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Servicing Clients in the US? 5 Labour Law Differences You Should Know

Posted by Chelsea Henry

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Feb 6, 2019 9:00:00 AM

Servicing_Clients_in_the_US_5_Labour_Law_Differences_You_Should_KnowIf you’re running a staffing agency, you may think a great way to expand is to cross the border into the United States. Maybe some of your clients have American branches, or maybe you’re in an area close to the border and know many local businesses that could benefit from your services. You may even be thinking of expanding on a larger scale.

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While international expansion is a great goal for any business, it comes with its own challenges. One of the most common for businesses moving across the Canada-US border is an understanding of labour law.

Labour law in Canada and the US can be quite different. If you’re planning to provide service for clients in the US, you should be aware of these five differences.

1. Understand What a 1099 Employee Is

Employee misclassification is an important legal issue in both Canada and the US. The IRS and many US states tend to shine more of a spotlight on the issue than Canadian governments do.

Part of the problem is the confusion between an employee and a “1099 employee.” A 1099 employee, so named after the tax form you’ll provide them, is actually a contractor. Using a contractor can reduce your obligations to the worker.

Some employers take advantage of these reduced obligations and purposefully misclassify employees as contractors. You might also be at risk of misclassification if you don’t understand the differences between the two terms in the US.

2. At-Will Employment

In Canada, there’s no such thing as at-will employment. You must have solid grounds for terminating someone’s employment with your firm. Termination must be carried out in a specific way, which includes proper notification and the payment of severance.

In the US, at-will employment allows employers and employees to terminate their relationship at any time. Employers don’t need to provide lengthy notice or hefty severance packages. You also may not need as much reason to dismiss someone.

3. Rules around Non-Compete Clauses Vary by State

In Canada, non-compete clauses are somewhat difficult to enforce. Nonetheless, many employers still make use of them. They’re governed by common law.

This is somewhat different from the United States, where non-compete clauses are easier to enforce. The rules change, however, from state to state. Some states will permit the modification of a non-compete clause, rather than striking it out entirely, if it’s deemed too restrictive.

4. Obligations to Employees with Disabilities

You might be familiar with Canada’s rules around accommodating employees with disabilities. Generally speaking, the employer is expected to accommodate an employee with disabilities, such as providing specialized equipment to use or modifying the duties of the role.

It’s difficult to tell where the employer’s duty to accommodate ends. Canadian courts usually draw the line at significant financial burden to the company, but you may be required to prove that.

In the US, you’ll see your financial threshold is much lower. Companies do not need to undertake “significant” financial burden before they’ll be judged to have fulfilled the duty to accommodate.

5. Creating a Severance Policy or Package

In the United States, you might be expected to create a severance policy or package for your employees. This can be quite different from Canada because severance is usually laid out within provincial law. Even having a policy or package may not override your obligation to provide notice of termination.

In the US, where at-will employment exists, employers don’t necessarily need to provide severance or notice. A severance policy usually favours more senior employees, but you may need to know your way around such policies to provide proper support to your clients.

These are just some of the differences between Canadian and American labour law. There are many more. If you’re expanding into the US, it might be helpful to work with a back office solutions provider who can give you the guidance and the support you need to deliver services to your US clients.


Topics: Compliance and Legislation

Chelsea Henry

Chelsea Henry is the team leader of risk management at The Staffing Edge. Chelsea’s passion for working closely with others in a challenging but rewarding environment is what makes her an important asset to our members. Chelsea has over 10 years of customer service experience—five years specifically dealing with risk management in the staffing industry—and is JHSC certified. Through research, Chelsea helps keep members up to date on current legislation involving employer’s rights, and deals with their day-to-day challenges with labour laws. Outside of work, she enjoys spending time with her family, DIY projects, and photography.
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