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What Canadian Employers Need to Know About Artificial Intelligence in the Workplace by 2026

Artificial intelligence is not the future anymore. It is here, reshaping workplaces, decision-making and the very way employers manage people. From resume screening and performance analytics to chatbots for employee support and predictive scheduling, AI tools promise efficiency, cost savings, and data-driven decisions but they also bring real legal and ethical challenges. If you are running a team in Canada in 2026, there are a few key legal realities you cannot afford to ignore.

Ontario's Initiative: Requirement for AI Disclosure in Recruitment Processes
Ontario leads the way as the first Canadian province to enact specific AI transparency rules in employment.

Effective January 1, 2026, under amendments to the Employment Standards Act, 2000 (“ESA”) via the Working for Workers Four Act, 2024, employers with 25 or more employees must disclose in every publicly advertised job posting whether artificial intelligence is used to screen, assess, or select applicants.

This applies to external postings advertised to the general public. The disclosure must appear in the job ad itself. The goal? Greater transparency for job seekers amid concerns about bias, opacity, and privacy in automated systems. Employers should err on the side of disclosure when in doubt, especially for third-party tools like applicant tracking systems with AI features.

Failure to comply could lead to ESA complaints, investigations, and potential fines or administrative penalties.

Other provinces watch closely; similar rules may spread if Ontario's approach proves effective.

A. Human Rights and Bias Risks
Even without dedicated AI statutes, existing human rights legislation applies forcefully. Both federal and provincial human rights codes prohibit discrimination based on protected grounds (race, gender, disability, age, etc.).

AI systems trained on historical data can perpetuate biases. For example, resume-screening tools that downgrade candidates with certain name patterns or penalize career gaps more common among women or caregivers.

The Ontario Human Rights Commission (OHRC), alongside bodies like the Information and Privacy Commissioner of Ontario (IPC), has issued the IPC-OHRC AI Principles emphasizing responsible AI use. Key expectations include:

• Conducting impact assessments for bias and human rights risks before deployment.
• Ensuring meaningful human oversight in significant decisions.
• Providing explanations for AI-influenced outcomes.
• Mitigating adverse impacts on protected groups.

Employers remain vicariously liable for discriminatory outcomes from AI tools, whether developed in-house or purchased. Proactive auditing of algorithms, diverse training data, and regular bias testing are essential risk-management steps.

B. Privacy Obligations Under Federal and Provincial Laws
AI thrives on data, but Canadian privacy laws set strict boundaries.

Under the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and provincial equivalents like Ontario's Personal Health Information Protection Act, 2004 (“PHIPA”) or Quebec's Law 25, employers must collect, use, and disclose personal information fairly and transparently.

Automated decision-making requires safeguards such as:

• Informing employees and candidates when AI processes their data.
• Limiting collection to what is necessary.
• Securing data against breaches.
• Allowing access, correction, and in some cases, withdrawal of consent.

Quebec's Law 25 already requires disclosure when decisions are made exclusively through automated means in certain contexts. When utilizing generative AI tools, such as for preparing performance evaluations, employers should ensure that sensitive personal information is not entered without appropriate safeguards in place.

AI extends into ongoing employment:

• Performance evaluation: Tools analyzing productivity data or sentiment from communications raise privacy and fairness issues.
• Monitoring: Keystroke logging or video analytics must comply with privacy and human rights standards; excessive surveillance can breach implied duties of trust.
• Discipline and termination: If AI flags misconduct or underperformance, human review is critical to avoid wrongful dismissal claims.

Best Practices for Canadian Employers in 2026

To navigate responsibly:

1. Review existing AI applications: Identify and document all areas within HR processes where AI is being utilised.
2. Update policies: Develop an AI governance policy covering ethics, bias checks, privacy, and human oversight.
3. Comply with disclosure rules: Make sure you follow disclosure rules, especially in Ontario and Quebec. Employers should review and update their job posting templates to ensure compliance.
4. Conduct impact assessments: Evaluate new tools and data for bias, privacy, and human rights compliance.
5. Train teams: Educate HR, recruiters, and managers on risks and responsible use.
6. Document decisions: Maintain records of AI involvement and human overrides.
7. Monitor developments: Watch for federal AI initiatives, provincial expansions, or OHRC/IPC guidance.

AI's rapid growth is set to encounter stricter regulations in 2026. Ontario's new hiring disclosure rule aims to increase transparency, while human rights and privacy laws address the existing federal shortcomings. Employers must use AI responsibly, with clear policies and oversight.

AI's rapid growth is set to encounter stricter regulations in 2026. Ontario's new hiring disclosure rule aims to increase transparency, while human rights and privacy laws address the existing federal shortcomings. Employers must use AI responsibly, with clear policies and oversight. Contact one of the lawyers at CCPartners to discuss further.

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