Location, Location, Location.

2020 has unceremoniously slung many employers into a virtual world of remote work. This has opened up a realm of possibilities of where workers can perform work. While the idea of working from a sunny (COVID-safe) remote island is tempting, companies will have to take a number of factors into consideration before permitting workers to work outside of Ontario.

Provincial Employment Standards

What law actually applies to the employment relationship? This is a key consideration, as employment laws vary dramatically from province to province or country to country.

Under section 3 of Ontario’s Employment Standards Act, 2000 (ESA), the ESA states that 1) the ESA applies if an employee’s work is performed in Ontario or 2) the employee's work is to be performed in and outside Ontario, but the work performed outside of Ontario is a continuation of work performed in Ontario. This means that if you have an employee working remotely outside of Ontario, the employment laws of where the employee is working from could apply instead the law you know, being Ontario in this example. This is especially complicated if the employee is working from another country, such as the United States of America (U.S.). Each state has different laws and companies have to be prepared to comply with the state’s laws and regulations.

If remote workers are not employees, but contractors, there must be a true independent contractor relationship with clarity around various aspects of the relationship such as the law governing the contract and where issues will be heard. If the worker is a dependent contractor, this could still have foreign law implications on the relationship. In a case where the contractor is doing 100% of their work for the same company, the worker is less likely to be a true independent contractor. In some countries/states, this could have a significant financial impact.

Taxation

Employers run a risk where an employee works remotely from a different country, where the employer doesn’t have an existing corporate entity. The employer is at risk of creating a corporate taxable presence in that country. Profits from the company can be pulled into corporate taxes where the employee is operating from. There are various factors that help determine whether a fixed place of business has been established, including the role of the employee, the term of work and tax legislation of the country/state, which all play a role in determining taxation both for the employer and individual employee. Moreover, payroll withholdings and reporting can become complicated as it needs to be ensured that there is continual global and local tax compliance.  This is certainly something that must be reviewed with financial/tax professionals.

Health and Safety – Worker’s Compensation

Legislation around Occupational Health & Safety defines “workplace” very broadly so there is some risk that if an employee gets a work-related injury while working from home, the employee could be entitled to some benefits/compensation. Local laws must be examined, including whether employees are subject to mandatory workers’ compensation coverage. Or if not, whether they still have the right to sue for damages.

Privacy of Data

If a worker is going to work remotely and particularly outside of Canada, privacy may be a concern for the company. Safeguards should be put in place to protect company confidentiality and data including privacy protection, access to documents, expectations around personal devices, and use of company property.

Policies Around Remote Work

Similar to the above, policies should be put in place about expectations around remote work. Companies may want to consider factors such as time differences particularly between Eastern and Western Canada. Expectations should all be considered in the development of such policies/contract.

The above are just some considerations to take into account when thinking about workers performing work outside of Ontario. Companies should contact local counsel of both where the company is located and where the worker is performing work when contemplating remote working relationships outside of Ontario.