post information online that walks you through it.

2. Human rights obligations

Employers also need to be aware of what is expected of them with respect to human rights. This includes treating everyone equally and not discriminating based on characteristics like race, citizenship, age or gender identity.

“Most provincial governments have a human rights commission, tribunal or board, and part of their mandate is to give information bulletins or public information about how the human rights system works. They typically have information that’s user friendly and explains what it means to engage in things like disability-based or gender-based discrimination,” Codjoe says.

“It helps to read the statutes. These types of resources provide the information you need to know.”

3. Occupational health and safety legislation

Health and safety are fundamental to a workplace. “Understanding this is crucial because it’s literally life and death,” she says, adding that a young worker’s life can hinge on poor operating instructions for a particular machine. “This happens more than you might think.”

Similar to minimum standards legislation, provincially regulated workplaces follow their provincial statutes; federally regulated employers are subject to federal ones. Most provinces have a board or tribunal where employees can file complaints about health and safety violations, and where employers can find information.

“Most provincial websites walk employers through what their obligations are,” says Codjoe.

Standard procedures for employers

Codjoe advises all employers to create procedures within the workplace that adhere to the labour and employment laws in their jurisdiction.

Too many employers do not appreciate the fact that it serves their interest to have rules and processes in place.

Written contracts

It’s critical to have a written contract for each employee, which includes basic information like rate of pay, hours of work, expectations of both parties and the rules of the workplace.

“Technically a handshake can be a contract, but this is not good practice. You should have a written contract that the employee can review and take to a lawyer if they wish. It offers a clear line of sight to what is expected,” Codjoe says.

Workplace policies

Workplace policies are also vital. “You’d be surprised how many organizations don’t have them or don’t have robust policies. Depending on the jurisdiction you operate in, you may be statutorily required to have them.”

These documents should contain anything that the employer wants to be clear about—and any provincially regulated requirements. For example, in Ontario, employers that employ 25 or more employees are required to have in place a written policy on disconnecting from work. They are also required to provide a copy of the written policy to all employees.

“Each province may have very specific policy requirements, usually in the areas of human rights, and health and safety. It’s important to look at your provincial website to know your obligations. If you’re just getting set up as a business, talk to an employment lawyer and they’ll advise,” Codjoe says.

Other information to include in a policy:

payroll details, such as how often employees are paid, by what method and how they receive pay stubs
use of technology in the workplace
whom you should talk to in the organization if you have a complaint

“These are the kinds of things that benefit not only the employees but also the employers. If you have a dispute, you can refer to it. And the policy provides guidance if an employee is unclear on something,” she says. “Everybody wins.”

Payroll obligations of an employer

Payroll obligations are a function of your province or territory’s minimum standards legislation, which outlines requirements for operating a business.

All businesses are required to meet federal obligations, including remitting taxes, performing statutory deductions (e.g., Employment Insurance, Canada Pension Plan) and any other contractual deduction to which an employer has agreed (e.g., group pension plans, RRSPs). All of this must be accurately completed and delivered to the right place.

Is an employer obligated to give a reference?

There are misconceptions around references for employees. They boil down to three different documents.

Reference letter

A reference letter is a tangible document that an employer gives a former employee. In it, the employer writes glowingly about the former employee’s work and offers to speak to a hiring manager at another organization.

Employers are not required to provide a reference letter. But Codjoe advises that it’s a good idea to provide an oral reference for an employee because it assists former employees in their job search. The key is that the reference be an honest assessment of the individual’s skills and abilities. “If someone is asserting that they were wrongfully dismissed and they’re looking for work, not having a reference impacts their ability to get new employment. If they’ve commenced litigation based on a wrongful dismissal, your not having agreed to provide a reference could potentially be held against you.”

Letter of employment

According to Codjoe, a letter of employment is sparer in its content. “It will state that the employee commenced employment at his workplace on this date and in this role; they progressed to these roles; and, at the time of departure, they were employed in this role. It may include a couple of lines about what they did and end with a thank-you for their time in the workplace. It speaks to who the employee is and what they did.” Such letters are often the preferred letter of choice for employers.

“In addition, a letter of employment is required for a variety of other reasons beyond leaving a job. An existing employee could request one because they wish to rent or buy a home, or apply for a mortgage or some form of credit. The employee needs proof of where they work and what they earn.”

Should an employer give a reference? Yes. It’s not an obligation but it costs you nothing to provide it.

Record of employment

Employers are required by federal law to provide a record of employment (ROE). It’s even more sparse than a letter of employment. It provides confirmation of the person’s employment at your organization and their rate of pay. There are penalties for not providing it.

Are employers obligated to pay overtime?

The answer depends on the minimum standards legislation by which your business is regulated.

“If your province’s minimum standards say you have to pay overtime, that is your obligation,” Codjoe says.

However, there are certain categories of employees (such as management) who are not entitled to overtime pay. Contractors are also exempt.

“There are people who perform work who aren’t considered employees for the purposes of the minimum standards legislation. If you’re not covered by the legislation, you don’t get overtime. A contractor could ensure that entitlement to overtime is part of their employment contract/contract for services.”

How can employers protect the dignity and privacy of their employees?

Codjoe says employers need to be mindful of the dignity and privacy of their employees. This is especially pertinent when it comes to firing someone.

Publicly humiliating the person, raising your voice, conducting the firing in front of all their peers and bringing in security (unless there are security concerns) are all unacceptable, says Codjoe.

“Do it in an environment where people don’t see them being walked out. Also take into consideration not terminating them on a special occasion, like the day before their child’s wedding.”

Privacy has become paramount in the age of shared networks and company-owned devices, says Codjoe.

“Just because you can track what employees do or have done doesn’t mean you should. If you happen upon something that an employee has done on a workplace computer, it doesn’t mean you should keep looking. For example, if an employee leaves their personal email or online banking open on their computer, they have a reasonable expectation of privacy.

“Even if you as an employer mistakenly look at private information, in the end, you may be on the other end of litigation. A judge or tribunal member could say the employee took measures that ensured no one would look at their private information, and that once you saw what that information was you should have stopped looking.”

Who pays into workers’ compensation?

Workers’ compensation is employer funded and is run according to provincial law.

What employer obligations are more likely to be contravened?

Codjoe says the top employer contraventions are related to minimum standards and include:

failure to pay wages or termination pay
failure to reasonably protect the safety of a worker
unfair treatment under human rights legislation (usually related to disability)

Employees’ obligations to their employers

It’s true that obligations in the workplace are a two-way street that includes employers and employees.

Codjoe says that, similar to employers’ obligations to ensure privacy, employees must protect the confidentiality of their employer. This means not disclosing things like trade secrets, operational information and intellectual property. “It includes anything that would be injurious to the employer. This is usually written in employment contracts.”

Other obligations include:

not poaching an employer’s client
doing the work they’re paid to do at the level expected
adhering to any other contractual terms and conditions agreed to
complying with the laws in their sector, province or territory, and country
following workplace policies

“These nuances around expectations should be outlined in workplace policies,” Codjoe says.

An employee who does not meet these rules could see their employment relationship terminated.

What is the minimum wage across Canada?

The minimum wage was raised to $16.65/hour in April 2023 for federally regulated private-sector employees. When a provincial or territorial minimum wage rate is higher than the federal minimum wage, employers must apply the higher rate.

How do employers ensure they’re meeting their obligations?

Codjoe says you can ensure you’re doing everything required by consulting a lawyer who knows your jurisdiction.

“Even if you’re already established, it’s never money thrown away to spend even a few hours’ time with a lawyer to find out what you need to do. Most employment lawyers see employers when there’s difficulty with an employee. We say, ‘I wish you’d have come to me earlier and we could have avoided this.’

“What you might have saved by not getting legal advice on the front end, you’ll end up spending on cleaning up a mess.”

Next step

Get key insights into recruiting top talent and retaining skilled employees for your business by downloading the free BDC guide, Hire and Retain the Best Employees.