Regulations Amending Certain Regulations Made Under the Canada Labour Code: SOR/2023-79

Canada Gazette, Part II, Volume 157, Number 10

Registration
SOR/2023-79 April 21, 2023

CANADA LABOUR CODE

P.C. 2023-361 April 21, 2023

Her Excellency the Governor General in Council, on the recommendation of the Minister of Labour, makes the annexed Regulations Amending Certain Regulations Made Under the Canada Labour Code under section 238.2footnote a and subsections 253.2(4)footnote b, 264(1)footnote c and 270(1)footnote d of the Canada Labour Code footnote e.

Regulations Amending Certain Regulations Made Under the Canada Labour Code

Canada Labour Standards Regulations

1 The Canada Labour Standards Regulations footnote 1 are amended by adding the following after section 3:

Employment Statement

3.1 The following information must be included in the employment statement provided under section 253.2 of the Act:

2 The Regulations are amended by adding the following after section 23:

Reimbursement of Reasonable Work-Related Expenses

23.1 (1) For the purposes of subsection 238.1(1) of the Act, the factors to consider in determining whether or not an expense is work-related are

(2) For the purposes of subsection 238.1(1) of the Act, the factors to consider in determining whether or not an expense is reasonable are

(3) For the purposes of paragraph 238.1(3)(c) of the Act, the time limit for the employer to pay the employee any amount that is payable is 30 days after the day on which the employee submits the claim for payment.

3 Paragraph 24(2)(f) of the French version of the Regulations is replaced by the following:

Administrative Monetary Penalties (Canada Labour Code) Regulations

4 (1) Part 1 of Schedule 2 to the Administrative Monetary Penalties (Canada Labour Code) Regulations footnote 2 is amended by adding the following after item 95:
Item

Column 1

Provision

Column 2

Violation Type
95.1 238.1(1) B
95.2 238.1(3)(a) B
95.3 238.1(3)(b) B
95.4 238.1(3)(c) B
(2) Part 1 of Schedule 2 to the Regulations is amended by adding the following after item 132:
Item

Column 1

Provision

Column 2

Violation Type
132.1 253.1(1) A
132.2 253.1(2) A
132.3 253.1(3) A
132.4 253.2(1) A
132.5 253.2(2) A
132.6 253.2(3) A
5 Item 1 of Division 1 of Part 2 of Schedule 2 to the Regulations is replaced by the following:
Item

Column 1

Provision

Column 2

Violation Type
1 3.1(a) A
1.01 3.1(b) A
1.02 3.1(c) A
1.03 3.1(d) A
1.04 3.1(e) A
1.05 3.1(f) A
1.06 3.1(g) A
1.07 3.1(h) A
1.08 3.1(i) A
1.09 3.1(j) A
1.1 3.1(k) A
1.11 3.1(l) A
1.12 3.1(m) A
1.13 4 A

Coming into Force

6 (1) Subject to subsection (2), these Regulations come into force on the day on which section 502 of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, comes into force, but if they are registered after that day, they come into force 60 days after the day on which they are published in the Canada Gazette, Part II.

(2) Section 2 and subsection 4(1) come into force on the day on which section 486 of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, comes into force, but if these Regulations are registered after that day, section 2 and subsection 4(1) come into force 60 days after the day on which they are published in the Canada Gazette, Part II.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Labour standards in industries within the federally regulated private sector are regulated by Part III of the Canada Labour Code (the Code). These include industries such as air transportation, interprovincial road transportation, radio and television broadcasting, telecommunications, banking, and postal and courier services, among others. At present, the definition of wages under Part III of the Code does not include work-related expenses (e.g. uniforms, equipment, travel and accommodations, training, fuel), resulting in a legislative gap. Employees seeking reimbursement for work-related expenses have limited options to recover the expense short of commencing a civil action against their employer. Civil proceedings can be costly for both employees and employers and take a substantial amount of time to conclude. Legislative provisions contained in Budget Implementation Act, 2018, No. 2 (BIA 2018, No. 2) address this gap but require supporting regulations. The Regulations will require employers to reimburse their employees for work-related expenses within 30 days of an employee submitting a claim for payment where there is no written agreement setting out an alternative time limit and will prescribe factors to consider in determining if an expense is or is not work related and if an expense is or is not reasonable.

Employers in the federally regulated private sector are also not currently required to provide employees with any documentation about their employment status or the nature of their relationship with the employer. The BIA 2018, No. 2 contains changes to the Code that will require employers to provide information to their employees concerning the details of their employment. Regulations are required to set out what information must be included in a statement of employment conditions.

Background

The BIA 2018 No. 2, which received royal assent on December 13, 2018, made a number of amendments to the Code. Several of these amendments have entered into force (e.g. the elimination of minimum length-of-service requirements for maternity and parental leave) and others are planned to come into force throughout the next several years, alongside supporting regulations. Amendments are aimed at improving protections for employees, particularly those in precarious work, while supporting productive workplaces.

Among the amendments in BIA 2018 No. 2 not yet in force are the requirements for employers to provide their employees with

The requirements listed under paragraphs (a) and (b) require supporting regulations: all three amendments will come into force by Order in Council. The legislative provisions related to reimbursement, the written employment statement and the required information about Part III rights and obligations, as well as supporting regulations, will come into force at the same time.

Application of the new provisions

Part III of the Code establishes basic labour standards (e.g. payment of wages, protected leaves) for persons employed in federal Crown corporations (but not the public service) and federally regulated private sector industries. These industries include

The new work-related expenses and statement of employment provisions are applicable to all workplaces subject to Part III of the Code. The federal public service and employees of Parliament are covered by Parts II and IV of the Code only. All other workplaces, which make up over 90% of the Canadian workforce, are under provincial labour jurisdiction.

Administrative Monetary Penalties (Canada Labour Code) Regulations

On January 1, 2021, the new Part IV (Administrative Monetary Penalties) of the Code came into force to promote compliance with requirements under Part II (Occupational Health and Safety) and Part III (Labour Standards) of the Code. The Administrative Monetary Penalties (Canada Labour Code) Regulations (the AMPs Regulations) designate and classify violations of obligations under Part II and Part III of the Code and related regulations for which an administrative monetary penalty (AMP) may be issued.

Amendments to the AMPs Regulations are needed to ensure that requirements set out in the legislative provisions and in the new Regulations can be subject to an AMP.

Objective

The primary objective of the Regulations Amending Certain Regulations Made Under the Canada Labour Code (reimbursement of work-related expenses and statement of employment conditions) [the Regulations] is to support the implementation of the new provisions of the Code pertaining to the recovery of unpaid work-related expenses and the requirement to provide employees a statement of employment.

Reimbursement of work-related expenses

The legislative amendments in BIA 2018 No. 2 expand the wage recovery provisions under Part III of the Code by enabling employees to recover the reasonable work-related expenses that they have incurred. The Regulations will make implementation possible by prescribing elements that are necessary for the operation of the legislative provisions. They will also provide additional clarity by setting out a time limit for reimbursement in cases where there is no agreement in place between the employer and employee.

Statement of employment conditions

A written employment statement listing key conditions of employment will provide additional clarity about labour standards and create greater transparency in the labour market, providing vulnerable workers with greater certainty about their employment. The Regulations will prescribe what information should be provided in the written employment statement.

Description

Work-related expenses

The BIA 2018 No. 2 introduced section 238.1 to the Code, which provides regulatory authority for the Governor in Council to prescribe ineligible expenses, the time limit for reimbursement in cases where there is no agreement in place between the employer and the employee, and factors to consider in determining whether an expense is work related or reasonable. An Order in Council will bring these legislative provisions into force at the same time as the coming into force of the Regulations.

Time limit for reimbursement

The Regulations will require employers to reimburse their employees for work-related expenses within 30 days of an employee submitting a claim for payment where there is no written agreement setting out an alternative time limit.

Work relatedness of an expense

The Regulations will prescribe the following factors to consider in determining if an expense is or is not work related:

Reasonableness of an expense

The Regulations will also prescribe the following factors to consider in determining if an expense is or is not reasonable:

Statement of employment conditions

The BIA 2018 No. 2 also introduced a requirement for employers to provide a written statement of employment within the first 30 days of employment (subsection 253.2(1)) and regulatory authority for the Governor in Council to prescribe the information that must be included in the written employment statement (subsection 253.2(4)).

Content of employment statement

The Regulations will require that the following information be included in the employment statement:

AMPs Regulations — Designation and classification

New regulatory obligations

When amendments are made to Part III of the Code and its associated regulations, Schedule 2 of the AMPs Regulations must be updated to reflect any new requirement that could be violated.

The Regulations will designate and classify all applicable employer obligations in Schedule 2 of the AMPs Regulations. The AMPs Regulations specify the method used to determine the amount of the penalty included in a notice of violation. The baseline penalty amount applicable to a violation (i.e. non-compliance with a designated legislative or regulatory provision) varies depending on the category of person (e.g. individuals, small or large businesses) believed to have committed a violation and the classification of the violation. With respect to obligations under Part III of the Code, each designated violation is classified as either Type A, B, C or D, in order of increasing severity, according to the level of risk and/or the impact and significance of the violation, as outlined in Table 1.

Amendments to the AMPs Regulations are needed to ensure that the requirement to provide an employment statement with the prescribed content is designated as a Type “A” violation, as this is related to record-keeping. Amendments are also needed to ensure that non-compliance with the time limit for reimbursing work-related expenses is designated as a Type “B” violation, as it relates to the calculation and payment of wages and other amounts.

New legislative obligations

The Regulations will also designate and classify provisions under the Code which will be brought into force through an Order in Council 60 days after publication in the Canada Gazette, Part II. More specifically, the legislative provisions that will be designated in Schedule 2 of the AMPs Regulations will be classified at the “A” level for all administrative requirements related to record-keeping.

Examples of these types of provisions include the requirement to provide employees with any applicable materials relating to employer and employee rights and obligations, to post the materials, to provide terminated employees with the applicable materials, to provide employees with updated employment statements, and to retain a copy of any employment statement.

The legislative provisions that will be classified at the “B” level are all related to the calculation and payment of wages. Examples of these types of provisions include the requirement to reimburse reasonable work-related expenses and to pay the employee within the time limit set out under the collective agreement or as agreed upon in writing between the employer and employee.

Table 1: Classification method for violations under the Code
TYPE PART III
A Related to administrative provisions.
B Related to the calculation and payment of wages and other amounts.
C Related to leave or other requirements, which could have an impact on financial security, or health and safety, of an individual or group of individuals.
D Related to the employment and protection of employees who are minors.
Minor technical change

The only change made to the Regulations since prepublication in the Canada Gazette, Part I, was the change of the term “déductions” to “retenues” in paragraph 24(2)(f) in the French version of the Regulations.

Regulatory development

Consultation

Reimbursement of work-related expenses

From May to August 2019, the Labour Program of Employment and Social Development Canada (ESDC) held a first round of consultations on modern labour standards. A discussion paper was shared in June 2019 with over 600 stakeholders. Feedback was received through information sessions, consultation sessions and written submissions. Although written submissions were received from 67 organizations, a small number of comments were provided from stakeholders on the reimbursement of work-related expenses.

The Calgary and District Labour Council (CDLC), the Vancouver Airport Authority and the Canadian Labour Congress provided feedback on whether the Regulations should prescribe any types of expenses as ineligible, factors to be considered, and the time limit for reimbursement. Generally, the comments were supportive of the direction being considered by the Labour Program. The CDLC suggested that the Regulations not prescribe any expenses as ineligible, supported a 30-day window for reimbursement, and called for expenses to be reimbursed if they were related to anything specifically required as a condition of employment. The Vancouver Airport Authority suggested that an expense could be considered ineligible if it was incurred for personal benefit rather than professional and asked for the Regulations to be as specific as possible. The Canadian Labour Congress’ comments related strictly to expenses incurred by student interns. The Regulations reflect these suggestions in the design of work-related and reasonableness factors as well as the 30-day window for reimbursement.

Statement of employment conditions

During the same consultation initiative, stakeholders were invited to comment and provide feedback concerning the development of the written employment statement. The Labour Program received input from the CDLC and the Canadian Bankers Association (CBA). The former suggested that employees should be given information on where to access the Code, a plain-language version of the Code, and information about how to file a complaint under the Code and other pieces of legislation for relevant rights. The CBA suggested that additional statement requirements might be duplicative of information already provided to new employees through their offer letter, employment contracts, and through existing internal communications. The Labour Program has taken these suggestions and considerations into account in the Regulations. Planned guidance material will assist employers in reducing duplication and providing Code information to their employees.

Prepublication in the Canada Gazette, Part I — Consultation

The proposed Regulations were prepublished in the Canada Gazette, Part I, on October 1, 2022, followed by a 30-day consultation period. The Labour Program received two submissions from individual members of the public. One submission questioned the need for reimbursement of work-related expenses in general. This is at odds with the purpose of the legislation and regulations, as they are meant to close an existing gap with regards to reimbursement. The other was supportive of the proposed Regulations, but mentioned the need for uniforms and dry-cleaning expenses to be covered. The Regulations were not amended to set out specific expenses to be reimbursed, as the preferred approach is to set out factors to be taken into account in determining if expenses are work related and reasonable. Under this approach, uniforms and dry-cleaning would likely meet the test in the types of employment where this is appropriate.

The Labour Program also received recommendations from two stakeholder groups: the Canadian Bankers Association (CBA) and the Federally Regulated Employers in Transportation and Communications Organization (FETCO). Both groups raised concerns with the potentially duplicative nature of the requirement to provide a statement of employment conditions, noting that much of the information in the statement is available in other documents and recommending that statements not be required. While the Labour Program recognizes that some duplication of effort may take place, the legislative intent of the amendments to the Code was to require employers to provide a written document to employees that contains information related to their employment. The Regulations set out the information to be included in that statement, while providing some flexibility necessary for the wide range of occupations and types of work found across the federal jurisdiction. The Labour Program believes that the availability of information in other formats should reduce the effort required to comply with the Regulations and help in the production and update of a written employment statement. Further, employers may (within the requirements of the legislation and regulations) provide the statement in a format of their choosing, using any existing documentation or material to assist in this process. The Labour Program will support employers in complying with the legislative and regulatory requirements by publishing guidance material that will provide assistance in compliance, without being overly prescriptive in outlining how employers may meet the requirements.

The CBA also recommended that the reimbursement provisions be aligned with the Canada Revenue Agency’s (CRA) conditions for assessing reimbursement in their T2200 and T777S forms and to include factors that are applicable to employees who are working from home. The Labour Program notes that there is no misalignment between the reimbursement provisions in the Regulations and the CRA’s conditions and that the proposed approach is also applicable for employees who are working from home or under a hybrid working model and incurring work-related expenses. Employers should continue to use forms T2200 and T777S to declare the conditions of employment as they relate to reimbursed or non-reimbursed expenses and note where those expenses are reimbursed in whole or in part. Employers and employees should consult CRA guidance on these forms to be clear about the tax implications of reimbursement and how to report these expenses. The CBA also recommended that expenses should be pre-approved in order to be considered eligible for reimbursement. The Labour Program notes that pre-approval (or authorization in advance, in the language of the Regulations) is one of the factors to be considered in making a determination of the reasonableness of an expense and not a requirement to be considered eligible for reimbursement. The CBA also recommended that 60 days be the time limit for reimbursement; the Labour Program notes that the 30-day window in the Regulations reflects a balanced approach between providing employers with enough time to process payment and providing reimbursement to employees in a timely fashion.

FETCO recommended that unionized employees be exempted from the Regulations if their collective agreement contemplates the reimbursement of work-related expenses. Collective agreements setting out procedures for reimbursement of reasonable work-related expenses will continue to govern the conduct of employer-employee reimbursement. There is no exemption necessary for unionized employees. The Labour Program notes that an employee will have recourse to the complaints process if their collective agreement does not cover reimbursement or covers it so narrowly as to preclude reimbursement of a reasonable, work-related expense.

The Labour Program appreciates the time and effort undertaken by stakeholders to provide their feedback on the Regulations. For the above reasons, no changes to the amendments were made as a result of the submissions.

Modern treaty obligations and Indigenous engagement and consultation

In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an Employment and Social Development Canada modern treaty assessment was applied as part of the Memorandum to Cabinet and Treasury Board submission associated with the Regulations. The assessment did not identify any modern treaty implications or obligations. The Labour Program consulted Indigenous organizations on the application of modern labour standards proposals to federal workplaces (e.g. First Nation band councils) on reserves, including reimbursement of workplace expenses. No comments or concerns related to this package were received. Going forward, the Labour Program will continue to work with Indigenous partners during the implementation stage and to raise awareness of federal labour standards, including with Indigenous employees covered by Part III of the Code and to enhance compliance among covered employers.

Instrument choice

New provisions concerning the reimbursement of work-related expenses and the requirement to provide employees a statement of employment conditions will be added to Part III of the Code through amendments contained in BIA 2018 No. 2. In the reimbursement, provisions contain regulatory authority to set out a time limit in cases where there is no agreement in place between the employer and employee. New provisions also provide authority to make regulations prescribing factors to consider in determining if an expense is or is not work related and if an expense is or is not reasonable.

At present, the Code does not set out a requirement for employers to reimburse employees for work-related expenses. When these are incurred and employers do not provide a reimbursement, employees are left with no recourse under the Code, and must file civil claims against their employers. This can be a very time-consuming process, and the burden and cost of a lawsuit can dissuade employees from asserting their rights. In addition, the conditions surrounding the reimbursement of work-related expenses are often the result of informal verbal agreements, leaving employees with little to no paper trail in case of a dispute. Regulations are needed to clarify what expenses are to be considered reasonable and work related, and to provide a time limit for compensation so that employees are reimbursed in a timely manner.

The new provisions of the Code create the requirement for employers to provide information to employees within the first 30 days of their employment and provide regulatory authority to set out the information an employer must provide as part of their statement of working conditions. Regulations are appropriate and necessary to ensure that the information provided to employees is standardized and comprehensive, and to ensure that all employees covered by Part III of the Code are provided with the same information.

Regulatory analysis

Affected stakeholders

The Regulations will apply to all federally regulated employees and employers covered by Part III of the Code. It is expected that, due to the higher volume of work-related expenses in the road transportation sector, employers and employees in the trucking sector, particularly small firms of fewer than five employees, may be more affected than those in other industries.

Baseline and regulatory scenarios

Baseline scenario

Under the baseline scenario, as Part III of the Code does not include work-related expenses in the definition of wages, employees seeking reimbursement for these expenses will continue to have few options for recovery, with likely a civil action against their employer as the only option, which often entails significant legal costs for both workplace parties. As a result, due to the prohibitive cost of a civil action, the majority of employees not covered by a collective agreement or an individual one that governs the payment of work-related expenses, will continue to run the risk of being unable to recover any reasonable work-related expenses if their employer is not in agreement, leading to a loss of income for the employee.

In addition, employers under Part III of the Code will continue to have no requirement to provide employees with documentation about their current employment status, the nature of their relationship with the employer, nor information respecting the employers’ and employees’ rights and obligations under Part III of the Code. This will continue to leave many employees unsure of their rights under the Code, leaving them more vulnerable, and in some cases suffering a loss of income (e.g. from eligible but unpaid overtime, vacation, etc.).

In the absence of the amendments, there would remain a general lack of clarity as to what constitutes a work-related expense and whether it is reasonable or not, and this will continue to be a source of conflict between workplace parties, negatively impacting workplace relations and productivity.

Regulatory scenario

The new subsection 238.1(1) of the Code prescribes that employers shall provide reimbursement for reasonable work-related expenses to employees, but is silent on the factors involved, such as what constitutes a reasonable work-related expense that an employer must reimburse an employee. Section 238.2 prescribes that the Governor in Council may make regulations for this purpose. The Regulations will introduce factors for determining whether an expense is considered reasonable and work related and, therefore, subject to reimbursement by employers. Correspondingly, the newly prescribed factors will impose additional costs on employers. The Regulations will also specify the factors used to determine whether an expense is ineligible for reimbursement, which, in some instances, could bring down the net costs to employers.

Expenses that employees are required to incur in accordance with a collective agreement or any other written agreement between the union and the employer will not be subject to the Regulations and are therefore excluded from the calculation of costs.

Benefits and costs

Costs to employers
Reimbursement of work-related expenses

Among the sectors in the federal jurisdiction, based on a preliminary survey of agreements between employers and unions/employees, the costs of work-related expenses are expected to be highest in the road transportation (e.g. costs of incidental automotive expenses) and air transportation (e.g. uniform allowances, dry cleaning, etc.) sectors and, to a lesser extent, in the postal and courier, railway transportation, telecommunications and marine (including longshoring) sectors.

The estimated costs are based on the Labour Program’s preliminary data on complaints in the road transportation sector. The total number of monetary complaints in this sector over the last year was 2 608. Of these, between 10% and 15% had an allegation related to expenses associated with them, and the average amount of claim for employment-related expenses per complaint was $217.

The annualized incremental costs incurred by employers are anticipated to be $90,833 starting in the first year the Regulations come into effect. This estimate is based on complaints related to expenses made by the road transportation industry (highway truck drivers for the most part). This estimate is conservative in nature (i.e. more likely to overestimate expenses in the trucking industry) because it considers the higher end (15%) of the range for the estimated number of complaints related to expenses (10%–15%). Following this approach, the 391 complaints found to be related to employment expenses (which represent 15% of the total 2 608 monetary complaints) was multiplied by the estimated average cost of $217 per complaint to employment-related expenses, in order to calculate the total annual incremental cost. Many employers currently reimburse some work-related expenses, thus the administrative procedures to receive and validate claims may already exist in a number of workplaces; additional costs should therefore be negligible to check and administer new claims.

Statement of employment conditions

It is estimated that up to 462 920 employees (high-end estimate), not subject to a collective agreement or not provided new orientation training, will benefit from written employment statements.

At present, at least 575 000 employees under Part III already receive a statement of employment conditions. This is estimated to include the 352 000 employees subject to a collective agreement and the 223 000 non-unionized employees who are estimated to receive new orientation training. It is highly likely that the majority of these employees who receive this type of training, and who are not unionized, are all provided individualized employment statements in support of their training.

According to the 2015 Federal Jurisdiction Workplace Survey, 38.2% of all employers under Part III provide new employee orientation training, representing about 7 278 firms. It is assumed that around half of these firms are unionized workplaces which already provide these types of statements. Since there are an estimated 19 000 firms under Part III, it is assumed that the bulk of remaining firms likely does not offer employment statements to their employees, reaching up to 11 774 individual companies (high-end estimate).

In terms of employer costs related to the development of an employer statement of conditions template, it is estimated that development costs will be straightforward and will take approximately two minutes. The relative short time assumed is because the regulations already provide a detailed template that employers can use. The following approach was used to estimate this cost component: The 11 774 firms estimated not to be currently providing statements, multiplied by 0.03 hour (2 minutes), and then multiplied by $39.26, which represents the average hourly wage for a human resources (HR) clerk in Canada. This provides a total of $15,409 for template development. These costs are mostly one-time costs, except for new entrants in future years, which are estimated at less than 1% annually.

In terms of employer costs to provide individualized information on the statement of conditions template, it is estimated that these costs will average about five minutes per employee affected. Some statements may be less complex and others more so, consequently the time required will vary depending on the level of detail required. The following approach was used to estimate this cost component: 462 920 employees currently not receiving statements, multiplied by the time required to fill them out by the employer, 0.08/hour (5 minutes), then multiplied by $39.26 for a total of $1,514,519. Similar to the development of the templates, most of the costs will accrue in the first year, with mostly new employees, and retirement replacements, being impacted in future years, estimated at only 2.75% of the labour force annually.

Total costs for this cost component to the Regulations comprise the addition of these two elements listed in the previous two paragraphs.

Costs to the Government of Canada

The Regulations will impose minor, one-time communication costs of $20,000 to develop operational guidance documents by the Government of Canada in the first year of operation. In addition, there may be added costs related to enforcement using a variety of approaches along a compliance continuum. This may include assessing non-compliance with the new record-keeping requirements by conducting inspections or encouraging compliance by educating and counselling employers on their record-keeping obligations, seeking an assurance of voluntary compliance from the employer, or issuing a compliance order to cease the contravention and take steps to prevent its reoccurrence. Though the cost of enforcement will likely decrease each year as employers adjust to the new regulatory environment, we have, conservatively, estimated the added costs of enforcement as $97,500 per year for the 10-year period from 2023 to 2032.

Benefits to employers

The greater certainty provided by these Regulations around what is and what is not considered a work-related expense is expected to benefit employers. Standardization of the factors to be considered may affect small employers who were previously unsure about and were unable to determine what should be considered work-related expenses. It is expected that the statement of employment conditions will be beneficial to employers in clarifying the employer-employee relationship at the outset of employment. This may result in fewer monetary complaints and complaints related to unjust dismissals, as well as a much lower volume of civil recourses being filed against employers.

Benefits to employees

Reimbursement of work-related expenses

Employees who incur work-related expenses that are not reimbursed by their employer currently have no recourse under the Code, and in order to pursue compensation must file civil claims against their employers — incurring substantial and often unbearable legal costs. The introduction of rules requiring employers to reimburse their employees will mean these fees are no longer borne by employees, and instead they may file a complaint with the Labour Program to be able to recover these amounts. Employees will receive an amount identical to the employer expenses listed above, but this time as savings, having an annualized value of $84,890.

Statement of employment conditions

Non-unionized workers (roughly 66% of federally regulated employees) will benefit from written employment statements. Employees will benefit from greater certainty and clarity around their employment conditions, reducing conflict between themselves and their employer by establishing — at the beginning of the employment tenure — a clear description of their hours and location of work, pay, benefits, requirements and conditions of employment, and other factors.

Savings related to the reduction of civil litigation cases

The Regulations will eliminate the need for workplace parties to engage in civil litigation over disputes relating to the reimbursement of work-related expenses. Using the cost of small claims court as a proxy, basic fees alone could run up to $601 per claim at a minimum (current total fees for both parties at one provincial Small Claims Division were used for this analysis). In addition, costs will also accrue for the opportunity cost in time necessary to pursue the claim (measured in lost wages), estimated at 8 hours total for the settlement conference and trial, and roughly 8 hours in total preparation time for each party. These costs are minimum costs because they do not include fees or time related to other procedures of the Court that may be necessary, such as examination hearings, costs of enforcement, and the costs of legal counsel.

The following approach was used to estimate savings related to this regulatory component: the 391 claims made annually to the Labour Program related to employment work-related expenses were multiplied by the total cost of small claims of $601. This cost is then added to the opportunity cost of two days (one preparation day of 8 hours and one court day of 8 hours) for both parties involved, applied to 217 cases that would go to trial (i.e. 55% of total cases would not be settled before trial). The estimated annualized savings related to civil litigation are estimated at $507,612 over the 2023 to 2032 period.

Cost-benefit statement

Summary of monetized costs and benefits

Monetized costs
Impacted stakeholders Description of costs Base year Other relevant years Final year Total (present value) Annualized value
Employers Reimbursement costs to employers $84,890 $64,762 $46,175 $637,971 $90,833
Employers Statement of employment conditions $1,529,928 $32,919 $24,409 $1,812,340 $258,036
Government Communications costs $20,000 $0 $0 $20,000 $2,848
Government Enforcement costs $97,500 $74,382 $53,034 $732,735 $104,325
All stakeholders Total costs $1,732,318 $172,063 $123,618 $3,203,046 $456,042
Monetized benefits
Impacted stakeholders Description of benefits Base year Other relevant years Final year Total (present value) Annualized value
Employees Savings in civil litigation $507,612 $387,255 $276,108 $3,814,825 $543,145
Employees Reimbursement of work-related expenses to employees $84,890 $64,762 $46,175 $637,971 $90,833
All stakeholders Total benefits $592,503 $452,018 $322,282 $4,452,796 $633,978
Summary of monetized costs and benefits
Impacts Base year Other relevant years Final year Total
(present value)		 Annualized value
Total costs $1,732,318 $172,064 $123,618 $3,203,046 $456,042
Total benefits $592,503 $452,018 $322,282 $4,452,796 $633,978
NET IMPACTS –$1,139,815 $279,953 $198,665 $1,249,751 $177,936

Small business lens

Of the total incremental costs to businesses associated with a higher level of employee reimbursements for work-related expenses, annualized costs of $88,880 are anticipated to be incurred by small businesses ($2021, 7% discount rate). This cost estimate is based primarily on road transportation, which is the sector with the highest anticipated cost impact — especially small trucking companies with fewer than five employees. The costs of work-related expenses are expected to be highest in the road transportation (e.g. costs of incidental automotive expenses), but the work-related expense claims in small businesses in other sectors like air transportation (e.g. uniform allowances, dry cleaning, etc.) sectors and in the postal and courier, railway transportation, telecommunications and marine (including longshoring) sectors are zero or insignificant because such expenses are often covered under the collective agreements already in place in these sectors. Further, these costs are related to compliance with the Code and will decrease as employers become familiar with the new regulations and regularize their reimbursement procedures with their employees (e.g. establish forms, collect receipts routinely). As these regulations are necessary to provide reimbursement to employees across the federally regulated private sector, as well as clarity about their employment conditions, no flexibility for small businesses is being introduced. During consultations, no additional flexibility for small businesses was requested.

Annualized incremental costs related to the development and distribution of the statement of employment conditions are estimated at $35,746 ($2021, 7% discount rate). This is significantly lower than the reported total amounts for all employers because the bulk of costs related to this provision accrue from their distribution to a high number of affected employees. Since employees working for small businesses only account for about 13.06% of all employees subject to Part III of the Code, the total costs to small businesses are much lower than costs to medium and large businesses.

Total annualized costs to small businesses stemming from these Regulations are estimated at $118,298 ($2021, 7% discount rate).

Small business lens summary
Compliance costs
Small businesses Annualized value Present value
Reimbursement costs to employers $88,880 $624,255
Development and distribution of the statement of employment conditions $35,746 $251,066
Total compliance cost $124,626 $875,321

One-for-one rule

The obligation to reimburse work-related expenses, as provided for under new provisions of the Code and the Regulations, will require that employers keep certain records. However, these requirements will not result in incremental administrative burden under the one-for-one rule, as their purpose is to process reimbursements and allow for an exchange of receipts or other proof of payments and reimbursements between employees and employers, facilitating compliance with the Code.

Regulatory cooperation and alignment

Reimbursement of work-related expenses

Five provinces currently allow for the recovery of employee-incurred work-related expenses under their employment standards legislation: British Columbia, Manitoba, Newfoundland and Labrador, Quebec, and Saskatchewan.

Although provisions in those jurisdictions that provide for the recovery of work-related expenses differ in many respects (e.g. the extent to which an employee may be required to pay some work-related expenses), they all provide recourse for employees who have not obtained a reimbursement to which they were entitled for work-related expenses, which the changes for federally regulated industries will also provide.

Statement of employment conditions

British Columbia and Newfoundland and Labrador both require a form of written statement to be given by employers that includes the terms and conditions of employment. While British Columbia requires the statement to include the duties, hours of work, wages, and charges for room and board included in the contract, Newfoundland and Labrador does not specify which terms must be included in the statement.

The European Union and other countries (e.g. United Kingdom, New Zealand) require similar information to be included in written employment statements, such as the parties to the employment relationship, job title and description, places of work, start date and tenure of employment, hours of work, and information related to payment of wages.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus (GBA+)

Labour standards are particularly important for those employees who are non-unionized and rely on legislation to ensure minimum standards in their work conditions, as well as those who are in non-standard, low wage jobs. The changes are likely to benefit all employees in the federally regulated private sector, though they may have particular benefit for male employees who make up a larger proportion of employees in both the federal jurisdiction as a whole and industries from which complaints of labour standards violations are more likely to be received.

Reimbursement of work-related expenses

Consultations with Labour Affairs officers (LAO) suggest that the majority of complaints recorded relating to expenses come from the road transportation industry. The majority of complaints are also made by males, and the road transportation industry as a whole is 84.5% male. Complaints relating to expenses in the road transportation industry are filed by drivers of all ages. The vast majority (95.1%) of employees in the road transportation industry is between 18 and 64 years of age. Above this age, however, the industry is even more male-dominated: men make up 91.3% of employees 65 years or older.

LAO have suggested, based on their experience addressing complaints, that it is common to receive them from drivers who are newcomers to Canada or for whom English or French is not their first language. Drivers filing complaints are often low-income earners that do not have a high level of education — for these reasons, they may be at greater risk of labour standards contraventions.

Small firms (1 to 5 employees) are also more male dominated: 79.5% of employees of all ages are male. Older employees of small firms (65 and older) are also more likely to be male (95.9%). The majority of small firms in the federally regulated private sector are in the road transportation industry. Additionally, employees of small firms and in the road transportation sector are more likely to be working non-unionized workplaces than the overall average in the federal jurisdiction.

The Regulations, because their effects will be felt most strongly in the road transportation industry, will have a greater beneficial impact on some groups — in particular those who make up the majority of employees who work for smaller firms in the road transportation industry. These employees, as described above, are more likely to be male, older, and working in non-unionized workplaces.

Statement of employment conditions

Non-unionized workers (up to 66.1% of federally regulated employees) will benefit from written employment statements. Ensuring that employers provide such statements may benefit young employees who, by virtue of their age, are likely to be early in their careers and, as a result, have less exposure to labour standards. Young employees are overrepresented in temporary, part-time, and other non-standard work, and are likely to disproportionately benefit from these Regulations.

Employees in the federal jurisdiction under 18 years of age (less than 1% of all employees) are more likely to be male (79.2%), and while the next age bracket up (18 to 24 years old, making up 5.7% of employees) is more evenly split — 64.2% male and 35.8% female — there are more men in that age bracket than women. Among small firms (1 to 5 employees), the gender split among employees younger than 18 is much more equal (51.2% male and 48.8% female). The next age bracket up (18 to 24 years old) is much more male-dominated (90.2% male and 9.9% female) among small firms.

Implementation, compliance and enforcement, and service standards

LAO will assess non-compliance with the new record-keeping requirements by conducting inspections, either proactively or in response to a complaint. Compliance will be achieved using a variety of approaches along a compliance continuum. This may include educating and counselling employers on their record-keeping obligations, seeking an assurance of voluntary compliance from the employer, or issuing a compliance order to cease the contravention and take steps to prevent its reoccurrence. To address more serious or repeated violations, an administrative monetary penalty under the new Part IV of the Code may be issued. To learn more about how AMPs may be issued, please consult the Administrative Monetary Penalties - Canada Labour Code, Part IV - IPG-106.

Coming into force

The Regulations will come into force on the day on which sections 486 and 502 of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, come into force. If they are registered after that day, they will come into force 60 days after the day on which they are published in the Canada Gazette, Part II.

The Labour Program will publish communications products, including social media posts and website changes, to help employers and employees understand their new obligations and entitlements under the new legislation and regulations. The Labour Program will also publish guidance material to support employers in complying with the legislative and regulatory requirements.

Contact

Annic Plouffe
Acting Executive Director
Labour Standards and Wage Earner Protection Program
Employment and Social Development Canada — Labour Program

Place du Portage, Phase II, 10th floor
165 De l’Hôtel-de-Ville Street
Gatineau, Quebec
K1A 0J9
Email: EDSC.DMT.ConsultationNTModernes-ConsultationModernLS.WD.ESDC@labour-travail.gc.ca