Hiring your first employee in Canada: a legal checklist

This is legal information, not legal advice. It describes general rules that vary by province and by situation. A licensed lawyer must review your matter before you act on anything here.

Plain-English summary

Employment law in Canada is mostly provincial. Which province's rules apply usually depends on where the employee works, not where your company is incorporated. A small number of industries — banking, telecommunications, interprovincial transport and a few others — are federally regulated and follow the Canada Labour Code instead.

Whatever the jurisdiction, the pattern is the same. Minimum standards are set by statute, those minimums cannot be contracted away, and anything your agreement says that falls below them is unenforceable to that extent.

Before the first day

Open a payroll account with the CRA. You need one to remit income tax, CPP and EI deductions. Remittance deadlines depend on payroll size, and unremitted source deductions are one of the areas where directors can be held personally liable.

Register for workers' compensation. Coverage is provincial and mandatory for most employers.

Put the agreement in writing, and sign it before the start date. This matters more than it sounds. A contract signed after someone has already started may fail for lack of fresh consideration — the employee gave up nothing new in exchange for the new terms.

Confirm the right to work in Canada. For a foreign national, check that the work permit actually covers this employer, role and location. Employer-specific permits do not transfer.

The clause that matters most

The termination clause is the single highest-stakes provision in a Canadian employment agreement.

Without an enforceable clause limiting entitlements, a dismissed employee is generally entitled to common-law reasonable notice, which courts assess on factors including length of service, age and the nature of the position. This is frequently far longer than the statutory minimum.

A termination clause that tries to limit entitlements below the statutory floor can be struck out entirely — and when it is, the employer is exposed to the full common-law notice the clause was meant to avoid. A clause drafted to save money can therefore cost considerably more than having no clause at all.

Key risks to watch

Classifying someone as a contractor to keep it simple. The classification is decided by the actual working relationship, not by what the contract calls it. Getting it wrong can mean retroactive source deductions, CPP and EI liability, vacation and overtime entitlements, and notice on termination.

Using a template from the wrong jurisdiction. A US template will not reflect Canadian statutory minimums. Even a template from another province may state entitlements that do not apply where your employee works.

Assuming probation removes obligations. Probation must be written into the agreement — it is not automatic — and statutory minimums still apply once the relevant service threshold is reached.

Non-competes by reflex. Ontario prohibits non-competes in most employment agreements. Elsewhere, courts apply a strict reasonableness test and generally will not narrow an overbroad clause to save it. Non-solicitation and confidentiality terms usually do the real protective work.

When to talk to a lawyer

Getting a properly drafted template employment agreement reviewed once, for the province you are hiring in, is one of the higher-return legal expenditures a small employer makes. It is reusable across hires, and it addresses the clause most likely to generate a dispute.

Seek advice specifically if you are hiring across multiple provinces, hiring a foreign national, converting a long-standing contractor to employee status, or asking an existing employee to sign new terms.