One of the basic concepts that anyone new to payroll has to master is which level of government applies. Canada is a federal state, meaning that both Ottawa and each of the provinces have their own legislative powers. While the 3 territorial governments are somewhat of a special case, for payroll purposes, territories mostly have the same powers as full provinces.
In some instances these powers overlap, meaning they operate in parallel. For example, both the federal government and the provinces have the right to tax employment income. Most people aren’t aware that each province has its own version of the federal Income Tax Act, since the CRA collects tax on behalf of both government levels.
However, for all employment related purposes other than taxation, jurisdiction over employment is held exclusively by either the federal government, through the Canada Labour Code, or by one of the provinces or territories. In practice, this means that to determine the correct employment standards jurisdiction, we have to ask ourselves, in order, these two questions:
- Is the employment subject to federal regulation?
- If not, which province or territory has jurisdiction?
Employment is federally regulated if it falls under the definition of “federal work” in section 2 of the Canada Labour Code. In some cases, federal works are specific industries; in others, specific activities that cross provincial or international boundaries:
- Specific industries:
- Transportation and shipping by water;
- Airports, aircraft and transportation by air;
- Television, radio and telephone broadcasting, including cable and wireless;
- Specific activities that cross provincial/national boundaries or occur outside the bounds of any province or territory:
- Transportation by rail, canal or road;
- Communication by telegraph;
- Drilling rigs or mineral exploration platforms on Canada’s continental shelf;
- Ferries, such as the ones between Newfoundland and the mainland.
For example, couriers are provincially regulated, when they make pick-ups and deliveries within a single province or territory. Similarly, employment on coastal fishing boats is provincially regulated, since this is not ‘shipping or transportation’, i.e. moving goods or people. By contrast, long-distance trucking, for example, taking Ontario car parts to Michigan, is federally regulated, since this means crossing the Canadian border.
In most cases, it’s clear whether an activity is federally regulated. Banks are listed in schedules to the federal Bank Act. If a company is on that list, the employment is federally regulated. If not on that list, such as for credit unions and trust or loan companies, employment is provincially regulated. However, it’s not always clear what the boundary is between federal and provincial employment standards regulation. Federal jurisdiction also includes employment ‘in connection with the operation’ of a federal work. In practice, there will always be a good deal of room for understanding what this means. For example, a retail store, located in an airport, is to some extent ‘in connection with the’ airport. Is that connection strong enough to mean employment in such stores is federally regulated?
If not federally regulated, employment is under provincial jurisdiction by virtue of the exclusive provincial jurisdiction over ‘property and civil rights in the province’. Note, this authority is restricted to ‘in the province’. Taken literally, these words mean the employment has to physically occur within the boundaries of a province, before that province’s employment standards apply. Some constitutional law experts have argued that these words need to be understood more liberally, to reflect sufficient provincial interest in the employment. Similarly, the Supreme Court has argued that incidental or consequential application outside a province will not by that fact alone invalidate that province’s jurisdiction.
The difficulty with this test for ‘in the province’ is that there are situations where the employment may not be restricted to a single province.
We are all familiar with the concept of employees who don’t report for work to an employer permanent establishment and are paid out of such an establishment in a province different from the one where they live and perform employment services. So in this case, is the ‘employment’ located in the province where services are performed or is the employment the relationship that spans provincial boundaries? It seems the accepted understanding is that the location of employment is determined based on the location where services are performed.
Similarly, what happens when an employee, who reports to work at an employer establishment in one province, also occasionally travels and performs employment services elsewhere?
The answer seems to be that if employment outside a province is only occasional or infrequent, it’s reasonable to assume that province has the right to govern the employment. For example, the Ontario employment standards claim jurisdiction over employment outside that province, which is a ‘continuation’ of employment within Ontario. On this basis, if an employee normally works in Ontario, but spends the odd day working in BC, for employment standards purposes, that work doesn’t fall under BC’s jurisdiction, but that of Ontario.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at email@example.com, (250) 228-5280 or visit www.alanrmcewen.com for more information. This article first appear on Canadian HR Reporter on September 10, 2013.