Canada: Key Changes To Employment Standards Regulations

Last Updated: December 18 2017
Article by James C. Lingwood

Last week, the government (by Order in Council 441/2017) amended the Employment Standards Regulation (AR 14/97) and thereby provided some greater certainty as to how the changes to the Employment Standards Code will impact employers.

The Alberta Legislature recently passed Bill 17 which made significant changes to the Labour Relations Code and to the Employment Standards Code.

The amendments to Alberta's Employment Standards Code left unanswered a number of questions such as how the new legislation might apply to specific industries, how time should be calculated for overtime averaging agreements, and how parental leave was expected to align with employment insurance benefits.

The amendments to the regulation provide answers to many of the questions raised, and provide employers and employees with a new framework and set of responsibilities. We provide a summary of some key changes employers will not want to overlook:

Administrative Penalites

The new scheme allows employment officers to fine employers with "administrative penalties" for breaches of the Employment Standards Code and regulation. The penalty may be appealed by an employer to an "appeal body".

The minimum amount of the fines range from $500 to $6,000. The minimum fine is determined by which provision(s) is(are) breached and by whether the employer is a "repeat offender" or fails to comply with a direction to fix the contravention.

Creation of Flexible Averaging Agreement

One of the most important aspects of the amendment is the creation of "flexible averaging agreements". These agreements are only available for full-time employees who work 35 hours or more hours per week and must be requested by the employee.

The agreements can only be for 1 or 2 weeks. They allow employees to bank flex time to be used on a one hour off for one hour worked basis. An employer and employee can agree to an extended daily overtime threshold - meaning that additional hours can be worked over the normally scheduled hours up to that threshold (up to a maximum of 10 hours per day) without overtime being owed. Any "flex time" worked up to that threshold can be taken as paid time off (on a 1:1 ratio) during the 1 or 2 week averaging period. The agreement does have to be formally documented.

This is a poor replacement for the past overtime agreements which were much more flexible, but it still provides some advantage to employees who want the ability to work some longer days and to have time off in lieu. It is also an advantage to employers who are otherwise required to provide time off in lieu at a rate of 1.5 hours for every hour of overtime.


The Basics

Effective January 1st, 2018, the amendments to the Employment Standards Code will eliminate compressed workweeks and introduce the requirement for "hours of work averaging agreements". These are in addition to the Flexible Averaging Agreements.

The new legislation allows an employee (or several employees) to enter into a written averaging agreement. An averaging agreement allows an employer to average an employee's hours of work over a period of one to 12 weeks for the purpose of determining an employee's entitlement to overtime pay.

Scheduled hours of work must still remain at or below 12 daily hours (each day) and 44 weekly hours (averaged across the averaging period).

Calculating Overtime Under an Averaging Agreement

The regulation provides some important clarifications as to how these agreements will operate. The first important clarification is the entitlement to daily overtime. The changes to the regulation explain that an employee under an averaging agreement is entitled to daily overtime in two scenarios:

  • If the employee is scheduled to work less than 8 hours in a day (under an averaging agreement), then the employee will be entitled to receive overtime only when the employee works more than 8 hours in that day (not merely when the employee works more than scheduled).
  • If the employee is scheduled to work more than 8 hours in a day (under an averaging agreement), then the employee will be entitled to receive overtime only when the employee works more than the scheduled number of hours in that day.

The regulation also explains that an employee is entitled to weekly overtime when the average number of hours worked per week (averaged across the period of the averaging agreement) exceeds 44 hours per week.

As always, an employee is entitled to the greater of the total daily overtime or the weekly overtime. For example, if an employee was on a 5 week averaging agreement to work 44 hours per week, but ended up working 46 hours per week (with no daily overtime) then the employee would be entitled to 2 hours of overtime for each of the 5 weeks (i.e. 10 hours).

Overtime is calculated and paid every pay period, which means that the calculation of overtime may occur in the middle of an averaging agreement. This is not an issue for paying employees on the basis of daily overtime – which should be done. If ,at the end of an averaging agreement, the employee has greater weekly overtime than the daily overtime he or she received, then the employer must make up the difference.

Fixed Work Schedule

One question facing employers prior to these amendments was whether or not an employer need only identify the number of hours to be worked in a week or whether the averaging agreement had to specify a work schedule.

The new regulations confirm that the latter is true – an averaging agreement must specify a single work schedule (whether it is for a group of employees or an individual employee). This means that an averaging agreement must identify all work days and the number of hours to be worked on each of those work days for each week in the schedule.

Employers are entitled to make temporary changes to the work schedule provided that the employer notifies the employee at least two weeks in advance of the day(s) affected. If an employer fails to provide notice, an employee is entitled to overtime for any hours over 8 in a day, irrespective of what the schedule states.

An employer does not need to provide notice of a change to an averaging agreement work schedule where there is an accident, where urgent work is necessary, or where other unforeseen or unpreventable circumstances brought about the need for a change.

Make-Up for Missed Shifts

If an employee works an unscheduled day to make up for his or her absence on a scheduled day during an averaging agreement, the "make up day" is treated as if it was the missed day.

Cancelling Averaging Agreements

As mentioned, the averaging agreements require both employee and employer consent. As a corollary, either the employee or the employer may cancel the agreement at any time. The cancellation takes effect 30 days after the employer or employee provides notice to the other party.

Posting Agreements

Employers are required to post any averaging agreement (or amendment to such an agreement) on the employer's website (if it has one) and at least one conspicuous place in the workplace (where it can be viewed by employees affected) before the averaging agreement (or amendment to an averaging agreement) takes effect.

The employer must also provide a copy to each employee under the agreement.

Maternity Leave & EI

The amended regulation has increased the period before the expected delivery date during which an expectant mother may commence her maternity leave and the amount of this leave. Maternity leave is now 16 weeks and may commence at any point during the 13 weeks immediately prior to the expected delivery date.

The period of parental leave has been increased to 62 consecutive weeks. This must occur within the 78 weeks after the child's birth or adoption, and must commence immediately following the last day of maternity leave in the case of the employee/mother.

Group Terminations

Fortunately the regulations have confirmed that an employer does not need to give a notice of group termination (notification to the Minister of Labour if an employer intends to terminate 50 or more employees within a 4 week period) if the employees are being dismissed as part of a seasonal business or where the employees are being let go at the end of a fixed-term or fixed-task contract. This will be beneficial to those employers in seasonal businesses as well as those employers engaged in construction and similar task-based ramping up and down of a workforce.


Some employers will be pleased to note that the regulations allow them to submit a request to the Director of Employment Standards for variances from certain legislated requirements. These include:

  • Extending hours of work beyond the 12 hour daily maximum
  • Extending the maximum number of consecutive work days
  • Extending "hours of work averaging agreements" beyond the 12 week maximum
  • Reducing the minimum amount payable to an employee who is called in to work for 2 or 3 (depending on the type of employee) consecutive hours

Before granting a variance, the Director will consider:

  • the employer's compliance with employment standards and occupational health and safety legislation
  • the reasons for the request
  • whether there is union/employee support and
  • the impact the variance could have.

In addition, the Minister of Labour has the power to grant a variance or exemption from any part of the Employment Standards Code and the regulations. The Minister of Labour will consider the same factors as the Director.

Restrictions on Youth Employment

Employers are now subject to restrictions on when and for how long young persons may be employed. 13 and 14 year olds may not be employed for more than 2 hours on a school day, for more than 8 hours on any other day, or at any time from 9pm through to the following 6am.

15 year olds may not be employed from 12am through to 6am.

15, 16, and 17 year olds may not be employed from 9pm through to 12am at retail businesses (including places where food and drink are sold), gas stations, and hotel/motels unless they are accompanied by another employee who is at least 18 years old.

After 12am (through to 6am), 16 and 17 year olds may not be employed at retail businesses at all. However, they may be employed at other businesses during this time if the parent or guardian provides the employer with written consent and the 16/17 year old is accompanied by another employee who is at least 18 years old.

Job-Protected Leaves

As promised by the Ministry, the regulations now provide a lengthy list of "family members" for the purposes of the family responsibility and person leave provisions provided in the Employment Standards Code.

Critical Illness Leave

While the amendments to the Employment Standards Code allowed for unpaid leave for parents of a critically ill child (up to 36 weeks), the regulation has extended this benefit to those who must care for a critically ill adult family member (up to 16 weeks).

Changes to Definitions of Insurance Agents & Securities Salesmen

Previously, employers of salesmen (under the Securities Act) and 100% commission-paid insurance agents were excluded from the requirement to provide certain minimum benefits to those employees, namely hours of work records, holiday and vacation pay and minimum wage.

As a result of the changes, employers of "Salesmen" under the Securities Act are no longer excluded from these obligations. Instead, only those employers who are either a "dealer" or an "adviser" (under the Securities Act) are excluded from these obligations for employees who make trades in securities/derivatives for that dealer or adviser.

In addition, while entirely commission-based insurance agents (those holding an insurance agent's certificate) were previously excluded, the definition has been expanded to include those holding a "restricted insurance agent's certificate" where the employee is paid entirely by commission.

Ranching and Farming Operations

The amendment has some special provisions for employees and employers in farming and ranching operations. These provide for unique periods of rest and holiday pay:

  • Periods of rest (4 days of rest for every 28 consecutive work days)
  • Holiday pay required for employees not working on a general holiday (4.2% of wages, vacation pay and general holiday pay earned by the employee in the previous four weeks)
  • Employees working on a general holiday are entitled to regular pay plus either:
    • an equivalent day off with holiday pay (4.2% of wages, vacation pay and general holiday pay earned in the previous four weeks) within 30 days (or longer where agreed); or
    • Holiday pay on that day – in addition to regular pay – calculated as 4.2% of wages, vacation pay and general holiday pay earned by the employee in the previous four weeks.

Note that the amendments to the Employment Standards Code do not treat all farm workers as "employees" under the Code and regulations and there are certain exceptions for family members and owners of the operations.

Deductions from Earnings

Previously, employers were entitled to deduct an employee's wages/earnings to cover the cost of providing, using, repairing, or laundering clothing (which the employer required the employee to wear) – so long as the deduction did not result in an employee receiving less than minimum wage.

The Government has altered this to make a blanket prohibition on employers deducting wages/earnings to cover the cost of providing, repairing, using, or cleaning clothing which the employer requires the employee to wear. Employers seeking monies to cover these costs must receive payment directly from employees and not through reductions to pay.

In addition, the Act and Regulations now make it clear that employers are prohibited from making deductions from an employee's pay for "faulty work", even with an authorization. "Faulty work" includes any act or omission of an employee that results in a loss to the employer.

While these are some of the most critical changes, we stress that these represent a summary and should not be taken as legal advice. We strongly encourage employers with questions relating to the application of any of these changes (or any employment-related advice) to seek independent legal guidance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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