Authored by: Lisa Harris and Jessica Proudfoot
Section 238.1(1) of the Canada Labour Code came into force July 9th, 2023. This new section entitles federally regulated employees to be reimbursed by their employer for reasonable work-related expenses. The Canada Labour Code is the key governing legislation for federally regulated employers, including First Nations. This means First Nations employers who are not already reimbursing employees for work-related expenses need to change their practices to comply with federal regulations. Employers can face potential administrative monetary penalties if they fail to reimburse employees for these reasonable work-related expenses within specified times.
What is a Reasonable, Work-Related Expense?
Section of the Canada Labour Standards Regulations sets out the factors to consider for determining whether or not an expense is work-related and reasonable.
Factors for determining if an expense is work-related are whether the expense:
- is connected to the employee’s performance of work;
- enables the employee to perform their work;
- is required by the employer as a condition of employment;
- is imposed by an occupational health or safety standard; and
- is incurred for a legitimate business purpose, and not for the employee’s personal use or enjoyment.
Factors for determining if an expense is reasonable are whether the expense is:
- connected to the employee’s work;
- incurred to enable the employee to perform work;
- incurred at the request of the employer;
- incurred beyond what is necessary to enable the employee to perform work;
- normally reimbursed by employers in similar industries;
- authorized by the employer in advance;
- incurred by the employee in good faith; and
- supported by documentation such as an invoice or receipt.
There may be different rules that apply for unionized work environments. For example, no reimbursement is required for costs required by a collective agreement or pursuant to a written agreement between employee-employer that indicates there is no reimbursement required.
The federal government has prepared an Interpretations, Policies and Guidelines document (the “IPG”) to help employers determine which expenses might fall under the new provisions.
Reimbursement
The employer must follow the repayment timelines set out in the written agreement, the collective agreement, and if neither apply, the regulations. Under the regulations, the employer must provide the reimbursement within 30 days after the day on which the employee submits their expense claim.
Risk of Penalties
Failure to reimburse an employee pursuant to the new reimbursement provisions may result in significant administrative monetary penalties for employers (e.g. for each violation, a penalty in the range of $750 to $6,000, plus penalties for past non-compliance). The amount of the penalty will depend on various factors, including the size of the employer, the type of violation, and the history of non-compliance. In addition, employees may sue their employers for unpaid expenses.
Recommended Action
Federally regulated employers, including First Nation governments, should review their current:
- employee expense policies, and
- employment agreements,
for consistency with the revised Code, and in particular, the factors set out in the Canada Labour Standards Regulations and the IPG.
If there are inconsistencies (or you are unsure if your current policies and agreements are compliant), your Woodward and Company lawyer can provide advice.