PEI’s new Employment Standards Act is now in force: What employers need to do now
Murray L. Murphy, K.C., CPHR and Jacob E. Zelman
In our earlier update issued in March 2025 (At a glance: Key changes coming to Prince Edward Island’s Employment Standards Act), we flagged that Prince Edward Island’s new Employment Standards Act (“ESA”) had received Royal Assent on November 29, 2024, and outlined the key changes employers would need to prepare for. That day has now arrived. The new ESA came into force on June 30, 2026, and the companion regulations are in effect alongside it. The old ESA and its Exemption Regulations (EC574/17) are revoked.
This update moves beyond the overview we provided previously and sets out the practical steps employers across PEI should be taking right now to ensure compliance with this new legislation.
Who is covered
Before addressing specific changes, one threshold question has been resolved by the new regulations. The new ESA broadly exempts salespersons who derive their income primarily from commissions on their sales and farm labourers employed in a non-commercial undertaking; however, the pay-related provisions of the ESA still apply to both groups, along with enforcement provisions. Home care workers and employees of non-profit organizations who are required to live in a facility operated by their employer are not subject to the standard weekly hours provisions or the entitlement-to-pay provisions.
Practical note: Employers who employ any of these categories of workers and have been treating them as fully outside employment standards requirements should revisit that assumption; failing to apply the pay provisions to otherwise exempt workers creates real exposure.
Scheduling and hours of work
The maximum work week has dropped from 48 hours to 44 hours. Employers whose operations have been running on the assumption that regular full-time schedules could extend to 48 hours before overtime obligations arose will need to recalibrate.
The new ESA also introduces a written scheduling obligation. Employers must now provide employees with a written work schedule that specifies when work begins and ends, when shifts begin and end, when rest and meal breaks occur, and the number and timing of any overtime hours. The schedule must cover at least one full work week.
Employers running split shifts need to be aware that the full split shift must now be completed within 12 hours of when the first shift began. There is also a new requirement to provide employees with at least eight consecutive hours of rest in every 24-hour period, outside of unforeseeable circumstances.
Practical note: Many employers have historically operated without formal written schedules issued in advance. This is no longer an option. Failure to provide a compliant written schedule is a contravention of the ESA and can now be reported. Employers should strongly consider reviewing their scheduling practices and implementing a compliant system immediately.
Averaging agreements
The new ESA introduces averaging agreements, which allow an employer and employee to agree in writing to average work hours over a period of two to four weeks for the purpose of calculating overtime. This is a meaningful tool for employers with fluctuating or seasonal staffing needs who want to manage overtime costs while providing employees with scheduling flexibility.
Practical note: Averaging agreements must be in writing and agreed to by the employee. Employers in sectors with variable workloads, such as agriculture, tourism, and construction, should consider whether averaging agreements make sense for their workforce.
Minimum wage posting
Orders from the Employment Standards Board setting minimum wage must now be posted at least six months before they come into force. This is a significant change from the previous fourteen-day posting window and gives employers considerably more lead time to adjust payroll and pricing.
Pay statements and tips
Pay statements must now include the gross amount of any holiday pay and the gross amount of any pay for any paid leave being taken. Employers who pool tips or gratuities must now post a copy of their tipping policy in a location where employees can see it.
Practical note: Employers whose businesses pool tips must now post their policy. If payroll software does not currently break out holiday pay and paid leave pay as separate gross line items on pay statements, employers will need to work with their payroll provider to make that change.
Vacation
The threshold at which employees reach the higher vacation entitlement has been reduced from eight years to five years of service. This means some employees will reach enhanced vacation entitlements sooner than they would have under the old ESA.
Where an employer and employee cannot agree on when vacation is to begin, the employer may now unilaterally set the vacation commencement date and notify the employee. Part-time employees may elect to waive future entitlement to paid vacation and may also elect not to take vacation at all.
Practical note: Employers should audit their workforce for employees with between five and eight years of service. Those employees may now be entitled to greater vacation benefits than employers have been providing.
Paid sick leave
As we noted in our March 2025 update, the new ESA introduces paid sick leave on a graduated basis. An employee employed for at least 30 continuous days is now entitled to four days of unpaid sick leave per year. Paid sick leave accrues for employees who have been continuously employed for at least one year as follows: one paid sick day in the second year of employment; two paid sick days in the third year; and three paid sick days in the fourth year and each year after that.
Unused sick days do not carry over. If an employee takes more than five consecutive sick days, a medical note from a qualified practitioner is required. The new ESA broadens the definition of “qualified practitioner” to include any person registered or licensed to practice a health profession under an applicable enactment, as long as the diagnosis falls within the scope of their practice.
Practical note: Employers that have not previously offered paid sick days must update their policies. The practical cost will vary depending on workforce size and employees’ term of employment, but the obligation is immediate. Paid sick leave entitlements also apply to unionized employees under collective agreements.
Medical leave
An entirely new medical leave provision has been added to the ESA. An employee who has been continuously employed for at least 90 days is entitled to up to 27 weeks of unpaid medical leave to recover from or receive treatment for illness or injury, organ or tissue donation, gender-affirming care, or any other condition or treatment that prevents the employee from working for an extended period. A note from a medical professional is required.
Practical note: This is a brand-new entitlement that did not exist under the old ESA. Employers may wish to add a medical leave policy to their handbooks and revisit operational capacity to accommodate absences.
Family leave
The eligibility period for family leave has been reduced from six months of continuous employment to 30 days. Employees are entitled to three days of family leave per year, and those days cannot be carried over. The expanded definitions of “immediate family member” and “family member” in the new ESA broaden the range of relationships that can trigger this entitlement, including stepchildren, spouses’ siblings, aunts, uncles, nieces, nephews, children-in-law, and persons with a relationship akin to a close relative.
Practical note: The shortened eligibility threshold means more of an employer’s workforce will qualify for family leave sooner. Employers should review their leave tracking processes and update their definitions accordingly.
Leave for domestic violence, intimate partner violence or sexual violence
The new ESA confirms that employees continuously employed for at least 90 days are entitled to three days of paid leave and seven days of unpaid leave under this provision. When an employer requests supporting evidence, the employee must now provide written evidence. The regulations clarify that evidence can come from a wide range of sources, including social workers, registered nurses, police officers, and spiritual leaders.
Practical note: Employers should update their leave policies to reflect both the written evidence requirement and the breadth of acceptable sources. A policy that sets an inappropriately narrow evidentiary bar will not be compliant.
Emergency leave
“Communicable disease” now has a definition in the ESA, which fills a gap that existed in the previous version. The new ESA also clarifies what evidence an employee must provide to support a claim for emergency leave. In most cases, the employee provides whatever communication or information from a public health official they are relying on. As a last resort, the employee may provide a written statement describing the circumstances.
Citizenship ceremony leave
Employees who have been continuously employed for at least 90 days are now entitled to one day of unpaid leave to attend a citizenship ceremony and receive a certificate of citizenship.
Sexual harassment
The Sexual Harassment section from the previous ESA has not been brought forward into the new ESA. Responsibility for addressing sexual harassment in the workplace now sits within the Occupational Health and Safety Workplace Regulations. Employers should confirm their existing sexual harassment policies and procedures align with those regulations.
Termination and notice requirements
Our March 2025 update flagged that the entitlement period for notice of termination was being reduced from six months to 90 days of continuous employment. That change is now in effect, as is the revised notice scale:
| Length of continuous employment | Required notice |
|---|---|
| 90 days or longer, but less than 1 year | 1 week |
| 1 year or longer, but less than 5 years | 2 weeks |
| 5 years or longer, but less than 10 years | 4 weeks |
| 10 years or longer, but less than 15 years | 6 weeks |
| 15 years or longer | 8 weeks |
The new ESA confirms that vacation time to which an employee is entitled cannot be counted as part of a required notice period.
Employers terminating 10 or more employees who represent at least 25% of the workforce within a continuous two-month period must now provide six weeks’ notice to those employees, any trade union representing them, and the Minister. The notice must include the number of employees affected, the effective dates, and the reasons for the termination or layoff.
Practical note: Employment agreements must be updated to ensure termination provisions apply with all minimum standards.
The group termination provision is new and catches many employers off guard. Employers contemplating a significant restructuring or reduction in force should strongly consider seeking advice before issuing any notices. The notice obligations to the Minister are particularly important and are easy to overlook.
Key definitional changes worth noting
The definition of “work” has been expanded to include trial periods of employment, employer-required training, and time spent being available to work at a location designated by the employer (other than the employee’s own home). The definition of “termination” has been updated to mean the ending of an employee’s employment by the employer, removing any ambiguity around what constitutes a termination under the ESA.
Practical note: The inclusion of on-call time at an employer-designated location as “work” has direct implications for wage and hour obligations. Employers with employees required to be physically present and available at a work site should note that such time may now count as work for ESA purposes.
Enforcement: The rules have changed
The enforcement regime under the new ESA is materially more robust than what existed before. Any person with reasonable grounds to believe that a contravention has occurred may now report it to the Chief Inspector. This is not limited to the employee directly affected. The limitation period for complaints is two years from the date of the alleged contravention, up from 12 months.
Practical note: The combination of a longer limitation period, broader standing to complain, and expanded inspector powers means the consequences of non-compliance are significantly higher than they were before. The time for employers to audit their practices is now, not after a complaint is filed.
Reprisal protections
The new ESA consolidates the anti-reprisal protections into a single provision. Employers cannot take action against an employee for inquiring about pay, disclosing pay information, inquiring about their rights under the ESA, exercising or attempting to exercise those rights, providing information to an inspector, making a complaint or report, or participating in a proceeding under the Act or regulations.
Practical note: If a complaint is filed and an adverse employment action follows, the timing will attract scrutiny. Employers should ensure that any performance or disciplinary decisions made around the time of a complaint are well-documented and clearly disconnected from the complaint itself.
What you should be doing now
The new ESA requires attention across employment contracts, policies, handbooks, payroll systems, and a range of other employment practices. The following are the most urgent steps for PEI employers:
- Review and update your employment agreements, handbooks, and policies to reflect the new notice periods, overtime thresholds, the expanded definition of work, and leave entitlements.
- Review your scheduling practices and implement a system for providing written work schedules that meet the new requirements.
- If you pool tips, post your tipping policy.
- Update your payroll system to ensure pay statements correctly itemise holiday pay and paid leave pay as separate gross amounts.
- If you employ workers in categories that may be affected by the exemptions (salespersons on commission, farm labourers, home care workers), review which provisions apply to those employees.
- If you are considering a significant workforce reduction, seek advice before taking any steps.
Our Labour and Employment Group has been advising PEI employers on the transition to the new ESA since the new legislation received Royal Assent. We are ready to assist with employment agreement updates, policy and handbook revisions, training for HR teams and managers, and advice on specific situations arising from the new requirements.
This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact the authors, or a member of our Labour and Employment Group.
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