Does my US employer have to withhold US tax on my paycheque if I live and work in Ontario?

No, generally not, if you're a Canadian resident performing all your work physically in Ontario, your US employer generally shouldn't be withholding US federal income tax on your wages, because that income is properly sourced to Canada rather than the US, and the same treaty principles that give Canada the right to tax your employment income mean the US withholding regime isn't the correct one to apply here. A US employer withholding US tax on a genuinely Canada-based remote employee is usually a payroll setup error, not a legal requirement.

The correct approach is generally for the employer to set up Canadian payroll withholding, Canadian income tax, along with CPP and EI as applicable, for an employee who lives and works in Canada, rather than simply running them through the existing US payroll system because that's what the company already has in place. Many US companies hiring their first Canadian remote employee get this wrong initially, sometimes using a payroll service or an employer-of-record to handle the Canadian side properly.

If US tax has already been withheld incorrectly, there are ways to recover it, but the better fix is getting the employer to correct the payroll setup going forward so the problem doesn't recur every pay period.