It's not Paypal. It's a US law aimed at preventing money laundering.
pierrelebel has explained it several times.
You can open a USD account in a US bank, like the Royal Bank's Centaura or TDNorth. Put your US payments into that bank in USD. Then you can transfer them with just one exchange fee to your CDN dollar account with the Canadian parent bank .
The fees for having the USD account in a US bank may be much greater than the PP fees, however. If you do not have a full time business that is big enough to have employees (as a rule of thumb) you may not do any better with Centaura or TDNorth.
If you are a snowbird with a US address, you probably already have a US bank account for convenience. This may also work .