Four-day work week: Canadian legal implications cannot be ignored

Thursday 21 September 2023

George Waggott
George Waggott Law, Toronto, Ontario

The move to a four-day work week has recently been gaining momentum in mainstream Canada, with workplaces continuing to fine-tune their post-pandemic schedules and working conditions.

In a study by recruitment firm Robert Half, 91 per cent of the senior managers surveyed said they would support four-day work weeks for their teams. Similar responses have emerged from workers, with nearly three-quarters of respondents saying that they would be pleased to work four 10-hour days in exchange for having an extra day of leave each week. Offering this option is also thought by some to support employee retention, productivity and well-being. As a result, the prevailing view in corporate Canada is that many companies are expected to transition to a shorter working week within the next five years.

The operation of a four-day work week can have substantial legal implications, which employers will need to review and address. As explained further below, the key issues include making sure there is clarity and express agreement about expectations, compensation and employee contractual arrangements.

What’s ‘the deal’ for a four-day work week?

A number of legal issues will arise based on the type of four-day work week an employer implements. The traditional approach has been to pay employees working a four-day week 80 per cent of the full salary offered for the same role on a full-time basis. The recent trend towards four-day work weeks typically involves having the employees work 100 per cent of the hours of a full-time employee, but compressing those hours into four days per week. The point may seem obvious, but it bears mentioning – this type of arrangement is not a part-time or partial work schedule. The employee is required to work the equivalent full-time hours. While there are other alternative methods of setting up a four-day work week, the key for employers is to make sure that employees are advised about and agree to the details of their schedule, compensation and related productivity expectations.

Contract claims: could it be constructive dismissal?

It’s possible that an employee moved to a four-day work week may claim that this amounts to a deemed dismissal by the employer, thus giving them the right to claim damages for termination. This could occur even if there is no resulting loss in pay. The key issue from the perspective of Canadian law is whether the relevant changes, when viewed objectively, amount to a fundamental change to the terms and conditions of employment.

Not all employees will want to be required to work additional hours across four days, and there could be associated repercussions from employees having to fit a full week’s worth of work into four days. As a result, employers will need to be mindful about how to address potential objections. The strategies available include: 1) obtaining employee consent to the change (which is likely going to be successful in many cases given what surveys indicate); 2) allowing employees to opt out of the four-day week by way of official notice to the employer; and 3) providing advanced notice about when the four-day work week will be implemented. Each case follows similar strategies as those implemented by Canadian employers regarding fundamental changes to employee compensation and schedules.

It is also important that employers set clear expectations from the outset with respect to whether the four-day work week will be a permanent change. To maintain flexibility and minimise the risk of potential legal claims, employers must ensure clear communication and advanced notice. Employers may want to consider a trial period, such as three or six months, during which the implications of a four-day work week are considered. This allows a level of ‘testing’ for both the employee and the employer. If the employer then wishes to revert to the standard five-day work week, there may be less concern after a trial period that there was some form of ‘broken promise’ that could be used to try to leverage an employee claim for severance. Indeed, several Canadian employers have found that after agreeing to flexible schedules and work-from-home arrangements in the context of the pandemic, it is often more difficult to revert to prior approaches regarding schedules and related expectations. Much of this risk can be minimised with clear notice, which outlines that the employer retains the right to make further changes based on genuine business reasons.

Overtime claims: new liability may arise

It’s possible that the implementation of a four-day work week may create new overtime obligations under applicable Canadian law and related employer policies. This makes it very important for the organisation to review applicable legislation as well as their own policies, and consider appropriate amendments to the extent legally permitted. Many employer policies have what Canadian employment standards legislation considers to be a so-called ‘greater right or benefit’ than prevailing legislated minimums. At times, this can mean that moving to a four-day work week may inadvertently expand the costs to the employer, including the amount of overtime due.

Some employers have daily overtime limits, such as eight hours per day, which exceed legislated requirements. Usually, a move to a four-day work week, if implemented properly, will involve a change to the participating employee’s ‘regular schedule’, meaning that there would not be any daily overtime requirement if the employee worked 10 hours a day as part of a four day per week schedule. If the employer does not intend to pay daily overtime for the ‘new normal’ schedule associated with a four-day work week, meaning the ninth and tenth hours of work in the new schedule, it will be important that overtime policies are changed, with employees receiving clear communication that additional overtime does not arise unless they work beyond the newly established schedule.

Potential human rights issues

The implementation of a four-day work week may give rise to human rights issues under applicable Canadian legislation. In particular, an employer that requires employees to work four 10-hour days may be challenged about the potential discrimination (likely indirect) this may give rise to. While the employer has the right, with notice or agreement, to implement the apparently neutral rule of a new schedule, this may have impacts that are protected under Canadian anti-discrimination laws. Employees may be able to claim that they are medically unable (for physical or mental health reasons) to work longer shifts. This could result in claims for special accommodation with respect to their circumstances (whether due to a disability or because of their status as a parent), which can lead to a request that would require the employer to revert to the five-day work week. In all cases, it will be essential that employers actively consider claims from employees who say that they are unable to work a four-day work week. If the reasons the employee provides go beyond mere convenience and extend to grounds protected by Canadian human rights law, then the employee’s needs will need to be properly considered and accommodated to the point of undue hardship.

Benefits plans: potential impact to coverage

In cases where a four-day work week is implemented, the employer-sponsored benefits plan may be impacted. There could be inadvertent changes to employee coverage and possibly also the level of benefits provided. Many third-party benefits providers base the eligibility for coverage on a stipulated schedule, which may be defined to include either being ‘full-time’ or working a minimum number of hours per week, which could require 40 hours of scheduled work. It will be important for the employer to review the amended employee schedule and pay arrangements to assess whether coverage is impacted. A related issue is that many employers offer short-term disability benefits, which are often tied to payment to the employee (often a percentage of wages) based on the employee's ‘regular’ working day. Any relevant plan provisions will need to be reviewed and potentially revised to align the benefits coverage with the actual arrangements contemplated by the four-day work week.

Right to disconnect

Since December 2022, Ontario has had rules in place that require certain employers with 25 or more employees to have a policy on the right to disconnect from work. These provisions are now a component of the Employment Standards Act. The right to ‘disconnect from work’ is defined to include not engaging in work-related communication, including emails, telephone calls, videos calls or sending and receiving messages. The workplace policy must set out the organisational approach and related guidelines for disconnecting from work. While these rules do not confer any substantive right on employees to ‘not work’, they do serve to put employees on notice about what times they are and are not expected to work. If a four-day work week is implemented, the default assumption for most employees is that they will be entitled to disconnect from work, and thus not obligated to communicate with their work colleagues or perform any work during the fifth (traditional) working day of the week. This change to working days likely requires relevant employers to review their ‘disconnecting from work’ policy, so that expectations regarding communications during the week are expressly outlined. This may also need to include a review of whether employees will be paid when they are contacted on what would otherwise be ‘disconnected time’.

Key takeaways for employers

The process of transitioning employees to a four-day work week is not just a simple matter of giving people an extra day off. Employers need to properly consider a number of legal issues, including whether there is a contractual and legal right both to make the change and to revert it in the future. There can also be unforeseen implications with respect to existing employer policies, including those relating to benefits and the right to be paid overtime. Certain employees may also have proper reasons to seek to opt out of a changed schedule, particularly if their circumstances involve a ground protected by applicable human rights legislation. None of this is to say that four-day work weeks are inherently bad. Instead, the key is to comprehensively consider the impact across the range of human resources and legal issues prior to proceeding. When done successfully, this can result in happier and more productive employees. On the employer side, this is obviously of interest, and can be achieved with proper planning and review.