Does my working remotely for a US company from Ontario create tax risk for my employer in Canada?

Potentially, yes, and this is a real risk many US employers underestimate when they hire their first Canadian remote worker. A "permanent establishment" is generally a fixed place of business or a person acting with real authority on a company's behalf in another country, and if your role in Ontario involves things like regularly concluding contracts on the company's behalf, or your activities go beyond purely preparatory or support work, your presence here could be treated as creating a permanent establishment for your US employer in Canada.

If that happens, the consequence isn't really about your personal taxes, it's that the US company itself could become exposed to Canadian corporate tax obligations on profits attributable to activities carried on through that Canadian presence, along with related compliance and registration requirements it likely hasn't set up for. This is a genuinely different question from whether your own salary is taxed correctly, and it's the employer's exposure, not yours, that's principally at stake.

Because this risk depends heavily on the specific nature of your role and authority, US employers with Canadian remote employees should get advice on how the position is structured, including limiting contracting authority or using an employer-of-record, rather than assuming a home-based employee is automatically low-risk.