Does Remote Work Have to be Performed in Your Province of Employment?

Does Remote Work Have to be Performed in Your Province of Employment?

As COVID recedes, companies have begun reopening offices and bringing employees back. But the switch to remote work over the past two years has accelerated growth in the number of job seekers who prefer to work remotely full time. Likewise, employers are discovering that posting job listings for fully-remote positions gives them access to talented but geographically distant job candidates who otherwise would not apply. These two recent developments have brought increased focus onto which jurisdiction’s employment laws apply when employees are based in a different province from their employer.

Employment Standards and Rules: Each Province Has Its Own

Each province has its own set of employment standards. All are broadly similar but differ in crucial details, including how to determine which jurisdiction’s regulations apply to employees working outside their employer’s jurisdiction. Few provinces have clear-cut rules on the matter, making it difficult to determine whose rules and standards should be applied.

Ontario employers are governed by the Employment Standards Act, 2000 (“ESA”), which sets out the minimum rights and standards employers must offer. The ESA includes rules about minimum wage, public holidays, work hours, and termination entitlements. It covers employees who work in Ontario and those working outside Ontario, as long as their work is a continuation of work performed within the province. What constitutes a “continuation of work” can be subject to dispute, such as when a terminated employee working outside Ontario seeks ESA-mandated severance pay.

For example, in Shu Zhang v. IBM Canada Limited, a 2019 employment standards case, the Ontario Labour Relations Board ruled that an employee of an Ontario-based company who had worked out of British Columbia for two years was not entitled to ESA statutory severance pay. The board said that since the employee had reported to a US-based manager and had not visited the Ontario office for more than two years, his work could not be classified as a continuation of work begun in Ontario; therefore, he was not covered by the Ontario ESA. 

In situations such as this, when the ESA does not apply to an employee of an Ontario-based company who is working outside the province, the employee is entitled to the same rights as workers in the local jurisdiction.

Other rulings concerning which province’s regulations should control have been very fact-specific, leaving little precedent to guide employers. Moreover, most provinces’ employment acts are silent on the subject. New Brunswick and Alberta are notable exceptions: New Brunswick’s Employment Standards Act applies to work carried out for New Brunswick employers, regardless of whether it is performed inside or outside the province. And Alberta’s Employment Standards Rules state that the employment standards of the province the employee regularly works out of must be applied unless the employment contract states otherwise (or there is supporting evidence that the parties intended it to govern to work relationship).

The steady growth of remote work in years to come should lead to more arbitrations, more case decisions, and more clarity and predictability in this area of law. 

Workers’ Compensation

Not all inter-jurisdictional employment law issues are as unclear as those just discussed – workers’ compensation policies are much more straightforward for those workplaces under this regime. All Canadian workers’ compensation boards have signed an Interjurisdictional Agreement on Workers’ Compensation (“IJA”), which regulates the payment of premiums and workers’ compensation benefits among all provinces and territories. However, in some cases, the employer must request that an out-of-province employee be covered for it to take effect.

The Dangers of an Incomplete Employment Agreement

If an employment contract fails to outline the conditions under which out-of-province remote work will be performed, another province’s employment standards may apply, and the employment agreement might even be unenforceable. For this reason, employers who allow employees to work remotely need to create well-defined policies regarding the circumstances under which remote work will be allowed and whether a return to the Ontario office is expected and required.

Employer Tips Regarding Remote Work

Statistics Canada reports that roughly 40 percent of jobs can be done from home. That being the case, the work-from-home movement is likely to persist and grow, not least because it allows family wage earners to hold down high-paying jobs in urban areas while living in more affordable areas. 

Before allowing an employee to work remotely out of a different jurisdiction, the employer should review the legal requirements of the other jurisdiction, including any licensing or business registration requirements. Also, ask your accountant to find out what the tax and payroll implications might be. Under certain circumstances, there may be unanticipated consequences if the remote employee performs particular duties. While the Canada Revenue Agency does not generally consider a home office to constitute a Permanent Establishment (a fixed place of business) for the corporation, tax authorities in a particular province may deem it to be one if the employee has general authority to contract for the employer.

Contact a Skilled Toronto Employment Lawyer

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