Case Study: A US Company's Hiring in Canada and Missed Employment Insurance Benefits

As the global marketplace continues to evolve, many US companies are exploring opportunities to expand their operations internationally. One of the most attractive destinations for these businesses is Canada, thanks to its proximity, shared language, and strong economic ties. However, hiring across borders comes with its own set of challenges. This case study examines how US companies are navigating these complexities to successfully hire in Canada and demonstrates those consequences when the right expertise is not retained.

Case Facts

A US company wanted to hire a remote staff member in Canada. Instead of using the expertise of a Canadian Employer of Record company, they decided to setup their own entity in Canada and administer payroll and HR matters for this staffer via this new Canadian entity. This entity was strictly setup for this sole employee. From the onset, all employment matters have been operating smoothly and it was perceived that the new entity creation was the right decision with relation to the onboarding of this new staff member. Of course this always feels like the case until issues arise without the proper awareness of what potential unfavorable and unforseen circumstances could rise.

Downfall

This arrangement with the new Canadian entity was operating for a few years. There was never any additional Canadian staff member so it was never perceived to explore further into employment and HR matters in Canada and its legal parameters and responsibilities.

However, it came a time for the US company to terminate the employment of this Canadian staffer due to a downsizing of operations. Unbeknownst to the US company, they felt a termination of employment simply meant a parting of ways without any further responsbilities.

Consequences - Missed E.I. Benefits

The Canadian employee was eligible for Employment Insurance (EI) benefits as the termination was without due cause nor for poor performance. However, a requirement for the application of EI benefits is for the previous employer to file a Record of Employment (ROE) form to Service Canada. The US company was unaware of their obligation to file and submit a ROE form via their Canadian entity. The Canadian employee was frustrated with the process and did not obtain the EI benefits eligible for him while in the pursuit of new employment.

Conclusion

In conclusion, while hiring in Canada presents certain challenges, US companies can overcome these obstacles by not simply understanding the legal landscape and understanding their legal obligations as a Canadian employer; but by also retaining the expertise of a Record of Employer. By doing so, they can successfully expand their operations and tap into a rich pool of Canadian talent.