Setting Up Business in Ottawa: 5 Employment Laws to Know

Canada is one of the best countries in the world for opening and building a business, and Ottawa is one its most business friendly municipalities. With a highly educated growing population, Ottawa’s easily accessible and talented workforce has allowed for the city’s economy to blossom. With a healthy work environment and an abundance of opportunities, it’s no surprise that companies from all over the world are expanding into Canada.

But, before anyone can decide to open a business in a new country or city it’s vital to understand the labor laws, so regulations are met, and mishaps are avoided.

In Ottawa, and in the entire province of Ontario, most employees are covered by the Employee Standard Act (ESA) which provides minimum rights, responsibilities and standards for employees and employers. These standards include hours worked, overtime, minimum wage, employment termination, holidays, leave, severance pay, vacation, and tips and gratuity. However, certain industries and jobs are not completely covered by the Employment Standard act, making it important to be aware of those with exemptions and special rules.

Industries and Jobs with Exemptions or Special Rules

Employees not covered by all parts of the Employee Standards Act are known as “exemptions”. Also, employees can be covered by special rules that change how the act specifically applies to them, and many employment standards differ depending on the job or industry. By not properly determining your employee’s status, misclassification can lead to regulation issues and payroll complications that ultimately lead to fines.

One of the many payroll issues that can arise from misclassifying an employee’s status is not providing them with proper overtime pay.

Overtime Pay

Overtime pay is required by the Ministry of Labour, however, if an employee’s job description fits a certain criterion, they may in fact be exempt from overtime pay. However, assuming that your employee is exempt and not paying them for their hours worked can cause legal issues.

Employees who do receive overtime payment are required to fill in timesheets for attendance by the hour and be paid bi-weekly. In addition to their usual pay, they will receive 1.5 times the regular rate, or 1.5 hours of vacation for each hour of work exceeding the weekly 44 hours.

A great way to keep track of all your hours worked is with a pay stub service like Not only does a pay stub serve as proof of income, it also helps you keep track of salary information, taxes paid, overtime pay and more.

Vacation Leave and Vacation Pay

Just like overtime pay, vacation leave and vacation pay are subject to exemptions or special rules. Employees who aren’t exempt are entitled to 2 weeks of annual leave for their first four years of continuous employment and 3 weeks for five or more years.

Vacation pay also corresponds to the employee’s length of employment. Those with at least a year, but less than five years, receive 4 per cent of their gross yearly wages (excluding vacation pay), and employees with five or more years receive at least 6 per cent.

Employees should receive vacation pay before they take their earned leave, however, there are four exceptions:

  1. When vacation is taken in periods less than 1 week.
  2. When an electronic or written agreement has been made for payments to be made as they accrue.
  3. If an electronic or written agreement that the payment can be given at any time.
  4. If payments are directly made into a financial institution account.

Pregnancy and Parental Leave

Pregnant employees who are covered by the ESA and have been employed for at least 13 weeks prior to the due date qualify for pregnant leave. This includes full-time, part-time, permanent or term contract employees. If the employee has qualified, they are entitled to 17 weeks of unpaid leave. Some leave may extend longer than 17 weeks depending on the circumstance.

Parental leave is granted to both parents for up to 61 or 63 weeks of unpaid leave who are covered by the ESA and have been employed for at least 13 weeks prior to the leave. This includes birth parents, adoptive parents, a person who is in a relationship with the parent of the child, and same-sex couples. Parental leave for mothers begins once pregnancy leave ends, while the other parents’ leave begins no later than 78 weeks after the baby is born, or the date their child came into their care or custody.   

Termination, Notice, and Severance

When an employer terminates an employee, who has been continuously employed for at least three months, the employee must be provided with a written notice, payment in lieu of notice, or a combination of the two. Although a notice is required, the ESA does not require reasoning of the termination to be presented to the employee. If an employee is terminated for any reason other than, misconduct, temporary layoff, refusal of reasonable alternative employment, or are still in the probationary period, is entitled to a notice of termination.

The notice period is:

Length of employment

Notice Period

Less than 1 year

1 week

1-3 years

2 weeks

3-4 years

3 weeks

4-5 years

4 weeks

5-6 years

5 weeks

6-7 years

6 weeks

7-8 years

7 weeks

8+ years

8 weeks

For the employee to secure severance they must have been employed for five or more years by an employer with a payroll of at least $2.5 million CAD or have terminated over 50 employees in the past 6 months due to all or part of the company closing. The severance pay amount is calculated by multiplying the weekly salary amount by the number of years the employee has been employed.

For further information see this guide to Canada’s payroll & employment laws