Special thanks to Stephanie Dewey.

Baker McKenzie’s Labour and Employment, Global Immigration and Mobility, and Tax lawyers review the wide variety of legal issues for Canadian employers to consider regarding a temporary or permanent remote work opportunity outside of the province of the employment agreement and provide tips on how employers can offer employees flexibility while remaining compliant with employment, immigration and tax requirements.

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When world economies face challenges, employment litigation claims of all types arise. In this In Focus video, our Labour and Employment lawyers discuss the range of trending COVID-19 related employment claims and cases and share what Canadian employers can do to best position themselves to manage impending litigation.

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On July 30, 2021, the Federal Government announced its proposal to extend certain COVID-19 support programs, including the Canada Emergency Wage Subsidy (“CEWS”), Canada Recovery Benefit (“CRB”), the Canada Recovery Sickness Benefit, and the Canada Recovery Caregiving Benefit until October 23, 2021.

Summary of Key Changes in the Federal Government’s Announcement

The key changes from the Federal Government’s announcement are summarized below: 

  • Further Extension of CEWS: The CEWS was previously set to expire in June 2021. Bill C-30, the Budget Implementation Act (No.1), 2021, (“Bill C-30” or “Budget Bill”) formally extended the CEWS until September 25, 2021. Bill C-30 also provided the Government with the authority to further extend the programs through regulations if warranted. The Government announced that it is proposing to use its authority to extend the CEWS until October 23, 2021.
  • Increase in the Maximum CEWS Subsidy Rate: The Federal Government is proposing to increase the wage and rent subsidy rates between August 29 and September 25, 2021. The maximum rate for the wage and rent subsidies would be set at 40% in Period 20 (August 29th to September 25th), instead of being reduced to 20% as previously announced in the Budget Bill. This means that the maximum weekly benefit per employee would be $452. The Federal Government is also proposing to extend these programs by an additional period, Period 21 from September 26th to October 23rd, with a maximum rate of 20% during this time. Eligible employers can still apply for the new Canada Recovery Hiring Program, which will be in place until November 20, 2021.
  • Increase in the Maximum Number of Weeks under the CRB: The maximum number of weeks available under the CRB would be increased by an additional 4 weeks, to a total of 54 weeks, at a rate of $300 per week. The Government has indicated that this will ensure it is available to those who have exhausted their Employment Insurance benefits.
  • Support for Furloughed Employees: The Federal Government previously extended the CEWS subsidy applicable to payments made to employees on leave with pay (furloughed employees) until August 28, 2021. The Government has confirmed that the CEWS will no longer be available for payments made to furloughed employees after August 28, 2021. The Government has published draft amendments to the Income Tax Act (“ITA”) to provide clarity on these changes.
  • Calculation of Revenue Decline: Generally, an employer’s decline in revenues is determined by comparing the employer’s revenues in a current calendar month with its revenues in the same calendar month before the COVID-19 pandemic for the purposes of the rent subsidy, the Canada Recovery Hiring Program, and the wage subsidy. This is known as the general approach. Employers can also use an alternative approach, which will compare the employer’s monthly revenues relative to the average of its January and February 2020 revenues. Employers are required to use the same approach for all qualifying periods once an approach is chosen.

The Federal Government is proposing to allow an eligible organization to elect to use the alternative approach to calculate its revenue decline for Periods 14 to 17 (March 14 to July 3, 2021), if it was not carrying on a business or otherwise carrying on ordinary activities on March 1, 2019. If approved by the Governor in Council, the Government has noted that these changes would align the rules for Periods 14 to 17 (March 14 to July 3, 2021) with those for periods 1 to 4 (Period 15 to July 4, 2020) for organizations that began operating between March 1, 2019 and the start of the pandemic. This is intended to address situations where an employer used the general approach to calculate its revenue decline, however was not yet operating in early 2019 and would not have any revenue during the prior reference period that was required to be used under the general approach. This proposal means that these organizations would be eligible for continued support under these programs.

Key Takeaways

COVID-19 continues to affect employment and economic life in Canada. Emergency measures and supports for businesses are frequently being amended and extended. Employers should review the Government’s announcement and proposed changes to the supports and extensions. Employers should also review the changes to the supports available for furloughed employees as the Federal Government has now confirmed that the CEWS will not be available for payments made to furloughed employees after August 28, 2021. We continue to monitor for further information about the Government’s proposed changes and extensions of COVID-19 supports.

 

 

Under the Ontario Employment Standards Act (“ESA”), employers with a payroll of at least $2.5 million are required to provide statutory severance pay when dismissing an employee with 5 or more years of service. But how is an employer’s “payroll” actually calculated?

Over the years, there have been conflicting decisions around the calculation of the $2.5 million threshold under the ESA and whether an employer’s payroll outside of Ontario is included. Both courts and the Ontario Labour Relations Board (“OLRB”) have gone back and forth on the definition, with the prevailing view that the $2.5 million threshold was limited to an employer’s Ontario payroll. This was until recently when the Ontario Divisional Court ruled in Hawkes v. Max Aicher (North America) Limited (“Hawkes”) that the payroll threshold refers to an employer’s global payroll.

The Decision

In Hawkes, the employee was employed by an Ontario-based subsidiary of a European company. Following the termination of his employment, the employee filed a complaint with the Ministry of Labour alleging that he was entitled to termination pay, vacation pay, and severance pay based on the employer’s global payroll.

An Employment Standards Officer (“ESO”) reviewed the claim and determined that the employee was entitled to termination and vacation pay, but not severance pay because the employer’s Ontario payroll was less than $2.5 million. The OLRB upheld the ESO’s decision, reiterating that “payroll” for the purposes of severance pay under the ESA was limited to an employer’s Ontario payroll. The employee appealed this decision.

On judicial review, the Divisional Court disagreed with the ESO and the OLRB and found that the payroll threshold for determining whether an employer is a severance payor under the ESA is based on its global payroll rather than its Ontario or Canadian payroll.

Key Takeaways

The decision in Hawkes has far-reaching implications for employers, particularly for multinational employers with a relatively small number of employees in Ontario. Unless the decision is successfully appealed, Ontario employers that are related to companies or have operations outside of the province will need to consider their global payroll in assessing their severance pay obligations under the ESA.

 

On June 29, 2021, the Federal Government passed Bill C-30, Budget Implementation Act, 2021, No. 1, introducing a number of changes impacting federally regulated workplaces and extending existing COVID-19 related economic measures.

Changes to the Canada Labour Code (“CLC”):

  • Child Death & Disappearance Leave: The maximum period of leave for a parent of a child who has disappeared increases from 52 to 104 weeks, and eligibility for the leave extends to parents of children under the age of 25 (previously capped at 18). One of the exceptions disallowing entitlement to this leave (i.e., where it is probable the child was party to the crime) has been amended so that it only applies where the child is 14 years of age or older at the time of the crime, and it is probable the child was party to the crime. This change came into effect on June 29, 2021.
  •  Increase in Federal Minimum Wage: Beginning December 29, 2021, the federal minimum hourly wage rate will be increased to $15.00. On April 1st of each year following, the minimum hourly wage rate will be incrementally adjusted to account for inflation. Where a province or territory provides for a minimum wage that is greater than the federal minimum wage, employers are expected to pay the higher wage.
  •  Extended COVID-19 Related Leave: The maximum number of weeks for unpaid leave for COVID-19 related caregiving duties increases from 38 weeks to 42 weeks. Bill C-30 repeals section 33.1(b) of the Canada Labour Code Regulations, which limited the number of weeks an employee could take for a COVID-19-related caregiver leave to 38 weeks. This change came into effect on June 29, 2021.
  •  Extended Medical Leave: The maximum length of medical-related leaves under the CLC has increased from 17 weeks to 27 weeks. The amendments also add “quarantine” to the reasons for which an employee can take medical leave. This will come into force on a future date upon proclamation.

 Changes to Employment Insurance Act (“EI”):

  • Increase in Maximum EI Sickness Benefits: The maximum number of weeks of employment insurance sickness benefits that may be paid because of illness, injury or quarantine increases from 15 weeks to 26 weeks. This change comes into force on a day to be fixed by order of the Governor in Council.
  • Treatment of Separation Payments: The EI Regulation is amended to clarify and simplify the rules around the treatment of money that is paid on separation, including severance and vacation pay. This will allow claimants to receive EI benefits at the same time. The amendments will remain in place for a one-year period beginning September 26, 2021.

Changes to the Canada Emergency Wage Subsidy (“CEWS”):

  • CEWS Extended to September 25, 2021: The qualifying claim period for CEWS has been extended until September 25, 2021. Additionally, for employees on leave with pay, (for example, “inactive” or “furloughed” employees), the CEWS will be extended until August 28, 2021.
  • Eligibility Criteria and Level of Subsidization: On July 4, 2021, the subsidy rate began to decrease in order to phase-out the program as the economy reopened. For Period 18 (July 4, 2021 – July 31, 2021), businesses will need to demonstrate that there was a decline in revenues of more than 10% in order to be eligible for the CEWS.
  • Repayment of CEWS for Certain Publicly Listed Corporations: Bill C-30 adds definitions for “executive compensation repayment amount” and “executive remuneration” to the ITA, as well as new sections 125.7 (14) and 125.7 (15), to introduce a CEWS repayment framework for certain publicly listed companies. Certain publicly listed corporations may need to repay some of or all of the CEWS that they received from June 6, 2021, onward, if i) a corporation has shares of capital stock that are listed or traded on a stock exchange or public market (or the corporation is controlled by such a publicly listed corporation); and ii) the total executive compensation paid to certain executives in 2021 exceeds the amount that was paid in 2019.

 

On July 9, 2021, the Ontario government announced that the province will enter Step Three of the Roadmap to Reopen on Friday, July 16, 2021, five days earlier than expected. Under Step Three, the following is permitted to operate:

  • indoor dining with no limits on the number of patrons per table with physical distancing and other restrictions still in effect;
  • indoor meeting and event spaces with physical distancing and other restrictions still in effect and capacity limited to 50% or 1,000 people (whichever is less);
  • essential and non-essential retail with capacity limited to the number of people that can maintain a physical distance of two meters;
  • personal care services, including services requiring the removal of a face covering, with capacity limited to the number of people that can maintain a physical distance of two meters;
  • museums, galleries, historic sites, aquariums, zoos, landmarks, botanical gardens, science centres, casinos/bingo halls, amusement parks, fairs and rural exhibitions, festivals, with capacity limited to 50% indoors and 75% outdoors;
  • concert venues, cinemas, and theatres permitted to operate at:
    • up to 50% capacity indoors or a maximum limit of 1,000 people for seated events (whichever is less)
    • up to 75% capacity outdoors or a maximum limit of 5,000 people for unseated events (whichever is less); and up to 75% capacity outdoors or a maximum of 15,000 people for events with fixed seating (whichever is less).
  • indoor food or drink establishments where dance facilities are provided, including nightclubs and restobars, permitted up to 25% capacity or up to a maximum limit of 250 people (whichever is less).

A number of other restrictions will be eased under Step Three. The province’s announcement along with a full list of permitted activities under Step Three can be found here.

The province will remain in Step Three for at least 21 days and until 80% of the eligible population has received at least one dose of a COVID-19 vaccine and 75% have received their second, with no public health unit in the province having less than 70% of people fully vaccinated. Other key public health and health care indicators must also continue to remain stable. Upon meeting these thresholds, the vast majority of public health and workplace safety measures, including capacity limits for indoor and outdoor settings and limits for social gatherings, will be completely lifted. Only a small number of measures are expected to remain in place following the end of Step Three, including passive screening (e.g. posting signs at all entrances informing people to screen themselves for COVID-19 before entry), and having a safety plan for businesses. Face coverings in indoor public settings and physical distancing requirements remain in place throughout Step Three. You can find our blog post on the province’s three-step Roadmap to Reopen here.

Employers should continue to pay close attention to the latest public health restrictions to understand how they affect their business. If you have any questions about what the current restrictions mean for your business, please contact our team.

In an encouraging decision for employers, the Ontario Court of Appeal clarified that a corporation is not a common employer just because it “owned, controlled or was affiliated with another corporation that had a direct employment relationship with the employee”. In O’Reilly v. ClearMRI Solutions Ltd., 2021 ONCA 385, the Court affirmed that the doctrine of common employer cannot be applied if there is no intention to create an employer/employee relationship between the individual and the related corporation.

Key Takeaways for Employers

Corporate entities often structure their businesses through multiple corporations for tax, liability or other strategic reasons. It’s essential employers consider common employer issues when designing a corporate structure. Further, employers must review these structures periodically as the structure changes or as employees, or the work they perform, are transferred between related corporate entities.

To limit the risk of a common employer finding, employers should bear the following in mind:

  • Employment contracts for non-unionized employees should set out the identity of the intended employer.
  • Administration of the employment relationship (i.e., payroll, tax remittances etc.) should be limited to the intended employer.
  • Control of an employee’s work, including hiring, training, supervision, discipline and termination, should be limited to the intended employer.
  • Employers should not rely on employee work to support the functions of multiple business entities, unless employers intend those entities to be a common employer.

Case Background

In ClearMRI, the appellant, Tornado Medical Systems, Inc., was a majority shareholder of ClearMRI Solutions Ltd. (”ClearMRI Canada”), which itself had a wholly owned subsidiary, ClearMRI Solutions, Inc. (”ClearMRI US”). The respondent, William O’Reilly, was the former Chief Executive Officer of ClearMRI Canada and ClearMRI US. His written employment agreement was with ClearMRI US, but he reported to, and his performance goals were set by, the board of directors of ClearMRI Canada.

Mr. O’Reilly sued Tornado, ClearMRI Canada and ClearMRI US and Dr. Jae Kim, a director for both Tornado and the ClearMRI companies, for salary and other entitlements allegedly owed when his employment ended. While Mr. O’Reilly did not have a formal position or written agreement with Tornado, he alleged that it, along with the ClearMRI companies, were his common employers. Mr. O’Reilly obtained a default judgment against the ClearMRI companies and a summary judgment against Tornado and Dr. Kim. Tornado and Dr. Kim appealed the summary judgment decision.

The Court’s Analysis

On appeal, a unanimous panel of the Court of Appeal held that the motion judge failed to apply the correct test, and accordingly overturned the lower court’s decision and found that Tornado was not liable under the common employer doctrine.

The Court of Appeal emphasized the concept of corporate separateness ¾ the principle that control by one corporation over another, on its own, does not make the controlling corporation liable for the obligations of the controlled corporation. Corporate separateness has exceptions — the court may pierce the corporate veil and hold a parent corporation liable for obligations nominally incurred by a subsidiary corporation that is a mere façade. But in such a case, a fraudulent or improper purpose must be present. The common employer doctrine does not involve piercing the corporate veil or ignoring separate legal personality of each corporation.

The Legal Test for Common Employers

A court should not hold a corporation liable under the common employer doctrine just because it owned, controlled, or was affiliated with another corporation that had a direct employment relationship with the employee. Rather, a corporation related to the nominal employer is a common employer only where the employee can prove that there was an intention to create an employer/employee relationship between the individual and the related corporation.

The key question is, did the employee and the corporation alleged to be a common employer intend to contract about employment with each other on the terms alleged? When such an intention is found to exist, no violence is done to the concept of corporate separateness because the corporation is held liable for the obligations it has undertaken.

A variety of conduct may be relevant to the question of intent; two types of conduct are important:

  1. Conduct that reveals where effective control over the employee resided, and
  2. The existence of an agreement specifying an employer other than the alleged common employer(s).

In ClearMRI, the Court concluded that Tornado had little involvement and control over Mr. O’Reilly’s employment duties. Mr. O’Reilly’s employment agreement did not list Tornado as his employer. There was no evidence supporting the notion that Tornado had intended to create an employment agreement with Mr. O’Reilly. As a result, the Court of Appeal concluded that Tornado was not a common employer of Mr. O’Reilly.

Conclusion

ClearMRI makes clear that courts will strictly construe the application of common employer liability to guard against conflating the existence of intercorporate relationships as evidence of a common employer relationship.

 

 

On June 24, 2021, the Ontario government announced that the province will enter Step Two of the Roadmap to Reopen two days earlier than expected, at 12:01 a.m. on Wednesday, June 30, 2021. Under Step Two, the following is permitted to operate:

  • essential and other select retail at 50% capacity;
  • non-essential retail at 25% capacity;
  • personal care services where face coverings can be worn at all times and with other restrictions, at 25% capacity; and
  • overnight camps for children, so long as they operate consistently with the safety guidelines provided by Ontario’s Chief Medical Officer of Health.

A number of other restrictions will be eased under Step Two. The province’s announcement along with a full list of permitted activities under Step Two can be found here.

The province may remain in Step Two for 21 days to evaluate any impacts on public health. However, Ontario has already surpassed the vaccination targets required for Step Three. You can find our blog post on the province’s three-step Roadmap to Reopen here.

Employers should continue to pay close attention to the latest public health restrictions to understand how they affect their business. If you have any questions about what the current restrictions mean for your business, please contact our team.

On June 7, 2021, the Government of Ontario filed amendments to several Regulations made under the Occupational Health and Safety Act (“OHSA”). The majority of the amendments relate to the reporting of workplace accidents.

Employers in Ontario should review their current incident reporting policies and procedures regarding critical injury or fatalities in the workplace to determine what, if any, changes need to be made to current practices, policies and procedures. To ensure compliance, employers should update existing policies and take steps to implement any necessary changes without delay.

Consolidation of Notice of Death and Critical Injury Requirements

The amendments to the Regulations under OHSA relate to the reporting of workplace accidents and consolidate the notice of death or critical injury requirements that are found in several Regulations into a single Regulation – O. Reg. 420/21: Notices and Reports Under Sections 51 to 53.1 of the Act – Fatalities, Critical Injuries, Occupational Illnesses and Other Incidents.

In particular, the section 51 – 53 notice and/or reporting requirements under OHSA, as may be applicable, have been revoked in the following regulations:

O. Reg. 420/21: Key Highlights

O. Reg. 420/21 applies to all workplaces that are covered by OHSA, with the exception of where a worker is killed, critically injured, disabled from performing their usual work or requires medical attention as a result of collisions on highways as defined under the Highway Traffic Act or Highway 407 Act.

Other key changes include:

  • Defines Critically Injured: Reg. 420/21 revokes Reg. 834: Critical Injury – Defined and replaces the definition of critically injured. “Critically injured” is defined as an injury of a serious nature, that a) places life in jeopardy; b) produces unconsciousness; c) results in a substantial loss of blood; d) involves the fracture of a leg or arm but not a finger or toe; e) involves the amputation of a leg, arm, hand or foot but not a finger or toe; f) consists of burns to a major portion of the body; or g) causes the loss of sight in an eye.
  • Retention of Copy or Written Notice: Section 6 of O. Reg. 420/21 provides that the employer or constructor shall retain a copy of a written notice or report required under sections 51 to 53.1 of OHSA for at least three years after the date the notice or report is made and notices may be sent electronically.
  • Written Reports or Notice: It also prescribes the information that an employer must provide in a written report or written notice of a workplace accident under sections 51 to 53 of OHSA. The Regulation also prescribes additional notice requirements for mines and construction sites.

Changes Applicable to Industrial Establishments

O. Reg. 421/21: Industrial Establishments amends Reg. 851: Industrial Establishments to add a new record-keeping requirement to workplaces that use lifting devices. Where a record is required to be kept, it shall be kept for a) a period of at least one year; or b) such period as is necessary to ensure that at least the two most recent records are kept.

O. Reg. 434/21: Industrial Establishments amends Reg. 851: Industrial Establishments to revoke and replace the pre-start health and safety review provisions.

Key Takeaways

The amendments come into force on July 1, 2021, except for O. Reg. 434/21: Industrial Establishments,  which comes into force on January 1, 2022.

Employers are required to inform the Ministry of Labour, Training and Skills Development if a workplace hazard caused anybody to be killed or critically injured at the workplace. Generally, the notice and reporting requirements will depend on the type of workplace. It is important that employers review the requirements under O. Reg. 420/21 to determine what information must be included when reporting an injury or death at the workplace to the Ministry. It is also crucial to assess critical injuries or deaths at the workplace to determine if the hazard that caused an incident could pose an ongoing risk to worker health and safety.

On June 4, 2021, the Ontario Government announced that the “COVID-19 Period” and the temporary measures introduced by O. Reg. 228/20: Infectious Disease Emergency Leave (the “Regulation”) under the Employment Standards Act, 2000 (the “ESA”) have been extended until September 25, 2021.

The Regulation, which was first introduced in May 2020, provides employers with temporary relief from the notice of termination and severance pay obligations under the ESA during the “COVID-19 Period”. That is, non-union employees who were not performing their duties, working reduced hours, or receiving reduced wages (at the employer’s discretion) are deemed to be on an Infectious Disease Emergency Leave (“IDEL”) during the designated “COVID-19 Period”.

When first introduced, the Regulation defined the “COVID-19 Period” as March 1, 2020 to September 4, 2020. Subsequent Regulations have extended the “COVID-19 Period” to January 2, 2021, then to July 3, 2021, and now again to September 25, 2021. This means that non-union employees who are not performing their duties, working reduced hours, or receiving reduced wages because of the pandemic can continue to be on an IDEL until September 25, 2021, without triggering termination and severance pay obligations under the ESA

Once the extended COVID-19 Period comes to an end on September 25, 2021, the usual ESA rules related to layoffs and constructive dismissal will be re-engaged. Employers who are not able to fully resume operations by that time will need to carefully consider how they will address their ongoing employment issues. Employers should note that this Regulation amends the ESA rules related to layoffs and constructive dismissal. However, it may not displace an employee’s right to pursue a common law claim for constructive dismissal based on a temporary layoff or reduced hours/wages.