Monday, December 04, 2006

Hiring and Firing Canadians

Americans like to shop North of the border at this time of year - for software engineers, CTOs, even entire companies. I thought it would be helpful to provide an overview of some of the key differences to hiring and firing in Canada:

1. Canada is a pro-employee jurisdiction. It's not France, but it's not an"at will" employment country, either. Every person you hire, or fire, will have his own employment lawyer review and comment on his offer. No sinister conclusions should be drawn from this.

2. Because Canada is a pro-employee jurisdiction, you cannot "just fire them" as some of my American clients would like. There are minimum amounts of severance that must be paid, based on length of service. The courts may increase severance beyond the minimum amounts to reflect age, seniority and type of position, among other factors. The case law is fairly well-developed on what are acceptable levels of severance (beyond the statutory minimums), so these amounts are regularly negotiated. In my experience, the amount of severance employers pay is commensurate with that which would have been agreed to in a negotiated contract in the US.

3. Forget about firing anyone in Canada for cause, unless you find them in the company safe stealing company money while perhaps sexually harassing a young employee (that last part is provided that you have a zero tolerance policy that was posted).Your legal dollars are better spent paying severance and moving on.

4. Even if you do not wish to fire anyone, the manner in which you integrate a newly-acquired Canadian business with the rest of your operations may have the same effect.The laws of constructive dismissal in Canada are broad and, much like my aging derriere, growing broader with every passing day. A toxic work environment, a diminution in profile (for example, no longer inviting someone to strategy meetings), personality clash - these have all been found by Canadian courts to be constructive dismissal, in which the employee was entitled to severance.

5. Firing must be done in a sensitive manner, to avoid claims for punitive damages.

6. Non-competition clauses are enforceable if drawn in a reasonable manner. Unlike California, these clauses are not per se prohibited, so long as they are drawn reasonably. The current practice with founders and other key employees is to embed this clause in the shareholder agreement.

I'll address trends in employment contracts (including relocation allowances, etc.) being offered to Canadians to move to the US in a separate post this week.

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