At the beginning of a new year, it is good to wonder what is in store for HR law and payroll in 2017? Let’s discuss and provide practical steps HR and payroll can take to prepare for these trends and changes.
1. Legalization of marijuana
The federal government is introducing legislation in the spring of 2017 to legalize marijuana. The future Bill is expected to legalize, regulate, and restrict access to marijuana. This means, marijuana consumption and incidental possession will no longer be crimes under Canada’s Criminal Code. Also, the Bill will ensure marijuana is kept out of the hands of children and profits out of the hands of criminals. However, how will employers control the use of marijuana in the workplace and how will it impact their drug and alcohol policies?
The cases of Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper, Ltd and R. v. Smith, among others, confirmed that Canadians have a constitutional right to use medical marijuana and that employers must balance their interest in mandatory drug and alcohol testing to produce a safe workplace with employee privacy interests. Only when workplace requirements outweigh privacy interests can an employer impose drug and alcohol rules with disciplinary consequences. As a result, mandatory workplace drug testing is impermissible absent an established substance abuse problem, even if the workplace is one with heightened safety concerns.
This said, the legalization and regulation of marijuana could further tilt the scales against restrictive drug and alcohol policies in the workplace. Many legal experts expect that a myriad of employment issues in regards to marijuana use will arise in the future. They also anticipate that balancing lawful marijuana use with the need for a safe workplace will be subject to further legal challenges. Challenges regarding an employer’s duty to accommodate employees with disabilities involving medical marijuana use are also anticipated.
Employers need to prepare by understanding that the legalization and regulation of marijuana do not make marijuana use in the workplace any different.
- Marijuana should be treated just like any other drug that could impair an employee’s performance or endanger others in the workplace. Workplace policies dealing with recreational marijuana and medical marijuana should largely reflect policies created to address any other use of prescription medication, drug and alcohol use in the workplace. However, it is important for employers to efficiently and precisely communicate the employee’s entitlements and obligations with regards to using, or being under the influence of, marijuana.
- Addiction is considered a disability under Human Rights legislation across Canada. Therefore the duty to accommodate applies, and this principle also extends to marijuana use (recreational or prescription). Accommodation of recreational marijuana addiction and medical marijuana should be approached no differently than any other form of accommodation. However, remember, generally speaking, an employer is not obliged to accommodate an employee beyond the point of undue hardship. Neither would an employer be forced to do something that threatens the safety of others.
- Random alcohol and drug testing are only appropriate in certain circumstances. Therefore, to implement testing, the employer must show that it is a safety sensitive workplace; there is evidence of a pervasive substance abuse problem which can be tied to the safety of the workplace; other less intrusive measures to deter substance abuse have failed, and testing must assess current impairment. This does not change because marijuana is legal.
Remember, employees have never had a right to work while they are knowingly impaired or unable to function because they have been taking substances (legal or not). What’s new is, with marijuana becoming legal, an employer and HR person might see the issue rise in the workplace and have to be more vigilant in establishing policies to control such use in the workplace. Employers and HR must ensure that their policies do not infringe on the constitutional right to use recreational (when legalized) and medical marijuana and privacy rights of employees.
2. Enhanced Canada Pension Plan
On October 6, 2016, the federal government introduced Bill C-26, An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act to enhance the Canada Pension Plan. The Bill received royal assent in the House of Commons, and in the Senate on December 15, 2016.
To make sure that individuals and their employers have time to adjust, increased annual CPP contributions will be phased in slowly over seven years from 2019 to 2025, so that their impact is small and gradual. For example, an individual with earnings of $54,900 will contribute about an additional $6 a month in 2019. By the end of the seven-year phase-in period, contributions for that individual would be about an additional $43 per month.
Once fully phased in, the CPP enhancement will increase CPP benefits by as much as 50 percent. The current maximum benefit is $13,110. In today’s dollar terms, the enhanced CPP represents an increase of nearly $7,000, to a maximum benefit of nearly $20,000.
Set out below is the outline prepared by PaySource of the contribution rates and annual maximums that payroll professionals and employers will have to apply beginning in 2019 and going forward.
The current employer/employee contribution rate of 4.95 percent of the Year’s Maximum Pensionable Earnings (YMPE) minus the current Year’s Basic Exemption of $3,500 remains the “base” contribution amount.
I. First additional contribution: Beginning in 2019, employers and employees will also have to make a first additional contribution. This first additional contribution will be gradually phased in between 2019 and 2023. The first additional contribution rate is also applied to pensionable earnings up to YMPE for that year.
It is hoped/expected that, administratively, the base rate and the first additional contribution will be combined into one rate up to YMPE. Therefore, the CPP contribution will be raised for both employers and employees to 5.95 percent from the current 4.95 percent. The first additional contribution rate is also applied to pensionable earnings up to the Year’s Maximum Pensionable Earnings (YMPE) for that year. People who are self-employed pay both shares, so their contribution rate will be two percentage points higher. As a result, for 2019, the employer and employee contribution should be the base rate of 4.95 plus the first additional contribution of 0.15 percent for a total contribution rate of 5.1 percent.
II. Second additional contribution: Beginning in 2024, employers and employees may also have to make a second additional contribution based on the Year’s Additional Maximum Pensionable Earnings (YAMPE). This will be a new and separate amount. This will be an additional contribution on earnings above the YMPE but less than the Year’s Additional Maximum Pensionable Earnings (YAMPE). The amount of income that the four percent second contribution rate applies to is new and must be calculated separately each year.
This second additional contribution will be phased in over a two-year period commencing in 2024, reaching a second additional contribution rate of four percent in 2025. The amount of a Year’s Additional Maximum Pensionable Earnings is:
- for 2024, 1.07 multiplied by the Year’s Maximum Pensionable Earnings for that year; and
- for 2025 and each subsequent year, 1.14 multiplied by the Year’s Maximum Pensionable Earnings for that year.
In monetary terms, the YMPE and YAMPE for 2024 and 2025 are projected to be as follows:
- for 2024, YMPE at $70,100 with YAMPE at $74,900
- for 2025, YMPE at $72,500 with YAMPE at $82,700
Therefore, the four percent second additional contribution rate that applies to both employers and employees will be applied to $4,800 of income in 2024 and $10,200 in 2025.
YAMPE is a new factor. The second contribution rate is a new and separate amount. Finally, the amount of income that the four percent second contribution rate applies to is new and must be calculated separately each year. Employers and payroll professionals will have to ensure that payroll systems apply the correct base/first additional contribution rate up to YMPE, know when an employee has additional income up to YAMPE and apply the correct rate to this additional income.
Note: Contribution rate estimated by the Department of Finance Canada. Requires confirmation from the Office of the Chief Actuary and is subject to secondary design decisions. Note as well, that as YMPE continues to increase so will YAMPE and so will CPP contributions with respect to higher income earners.
Employers and payroll professionals will see an increased payroll cost associated with the CPP enhancement and should consider how they will account for such increased costs in an organization’s payroll budget. In addition, employers who already have their own retirement and pension plans may want to amend their plans to offset the additional investment they will be making in the CPP.
Employers and payroll professionals will have to ensure that payroll systems apply the correct base/first additional contribution rate up to YMPE, know when an employee has additional income up to YAMPE and apply the correct rate to this additional income.
Employers and payroll professionals should start reviewing their payroll systems and current retirement plans to prepare for the 2019 expansion of the Canada Pension Plan, and how they will communicate the changes to employees. Most employees will have to contribute more toward the CPP and will eventually see a decrease in their take-home pay. They may also want to change their contribution to their employer-provided private pension plans.
3. Increase employment law requirements
Several Canadian jurisdictions are reviewing employment standards, occupational health and safety and workers compensation legislation to keep up with the times. In addition, payroll taxes continue to increase, new mandatory training have been introduced in a number of areas, accessibility legislation are being implemented or enacted beyond the province of Ontario, and the definition of an “employee” has been expanded to clarify when interns are employees and include non-traditional employees such as volunteers and contractors.
Also, some of the changes are a result of court decisions, and it was a busy year for employment law in Canada. Consider, too, that a 2014 Supreme Court of Canada case has imposed a “duty of good faith” on employers and in commercial contracts, and created a new general duty of honesty in contractual performance. That decision began to find its way into employment law jurisprudence in 2015 and is expected to continue to influence employment law in Canada in 2017. For example, and according to legal experts,
- pay a discretionary bonus following the termination of the employment relationship;
- provide an employee with a “cooling-off period” to reconsider the employee’s resignation decision; and
- justify awarding bad faith damages payable by an employer for conduct during the course of the employment relationship.
A significant employment law case in 2016 is the Supreme Court of Canada’s decision in Wilson v. Atomic Energy of Canada Limited. The Court confirmed that employees in federally regulated workplaces may not be dismissed without cause. This is in opposition of provincial employment law but more like what we see in collective agreements. Provincially regulated employees are not afforded that same type of protection.
Another important case for employees in 2016 was Howard v. Benson Group Inc., in which the Ontario Court of Appeal confirmed that when an employee is working pursuant to a term contract, unless there is an enforceable termination clause in that contract, an employer can only terminate the contract by paying the employee what remains of the term. Most importantly, the Court confirmed that an employee does not need to mitigate these damages.
And guess what, more changes are coming, and more cases are waiting to be tried in 2017!
Therefore, it is important that employers, human resources, and payroll professionals keep up to date with ever changing and increasing legal and regulatory workplace requirements and key court decisions.
Moreover, small to medium size business owners will need to be incredibly informed in the upcoming year to stay abreast of new rules and regulations.
Several sources of employment law exist in Canada; firstly, there is a host of federal and provincial statutes specifically designed to deal with employment issues including employment standards, workers’ compensation, occupational health and safety and human rights. There is also the common law in each province and territory (the Civil Code in the province of Quebec), as well as jurisprudence by Canadian courts. In Quebec, various texts by legal scholars, called “doctrine”, can also inspire employment law and finally, the contract of employment between the parties can be a source of law between them. Navigating through the multitude of statutes and case law is not an easy feat, but it must be done.
Knowledge is key. Ignorance of the law is no defense to non-compliance with the law. See how First Reference can help keep you up to date and in compliance here.
4. Increasing damages awards and penalties
Canadian courts and administrative tribunals have been levying harsher penalties against employers, directors, officers, and supervisors for violations of human rights, occupational health and safety, and employment standards legislation. The courts and tribunals have also proved more willing to provide higher damages awards to employees who have either been badly treated by their employer or that have been loyal employees for decades.
It is expected that this will continue in the year to come.
Several Canadian jurisdictions have removed caps on recovery and set longer time limits for employees to recover outstanding pay under employment/labour standards legislation.
In O.P.T. v. Presteve Foods Ltd. an employee received $150,000 from the Ontario Human Rights Tribunal as compensation for injury to dignity and self-respect.
In addition, criminal charges for occupational health and safety under Bill C-45 are finally being used. Bill C-45 imposed the legal duty on persons directing work to take reasonable steps to prevent bodily harm to the person performing the work, or any other person, arising from the work or task. Bill C-45 also contained provisions allowing for organizations and representatives to be charged with negligence and other offences. Section 220(b) of the Criminal Code states: “every person who by criminal negligence causes death to another person is guilty of an indictable offence and liable to imprisonment for life.”
More recently, on October 31, 2016, the Quebec Superior Court issued its decision in R v. Fournier, concluding that a business owner’s breach of occupational health and safety legislation supports his committal to trial on a charge of manslaughter under the Criminal Code.
Unions and other organizations supporting workers, Ministry of Labour and the police and prosecutors are calling for an increased use of the Criminal Code in serious workplace accidents and fatalities. Consequently, employers, supervisors, and their legal counsel should be mindful of this avenue of risk going forward.
One step to be taken is to review all human resources, payroll, health and safety and human rights policies, practices and procedures, including employee and supervisor instructions and training. This will ensure these policies and procedures and instructions are up to date, that employees have been trained or retrained if necessary, and that these sets of company rules are followed consistently.
Another step is to have well-written and enforceable employment agreement. This is a good business practice and can save employers time and money if things go wrong following a hire.
Finally, know the law and how the courts or tribunals have dealt with the law so that you can have a proper response to an employment law or payroll issue when it arises.
- A new version of form T3010 is coming in January 2024 - November 24, 2023
- Ontario introduces Bill 79, Working for Workers Act, 2023 - March 29, 2023
- Call for a ban on NDAs in certain cases - March 1, 2023