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Legislative Compliance

Remote Workforce Compliance in Canada: 6 Questions Every Employer Must Answer Before Hiring Across Provinces

Remote work compliance in Canada: What employers must get right before hiring across provinces

Hiring a remote worker in another province is a great way to access a larger talent pool. But it also means complying with employment, occupational health and safety, and other legal requirements in the province where the employee works. When an employer hires someone who lives or works outside the headquarters’ province, there are six key questions employers should answer to help ensure remote work compliance with the laws that apply to remote employees. Without the advice of a trusted HR professional or employment lawyer, that chance can quickly turn into an expensive gamble.

What do Canadian employers need to know about hiring remote workers in another province? 

For a start, tax and payroll obligations, employment standards, health and safety legislation, workers’ compensation premium calculations, and contract requirements. And the wording of your remote work policy all needs to be ironclad. Overlooking even one of these areas exposes employers to payroll errors, statutory breaches, and costly legal issues. Often, these problems only appear after something has gone wrong.

Which employment laws and legislation apply to remote workers in Canada?

The employment laws that apply to a remote worker in Canada are generally determined by where the work is physically performed. Federally regulated employers follow the Canada Labour Code regardless of the province or territory in which the employee works. But most employers are governed by the employment standards legislation of the province or territory where the remote worker lives and performs their work. Payroll and source deductions generally follow the Canada Revenue Agency’s (CRA) province of employment rules. Occupational health and safety obligations apply under the laws of the jurisdiction in which the employee works, including employees working from home.

The workplace shift that outlived the new normal: Remote work compliance

Since the COVID-19 pandemic, when remote work became the “new normal,” many employers changed their recruitment strategies to source talent across Canada. Occasionally, this included adding a jurisdiction or jurisdictions where the employer may not have a regular business presence. Recruiting remote workers can expand an employer’s talent pool and allow for greater flexibility. However, there are some important factors employers should consider when introducing remote work arrangements outside their own jurisdictions.

1. How is a remote worker’s province or territory of employment determined?

For employment income tax and payroll deduction purposes, a worker’s province or territory is based on the CRA’s province of employment rules. The province of employment is based on:

  • The type of income
  • The employee’s residency status
  • The establishment of the employer where the employee reports for work

An establishment of the employer is any place or premise in Canada owned, leased, or rented by the employer and where one or more workers report to work or from which one or more workers are paid. An employee’s home office is generally not considered an establishment of the employer.

If the employee reports to work in person

If a worker reports to an employer’s establishment in person, then the worker’s province or territory of employment for employment income tax and payroll deduction purposes is the one in which the establishment is located and where the worker reports to work.

When the employee works remotely full-time

Where an employee works remotely full-time and doesn’t physically report to an employer’s establishment, the employer must determine if a full-time remote work agreement exists and whether the employee is reasonably attached to an establishment of the employer to determine their province of employment. The CRA sets out factors that must be used to determine whether an employee is considered attached to the establishment of the employer.

Employers must complete an analysis of these factors to determine an employee’s province of employment.

2. Which employment legislation applies to the remote worker?

If federally regulated

The Canada Labour Code applies to federally regulated employers and their employees, regardless of the province or territory in which the employee works.  

If governed by provincial or territorial legislation

Most often, the law of the province or territory where the work is performed governs the employment relationship. For example, a remote worker who physically lives and works exclusively in Alberta but has been hired by an Ontario-based employer is governed by Alberta’s Employment Standards Code.

However, some employment standards legislation provides exceptions. For example, under Ontario’s Employment Standards Act, 2000 (ESA), an employee whose work is based in Ontario but who travels outside Ontario in the course of their employment is likely still subject to Ontario’s ESA, as their work outside the province is a continuation of the work performed in Ontario.

If a worker moves from one jurisdiction to another

If a worker moves to a different province or territory and then performs work from that jurisdiction, it’s likely that the employment standards legislation of that new province or territory will apply. However, the precise answer depends on the legislation of the jurisdictions involved and the circumstances of the worker’s employment.

3. Which health and safety legislation applies to the remote worker?

Generally, employers must comply with the occupational health and safety legislation of the jurisdiction where they have employees performing work. Employers with employees working in more than one province or territory may be subject to the OHS legislation of multiple jurisdictions.

In many jurisdictions, “workplace” is defined broadly enough so that it applies when an employee is working from home. Employers should assess a remote worker’s home workstation for health and safety risks (like ergonomic risks). They should also take reasonable steps to ensure that those risks are eliminated or minimized. Employers should also have a plan in place for reporting and responding to remote work injuries.

Statutory health and safety obligations differ among provinces and territories. Employers should investigate and understand the potential differences and nuances in legal obligations across provinces and territories.

4. How should workers’ compensation premiums and compensation be paid?

It is generally the province or territory where the work is performed that determines the province or territory where workers’ compensation premiums are payable.

All workers’ compensation boards in Canada have signed an interjurisdictional agreement (IJA). It establishes rules for determining where premiums are payable and which workers’ compensation board has jurisdiction over a claim. Under this IJA, employers may be required to pay premiums to one or more workers’ compensation boards in the jurisdictions where workers perform work, regardless of whether the employer has a physical office there. The IJA does not apply to certain employers or to industries or occupations that are exempt from mandatory workers’ compensation coverage in a particular jurisdiction.

Remote work compliance when work is performed in multiple jurisdictions

If a worker performs work in more than one Canadian province or territory, the employer may need to prorate the worker’s earnings and pay premiums on those prorated earnings based on where the work was performed.

Different considerations may apply when an out-of-province arrangement is only temporary. Some workers’ compensation legislation includes coverage for employees who are injured at work while temporarily working outside a particular province or territory.

Employers should consult the workers’ compensation board in their current jurisdiction. Always confirm the process and arrangements when contemplating having a new or existing employee work in a different jurisdiction.

5. What should be included in employment contracts?

For new remote hires who will be employed or working remotely in another province or territory, include the following provisions:

  • The worker may work from a remote location in a particular province or territory, but not remotely from a different province or territory without the employer’s express written approval.
  • Whether the remote working arrangement will be permanent or temporary, or whether the worker will have a hybrid working arrangement, where the worker will work both onsite and remotely.
  • General employment contract provisions, such as hours of work.
  • The applicable statutes that will govern the employee’s employment.
  • Details about mandatory travel to the office for something that cannot be done virtually, such as training. Include details about commuting costs and other considerations.
  • Requirements for reliable access to a high-speed Internet connection and procedures to follow in case of an outage.
  • The time zone in which the employee is expected to work.
  • Employment expenses (for example, furniture, equipment, or Internet) and who will cover these costs.

Be sure to review and update existing contracts. Or, draft new ones for employees who already have employment contracts and who intend to begin working in a different province or territory.

When should a remote work policy be given?

Employers should implement a remote work policy that clearly sets out expectations for their workers.

6. What about in remote work arrangements outside of Canada?

Diligently review requests to work outside Canada and engage the appropriate subject matter experts. Questions requiring due diligence about remote work compliance include:

  • Is the employee legally authorized to work in the proposed country?
  • If the employee is covered under a medical plan by the employer, will coverage be affected by working outside the country?
  • Are there tax implications for the employer or the employee?
  • How do any employment laws (workers’ compensation, employment standards, health and safety, and so on) in the proposed country affect the employment relationship?

Employers should consider the nuances of remote work compliance among Canada’s jurisdictions before implementing any new out-of-jurisdiction working arrangements. Considering potential jurisdictional issues beforehand and putting the requisite agreements, policies, and procedures in place at the start can help you avoid unforeseen legal issues.

Is your policy manual up to date with the latest employment legislation?

Ensure your HR and remote work compliance requirements are met. Start building a safer, more resilient organization that meets all legislative requirements, no matter where your employees work.

Check out our Ultimate Guide to HR Compliance in Canada.

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