Chapter 5: Enforcement and administration
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5.1 Goals and objectives
Chapter 2 of this report sets out the Principles informing this review. Some are worth highlighting here as they have particular relevance to our recommendations.
5.1.1 Fostering a culture of compliance
It is of utmost importance that there be a respect by all Ontarians for the laws governing the workplace, and that as a society we recognize the importance of compliance with the law. As Ontarians, we need to foster a culture where compliance with minimum terms and conditions of employment is widespread – a culture of compliance. Rules that are easy to understand and administer and that provide workplace parties with compliance tools, together with enforcement that is consistent, are key to achieving these objectives. In a society where there is a culture of compliance, both employers and employees would be reasonably aware of their legal rights and responsibilities, and the law would be easy to access, to understand and to administer. The objective would be to provide employees with the minimum requirements that the law demands and employees would be aware of their rights and would feel safe in asserting them. The failure to provide the ESA’s basic rights would not only be legally impermissible but culturally and socially unacceptable. There would be a strong element of deterrence in the system as those who engaged in deliberate flouting of the law would be dealt with by not only having to make restitution, but also being liable for significant administrative monetary penalties.
As stated above, moving towards a culture of compliance requires focus on a number of
included objectives. These include:
1. Increased awareness by employees and employers of their legal rights and responsibilities
Among other things, this requires education and outreach. Increasing awareness of rights of employees and obligations of employers is a vital part of achieving a culture of compliance. Employees who know their rights will expect their employers to observe them. Employers who understand the rights of their employees and their obligations as employers are more likely to comply with the law.
2. Increased protection for employees who exercise their rights
In order to achieve a culture of compliance, it is vital to provide protection to employees to allay fears of reprisal and to respond effectively when reprisal or threats of reprisal occur.
3. Strategic enforcement
If achieving a culture of compliance is a rational objective, new enforcement strategies are required to work towards this outcome. The adoption and implementation of more strategic enforcement initiatives is critical to achieving a culture of compliance. It also requires an assessment of the efficacy of a policy requiring the investigation of all complaints.
4. Access to justice
Combining a complaint driven process with other strategies for enforcement should not be at the expense of access to justice. Our recommendations recognize and suggest ways to reduce barriers to access to justice.
5. Consistent enforcement
Consistent enforcement will help ensure a level playing field for business. A level playing field
ensures that all those who are similarly situated should be regulated according to the same rules, and that the law should guarantee equal protection for all its intended beneficiaries. A level playing field
serves to protect not only workers but also the majority of fair-minded employers who wish to meet their legal obligations without the risk of being undercut by those who do not. Clear laws, effective oversight, consistent interpretation and certainty of enforcement are critical to ensuring observance of the level playing field principle.
6. Stronger sanctions and deterrence
Voluntary compliance approaches should be preferred in dealing with non- deliberate non-compliance or where an employer is willing to eliminate non-compliance. Fines and penalties sufficient to deter non-compliance must be an integral part of achieving a culture where the law is respected and compliance is normative.
While our recommendations do not fit into neat categories, we have grouped our recommendations into sections that focus on some specific objectives.
5.2 The extent of and reasons for non-compliance
A report by the Law Commission of Ontario (LCO) confirms the conclusion that
most employers are compliant with the legislation
In their research paper prepared for the CWR, Vosko, Noack and Tucker advise that the existence of complaints does not always accurately reflect the number or source of violations. However, in our view, complaint patterns and outcomes can nonetheless be helpful in considering compliance issues.
Complaints related to the accommodation and food services industry are most likely to have violations, with 78% of assessed complaints resulting in violations (see Appendix B, Table 1.3). Violations are also more likely to be found for complaints filed against small firms. The difference between large and small firms is most noticeable when comparing complaints relating to firms with 1-5 employees, that have a violation rate of 80%, and complaints relating to firms with more than 200 employees, which have a violation rate of only 49% (see Appendix B, Table 1.4). The vast majority of these violations relate to monetary complaints. Among assessed complaints, 69% included monetary violations, and only 1.6% included non-monetary violations. The percentage of assessed complaints that result in a violation declined slightly in the 2014/15 year, though it is too soon to say whether this is part of a trend.
Simply put, there are too many people in too many workplaces who do not receive their basic rights.
A variety of factors contribute to non-compliance. Ignorance by both employees and employers of their rights and obligations contributes to non-compliance.
Many small employers and employees have no idea what the ESA requires. Educating employers about their responsibilities is as important as educating employees about their rights. The complexity of the law may contribute to a lack of understanding of the rights and obligations in the ESA, thereby exacerbating non-compliance. Some employers have an uncaring attitude towards their obligations and responsibilities and do not regard them as important enough to ensure compliance. Some employers violate the law as part of a deliberate business strategy - including situations where they think that their competitors are not complying. Some employers are confident that because their employees will not complain and the likelihood of government inspection is very low, non-compliance is a risk worth taking, calculating that if they are caught, they can extract themselves from the legal consequences of non-compliance without much difficulty and with trivial costs. The literature is also clear that fear of reprisals reduces the number of complaints that are made by employees. Unfortunately, there is a widespread fear of reprisal among employees if they complain about violation of their ESA rights
5.3 Strategic enforcement – a combination of existing and new approaches
Strategic enforcement involves a set of policies and practices that have the goal of changing employer conduct so that breaches of the Act do not occur. It is designed to address non-compliance at a systemic level and not only on the basis of complaints. This is a change in emphasis that is required as a result of the changed workplace. As David Weil stated:
The changing workplace environment … requires new, more strategic approaches to enforcement. Strategic enforcement policies aim to change employer behavior so that practices that result in underpayment of wages do not occur in the first place. This requires addressing the underlying factors that lead to lost wages and other violations of labor standards. Strategic enforcement also entails changing behavior of employers at the market level, rather than on a case-by-case basis.
In his research paper for this Review, Professor Kevin Banks described an integrated enforcement strategy with a variety of important elements in the toolkit of the Ministry of Labour including education, proactive auditing, and the effective use of deterrents and remedies:
An effective compliance and enforcement strategy will … seek to inform about, strengthen normative commitment to, and detect, deter and where possible address systemic root causes leading to violations of employment standards. Doing this requires a tool kit that combines information dissemination, outreach, persuasion to voluntarily comply, proactive detection of non-compliance, and enforcement of deterrent remedies and sanctions. Deploying these tools effectively to increase compliance requires intelligence gathering and the capacity to evaluate alternative strategies.
David Weil and others argue that changes in the structure of the economy and in the complexity of employment relationships, together with the decline in unionization have meant that the traditional complaint driven approach to enforcement is less and less effective. Weil put it this way:
The employment relationship in many sectors with high concentrations of vulnerable workers has become complicated as major companies have shifted the direct employment of workers to other business entities that often operate under extremely competitive conditions. Thisfissuringor splintering of employment increases the incentives for employers at lower levels of industry structures to violate workplace policies, including the FLSA. Fissuring means that enforcement policies must act on higher levels of industry structures in order to change behavior at lower levels, where violations are most likely to occur.
Strategic enforcement is increasingly important when the workplace environment is becoming more complex and governments with limited resources are faced with high public expectations. The Ministry must adopt proactive strategic enforcement tools to detect and target systemic violations of the act across the economy and in particular sectors. Responding to individual complaints alone cannot form a primary basis for enforcement and will leave most breaches of the Act undetected.
The Ministry of Labour currently utilizes enforcement strategies in addition to individual complaint investigation. Inspections, targeted and otherwise, have shown the impact of strategic enforcement strategies as a supplement to the investigation of individual complaints and an analysis of current inspection practices illustrates their effectiveness.
5.3.1 Proactive inspections
A good starting point in the discussion of inspections is Professor Banks:
For good reasons, the literature is essentially unanimous in concluding that labour standards compliance and enforcement agencies need to proactively and strategically detect and target non-compliance.
As discussed above, the need for proactive detection arises because many workers are unlikely to complain about violations of their employment standards rights during the life of the employment relationship, or at all. Moreover, as Weil points out: Although most complaints relate to real problems, there is nothing to say that they represent problems of the highest order if compared to the dog that doesn't bark- that is, those workplace problems which may exist but which, for one reason or another, are not reported via complaint processes. … Complaints are often driven by specific problems facing particular workers. They may or may not be related to more systemic issues. And even if they are, investigations arising from a complaint process may not be perceived as part of a wider systemic problem. This compounds their reactive nature.(Weil, 2008, at 356).
… relying on complaints or legal actions to detect violations leaves much if not most non-compliance undetected. Without risk of detection, there can be little deterrence. To the extent that education and information initiatives are not enough to correct non-compliance, as is likely often the case, it will persist without remedy.
The conduct of inspections should be a continuing and increasingly important focus of enforcement strategies. An effective proactive inspection program should detect and deter non-compliance. To quote Banks:
The consensus in favour of increased proactive inspection is essentially based on evidence of significant non-compliance … and the proposition that proactive inspection is the most effective available means of addressing non-compliance not detected through complaints. … Proactive inspection campaigns can, if properly targeted, achievewholesale-leveleconomies of scale that cannot be matched byretailinterventions in response to particular complaints. Further, the use of targeted campaigns stands to have a deterrent effect as it increases the risk of non-compliance detection.
There is general agreement among experts and Ministry officials that proactive enforcement is a more effective mechanism for ensuring ESA compliance than relying on individual employees to file claims. It is a laudable goal of the Ministry of Labour to increase the number of proactive inspections it conducts, but the ability of the Ministry to conduct inspections is tempered by dedicating resources to the investigation of individual complaints.
In determining which employers to inspect, the Ministry relies on a variety of factors including:ESOinformation obtained while investigating a claim; a history of contravening the ESA; information received from employees and third parties; whether the employer is part of a targeted sector; and analysis of data to develop
Vosko, Noack and Tucker, in their CWR research paper, assess the utilization of different types of inspection and their effectiveness. They divide inspections into three categories: expanded investigations, targeted inspections, and regular/other inspections.
Expanded inspections are triggered by an individual complaint and occur when there is an indication that an ESO should assess the workplace more fully by conducting an inspection. Targeted or blitz inspections are determined at the provincial level, and typically take the form of blitzes directed at a particular industry, occupational group or form of employment. In contrast, regular inspections are largely determined either by individual ESO IIs or regional or district offices on the basis of local conditions and are unconnected with blitzes.
This categorization is not complete as there are other inspections that are initiated by the Ministry. The authors point out that:
the Ministry of Labour tracks several other types of inspections, including re-inspections of previous violators, inspections as a result of participating in a self-assessment (compliance check) and random selections.
Expanded investigations detect the highest rates of ES violations; fully 82% of such inspections find infractions… targeted and regular inspections … detect violations 72% and 70% of the time… Expanded investigations also yield the highest levels of monetary violations (overall about 46%), whereas targeted and regular inspections find monetary violations 36% and 38% of the time respectively.
Vosko, Noack and Tucker also observe that:
…there appears to be no particular relationship between the type of inspection and the standards for which violations are found, with the exception that expanded investigations tend to detect violations of overtime pay requirements more frequently. For inspections overall, violation rates are lowest for firms with 50 or more employees (about 68%) and highest for firms with 11 to 19 employees (79%).
Professor Banks summarizes the impact of inspections:
Proactive inspections provide an effective means of detecting and remedying non- compliance. The LCO notes that in 2011-12, Ministry figures show that 83% of such inspections detected violations (LCO 2012, at 56). Vosko, Noack and Tucker (2016, Appendix B, Table 3.1a) find that the proportion of inspections that detected violations ranged from 75% to 77% in the years between 2011/12 and 2013/14, but dropped to 65% in 2014/15. They also point out that 92 to 99 per cent of confirmed unpaid wages were recovered through proactive processes, much higher than the 60% more typical in complaints investigations, though, as Ministry officials suggest, this difference is likely due in part to a higher proportion of insolvent employers among the population of employers that is the subject of complaints. (Vosko et al. 2011; LCO, at 54) Regular enforcement sweeps also provide low risk opportunities for workers to voice their complaints of alleged non-compliance (Vosko, 2012, at 873).
With respect to targeted inspections, the evidence is they are of significant importance in detection and deterrence. Professor Banks reports that:
… the literature is also unanimous in concluding that proactive inspection and enforcement should be strategically targeted. In this respect recent analyses have been guided by Weil’s seminal 2010 report to the United States Department of Labor (Weil 2010). Weil argues that enforcement activity should be targeted at particular industrial sectors and geographic locations according to three priorities: (1) concentration of vulnerable workers; (2) likelihood of complaints in relation to extent of non-compliance, i.e. sectors where workers are particularly unlikely to file complaints and in which non-compliance is likely to be relatively high; and (3) likelihood that enforcement and compliance action can change behavior (Weil, 2010, at 75; LCO 2012, at 64; Howe, Hardy & Cooney 2013, at 136). In recent years the US Department of Labor has explicitly targeted industries with higher concentrations of vulnerable workers (Weil, 2011, at 49).
Targeted inspections can influence the behaviour of others in the same line of business and beyond. Weil:
But other investigations seem to have much stronger ripple effects that go on to affect the behaviour of other establishments controlled by the firm, or, more interestingly, the behaviour of other companies in the same industry or geographic area.
An efficient and effective use of inspection resources requires an analysis of where risks of non-compliance are greatest, where complaints are least likely to be used, and where remedies are likely to have the greatest sustainable impact in improving compliance. As Professor Banks notes:
A strategic approach to targeting enforcement resources requires evidence-based assessment of risks of non-compliance across the regulated economy, and of outcomes of regulatory interventions (Sparrow; Baldwin & Black, 2008, at 65). Each in turn requires data on likelihoods of non-compliance, seriousness of non-compliance and the number of workers affected.
Targeted inspections need to be maintained over time. They will likely not have sustained effects if they are seen as one-time events rather than part of an ongoing initiative.
5.3.2 Other strategic initiatives
David Weil and others argue that changes in the structure of the economy and in the complexity of employment relationships together with the decline in unionization have meant that the traditional complaint driven approach to enforcement is less and less effective. Weil put it this way:
The employment relationship in many sectors with high concentrations of vulnerable workers has become complicated as major companies have shifted the direct employment of workers to other business entities that often operate under extremely competitive conditions. Thisfissuringor splintering of employment increases the incentives for employers at lower levels of industry structures to violate workplace policies, including the FLSA. Fissuring means that enforcement policies must act on higher levels of industry structures in order to change behavior at lower levels, where violations are most likely to occur.
Weil recommends designing sectoral enforcement strategies, a central purpose of which – as with all enforcement strategies – is to deter violations before they occur. Implementation of a sectoral enforcement strategy requires analysis and understanding the structure of industries to provide insights into why there are higher levels of non-compliance in some industries than in others, and to help inform sector-based enforcement strategies designed to improve compliance. It is his view that an understanding of supply-chain relationships, franchising and other industry structures is an essential first step to the development and implementation of effective enforcement strategies.
Given the similarities between the structural changes in the US economy and those in the Ontario economy, serious consideration of the strategic approach recommended by Dr. Weil and others is a necessity.
fissured workplace requires re-thinking compliance strategies that may engage entities other than the immediate employer. Weil and others have recognized the potential influence of leading firms (such as franchisors, leading brand, or major retailers) within fissured networks of employers on the compliance behaviour of subordinate firms, and of engaging those firms in order to change systemic conditions that create incentives for non-compliance. Professor Banks states:
Further, as Weil notes, to pursue strategies that focus at the top of industry structures, on the companies that affect how markets operate and many of the incentives that ultimately affect compliance, inspectorates need to have a clearmapof how priority industries operate and how that affects employer behaviour. (Weil, 2010, at 78-79) Strategic enforcement also requires information that enables the inspectorate to take into account the likely ripple effects of investigations. As Weil points out, these ripple effects will not only depend on the characteristics of the particular industry or geographical area, but will also be conditional on the relationship between the state inspectorate and key non-state actors. Lead firms, unions, employer associations and other influential community groups can all be critical for magnifying the necessary ‘ripple effects’ of investigations and prosecutions. (Weil, 2010, at 76-82)
An essential first step in designing and implementing these
top of industry initiatives is obtaining reliable information on risk factors and industry operations, particularly with respect to new and emerging risks that may require new information collection strategies. (Professor Banks also discusses good practices and the collection of data on employer size and worker characteristics - particularly those associated with labour market vulnerability.
Good practices may also include
obtaining information from individual workers, anonymous sources, unions, community organizations and employer associations in order to learn about
particular employers that are likely to be non-compliant, how fissured industries are organized, and the extent to which lead firms and employer associations might be engaged to alter systemic conditions fostering non-compliance.
As Professor Banks points out:
In Australia, the FWO regularly consults with employer and union organizations with respect to targeting of enforcement campaigns. The organizations provide a key source of information on how industry operates and how to approach compliance and enforcement for maximum effect (Hardy & Howe, 2009, at 129). Hardy also reports that FWO also increasingly uses migrant resource networks, ethnic business groups and community legal centres for whistle-blowing (Hardy, 2011, at 131). Vosko suggests that the Employment Standards Program Advisory Committee might provide a potential means for communicating with worker advocacy groups about improving employment standards enforcement (Vosko 2011). The same might be true with respect to employer organizations.
Investigators too can collect data about industry structures and practices to bring an increased understanding of numerous matters, including: related employers, management structures, franchising and ownership structures, and how decisions are made about personnel policies.
5.3.3 Focusing at the top
In addition to an expanded use of inspections, Weil and others advise focusing enforcement strategy so that it includes
lead firms (i.e., firms at the top of the industry structure such as franchisors), as well as the employers directly responsible for labor standards violations. Weil argues that such a strategy requires changes to a variety of investigation protocols. As noted above, it requires sophisticated data collection and a commitment to investigations of multiple sites of a given employer or operating under a lead firm where wide scale violations are believed to be present.
Related to strategies designed to involve the top or lead firm, brand recognition and the need to protect the brand can be important factors in engaging a lead firm. Professor Banks:
Weil (2010) points out that addressing non-compliance within fissured networks of firms may require attention to the role of lead firms in setting terms of product market competition and their potential role in altering those terms. For example, to determine whether there are systemic pressures for non-compliance within such networks, investigations into eating and drinking establishments should focus on other establishments owned by the same franchisee, and consider whether there is a pattern of non-compliance within the brand (Weil, 2010, at 78). If such pressures exist, enlisting top-level businesses may be crucial to improving compliance, drawing on their capacity to monitor and regulate conditions of production within the networks of enterprises that they lead. This strategy has the support of the LCO (2012, at 69).
However, without reforms to the legal rules of responsibility for terms and conditions of employment such firms may not have any legal obligation or liability for employment standards violations in lower level firms. The lead firms generally will not be the employer of record for the purposes of employment standards legislation. They therefore may have no interest in participating in such agreements. In fact, they may have positive incentives not to get involved in such matters, in order to avoid liability.
Nonetheless, lead firms sometimes do have incentives to participate in negotiated agreements to change systemic pressures on labour standards. These incentives can arise out of a desire to protect their brand from damage to reputation that flow from labour standards violations of suppliers, franchisees, or agencies supplying workers upon whom they rely. Lead firms may also have incentives to reduce the potential liability of franchisees in order to protect the value of franchises.
A sustainable compliance strategy might therefore seek to mobilize such incentives. Weil argues that regulatory agencies could potentially make use of information disclosure as a way to promote compliance:…reputation can be a source of regulatory jujitsu—even without recourse to legal strategies. Workplace regulatory agencies could map relations—whether subcontracting, third-party management, or franchising—of the entities they inspected routinely to the entities that had an overarching role in their activities and report on violations and investigations to that controlling entity. (Weil, 2014, at 235)
Implementation of such strategies may involve consideration of whether other provinces might be interested in a coordinated strategic approach, given that lead companies often operate in multiple provinces. It would involve data sharing, coordinating the larger investigation strategy and an integrated approach to short-term investigations as well as long-term objectives.
Finally, coordination across cases that are associated with a common business association or an entity that might not traditionally be considered part of coordinated investigation efforts (e.g., independent management operators in the hotel industry) becomes essential.
In order to develop coordinated approaches, consideration should be given to establishing what Weil has described as
vulnerable worker coordinated strike forces in one or two industries employing vulnerable workers.
obvious industries such as eating and drinking, hotel/motel and to other industries with vulnerable workers, such as a major, multi-unit franchisee with a history of violations or a specific management company in the hotel/motel sector.
For such strike forces, a targeted group of firms would be pre-selected and screened and inspections of the targeted employers would start at the same time. These initiatives could be implemented in the hotel, restaurant and other sectors where there are a large number of vulnerable and precarious workers. For example, the outlets of a major franchisor could be inspected during a stipulated period in multiple locations. Such a coordinated effort would both create an impetus for establishing agreement with the franchisor to encourage ESA compliance with franchisees, as well as have potential ripple effects on other industry players. (See below for a discussion of what such agreements might look like.) Such a strategy is designed to engage the custodian of the
brand in voluntary strategic partnerships to create
top-down pressure to comply.
top down compliance strategies are not based on concepts of joint liability, but rather on the fact that top of industry firms have a stake in protecting the name of the brand and its potential vulnerability if there is well-publicized non-compliance by those down the chain – franchisees for example.
There are similar approaches that have been used in other jurisdictions to engage the
top of industry in strategic enforcement initiatives. As mentioned above, the Fair Work Ombudsman (FWO) in Australia has established a National Franchise Program that works with franchisors aiming to improve the employment standards compliance performance of their franchisees. The franchisor program is premised on the notion that non-compliance by an employer franchisee can result in serious legal consequences for the franchisee and that these consequences may impact the entire brand. As a result, the franchisor program encourages franchisors to take steps to minimize the risk to their brand by taking practical steps to help franchisees understand and meet their obligations. For example, the FWO encourages franchisors
- include in their franchise agreements a specific obligation requiring franchisees to comply with workplace laws;
- make sure that every franchise’s business model takes into account the costs of lawfully employing adequate numbers of staff;
- incorporate the Fair Work Handbook into the business’ operations manual or as a stand alone document for franchisees;
- develop internal processes to support compliance including making compliance easier for franchisees by providing human resource/industrial relations systems or software to help franchisees achieve consistent and compliant workplace practices;
- recruit and train franchisees who are committed to compliance on the applicable workplace laws including engaging appropriately qualified human resources / industrial relations staff to train, update and assist franchisees; or arrange corporate memberships with an employer association, or special rates with a professional adviser to help franchisees access reliable and cost effective advice;
- regularly check that franchisees are complying with workplace laws including audits to ensure franchisees are meeting their record-keeping obligations or require franchisees to conduct ‘self-audits’ and report the results.
The FWO also has entered into various
compliance partnerships between the FWO and
top of industry enterprises that may involve reviewing and monitoring supply chain and franchise relationships. These agreements are designed to establish a collaborative relationship between the regulator and businesses that want to publicly demonstrate their commitment to creating compliant and productive workplaces. To quote the office of the FWO:
Through a Compliance Partnership with us, businesses can ensure their systems and processes are working effectively to build a culture of compliance.
Other investigation tools could also be modified to better support a targeted approach to enforcement. Reinvestigations/inspections could be used in a focused effort as part of a wider initiative regarding a problematic brand, as described above. By tying reinvestigations explicitly to brand- or third-party management initiatives, the groundwork could be laid for more comprehensive agreements with the top-level organizations (and potentially increase the deterrence effect of these interventions).
- Concurrent with our recommendation for changing the current practice of investigating all complaints, the Ministry of Labour should allocate more resources to proactive enforcement initiatives, including spot checks, audits, and inspections.
- The proactive model of enforcement should do the following:
- be strengthened by targeting monetary violations of the type being detected through complaints;
- continue to regularly collect and analyze statistical survey data on compliance to determine the likely extent of non-compliance;
- continue to regularly collect and analyze data on concentrations of vulnerable workers in various sectors of the economy; and
- continue to analyze incoming and processed complaints for data that may help to focus proactive compliance and enforcement initiatives within priority areas.
- Strategically increase the use of targeted inspections, particularly in sectors and jobs where there are large numbers of vulnerable and precariously-employed employees and with respect to employers in specific sectors and geographic locations.
- In the course of investigations of individual complaints, employment standards officers should continue to assess whether an expanded investigation or regular inspection should be initiated whenever there is an indication that the problem of non-compliance affects more employees than the complainant alone.
- Employment standards officers should treat evidence of deliberate non-compliance uncovered in the course of complaint investigation as warranting, prima facie, an extension of the investigation, subject to any overriding priorities related to targeted inspections established as part of a strategic approach.
- Further utilize enforcement strategies with a view to focusing on the top of industry structures – the top of the supply chain or franchisor, for example – where decisions are made that influence compliance by those lower in the chain. This will involve the collection of data, during investigations, about industry structures in relation to such matters as common employers, management structures, franchising and ownership structures, and how decisions are made regarding personnel policies.
- Develop the capacity to link quickly to other sources of government data, including information from other ministries of labour in other provinces, which may help identify areas with a propensity towards non-compliance.
- The Ministry of Labour should be provided with additional funding sufficient to implement a comprehensive strategic enforcement approach and to hire more officers to increase the capacity for conducting proactive and targeted inspections.
5.3.4 A law enforcement agency
As effective as inspections and other strategic initiatives may be, they are just one element of a cohesive and a comprehensive strategic enforcement approach.
As part of strategic management, the Ministry must move closer to becoming a more traditional law enforcement agency and less an agency involved in customer service that also performs some enforcement activities. We do not mean to suggest that the MOL is not currently interested in and dedicated to enforcement. It is. We do suggest that it needs to consider the implementation of new strategies and also that the Ministry needs more tools and more opportunity to pursue enforcement initiatives. A change in emphasis – to become more of a law enforcement agency – accompanied by legislative change should help create a culture of compliance in Ontario workplaces and help the MOL to carry out its mission more effectively.
Some important enforcement activities - such as proactive inspections - are important and effective components of law enforcement. However, other practices and procedures restrict the effectiveness of the Ministry in its law enforcement role.
5.3.5 Impact of the current complaints-driven system on enforcement strategies
Currently in Ontario, like most jurisdictions, employee-initiated complaints are the foundation for enforcing employment rights. A central focus of the Ministry’s activities is processing complaints. At various times the Ministry devotes extra money and resources to shortening the backlog in its efforts to process all complaints. In this system, the Ministry cannot easily establish priorities and act strategically in the interest of broader workplace compliance. Rather, a large portion of its time and energy is taken up with priorities set by the individual circumstances of those who happen to file complaints and dealing with a backlog. With limited resources, if individual complaints dominate the agenda, the priorities of a law enforcement agency can be secondary instead of dictating the agenda. Just adding personnel to deal with complaints without changing the strategy and the approach will not address the fundamental issue.
If achieving a culture of compliance is a rational objective, new enforcement strategies are required to work towards this outcome. This does not mean to minimize the importance of investigating complaints and recovering wages lost to employees because of non-compliance. That will likely always remain a core function of the Employment Standards Program of the MOL. However, a complaint-driven process - on its own - will not achieve the desired results. As Professor Banks stated:
The growth of the vulnerable workforce and the fissuring of workplaces in many networked industries pose very significant and likely insuperable challenges to the effectiveness of any approach to compliance and enforcement that is primarily complaint-driven.
5.3.6 Systemic campaigns to counter systemic non-compliance
Adopting an approach more like that of a law enforcement agency would make a difference in that it would be likely to initiate more action on a province-wide or sectoral basis to address systemic problems in the workplace. In the same way as the police in public communications might emphasize the dangerous use of a cell phone or alcohol while driving, a workplace law enforcement agency could highlight the issues of systemic non-compliance such as:
unpaid internships in situations where the employee is entitled to the protections of the ESA and the misclassification of employees as independent contractors. Both of these practices are illegal and widespread and both constitute a fundamental repudiation of the essential protection of the law, namely, a refusal to recognize that someone is an employee entitled to basic rights. Both issues are poorly understood and should be addressed systemically. A law enforcement agency might broadly publicize when
internships must be paid, the fact that many unpaid internships and the misclassification of employees as independent contractors are illegal, and publicize a clampdown on illegal practices. It would encourage people to call anonymously and to leave the relevant information on tip lines. If the tips resulted in investigations or inspections, when the investigations were complete and the matters closed, the agency would actively publicize the results with names of offenders and the resulting orders and penalties.
5.3.7 A strategic approach to litigation
A law enforcement agency would have a more active approach towards litigation and the adjudication of disputes. Currently, the Ministry does not see its role as defending the vast majority of the decisions and policies applied by its Employment Standards Officers (ESO).
It is not suggested that the MOL should blindly defend all ESO decisions on Reviews initiated by either party. Some decisions may be indefensible. We do say that consistent interpretation and application of the Act necessitate an active participation in litigation as part of strategic enforcement. It is suggested that the Ministry should, in enforcement of the Act, assume a role analogous to that of the Crown in criminal matters. As the Supreme Court of Canada has stated:
It cannot be over-emphasized that the purpose of a criminal prosecution is not to obtain a conviction, it is to lay before a jury what the Crown considers to be credible evidence relevant to what is alleged to be a crime. Counsel have a duty to see that all available legal proof of the facts is presented, it should be done firmly and pressed to its legitimate strength but it must also be done fairly. The role of prosecutor excludes any notion of winning or losing; his function is a matter of public duty than which in civil life there can be none charged with greater responsibility. It is to be efficiently performed with an ingrained sense of the dignity, the seriousness, and the justness of judicial proceedings.
In employment matters, the Ministry should actively participate where violations have occurred by ensuring that the evidence and the law are fairly presented to the adjudicator. It should be an advocate for compliance and not restrict its role to being an amicus.
However desirable it would be for the Ministry to appear in all cases, it likely requires too many additional resources. It is not practical. However, the Ministry should be strategic and participate in important cases in sectors where there are high levels of non-compliance and in cases that may have precedential value. In short, a law enforcement agency must have a proactive and policy oriented litigation strategy that will see it be an active advocate for the application of the law in proceedings before the OLRB.
- Ministry of Labour counsel or representatives at review hearings before the Ontario Labour Relations Board should actively participate in proceedings to ensure that the best evidence and the law are before the adjudicator.
5.3.8 Current complaints-based system and the necessity for change
The ESA is a complaints-driven model. As Vosko, Noack and Tucker point out in the paper prepared for the CWR:
Worker-initiated complaints are the foundation of most regimes for enforcing employment and labour rights. After all, workers are the ones who experience violations directly and have the most direct and immediate interest in obtaining a remedy.
According to their research:
the volume of ESA complaints received by the Ministry of Labour has decreased in recent years. Between 2008/09 and 2012/13, the number of ES complaints submitted annually dropped substantially, but has levelled off at about 15,000 per year since 2012/13. … [I]n 2015/15, there was one complaint submitted for every 285 non-unionized employees.
The ESA contemplates that the Ministry will investigate all complaints that are filed, as long as the claimant has taken the specified steps to facilitate the investigation. In a world where financial constraints are a constant, budgetary considerations do not permit the hiring of enough ESOs to complete the investigation of all complaints in a timely fashion while also maintaining a significant proactive presence. The result is that there is a backlog of uninvestigated and unresolved complaints.
Quarterly, between 2011-12 and the first two quarters of 2015-16: the average wait time for assignment to a Level 1 ESO ranged from 2 days to 67 days, with an average of 35.4 days. Over the past four quarters in this period the average was 38 days; the average wait time for assignment to a Level 2 ESO for investigation has ranged from 54 days to 189 days, with an average of 119.6 days. Over the past four quarters in this period the average was 89 days.
There have been fundamental changes in the workplace. The number of employees represented by trade unions has declined. There has been a change in how many businesses organize their affairs, as the direct employment of employees has been shifted to other business entities including subcontractors, temporary help agencies and franchisees. There are many vulnerable employees in precarious jobs whose basic employment rights are being denied. This denial of rights and protections occurs for many reasons; however, it is exacerbated by the overwhelming number of complaints and by the lack of resources required to make timely investigation of all complaints.
The problem of limited resources is not unique to Ontario. In the US in 2010, David Weil in his report to the US Department of Labor’s Wage and Hour Division, Improving Workplace Conditions through Strategic Enforcement described the situation in the US as follows:
The challenges facing the major agencies in the US Department of Labor (DOL) that regulate conditions in the workplace are daunting. Public policies on health and safety, discrimination, and basic labor conditions cover millions of workers, and have to be implemented in hundreds of thousands of disparate workplaces in differing geographic settings. Conditions within those workplaces vary enormously – even within a single industry – and employers often face incentives to make those conditions as opaque as possible. Workers in many of the industries with the highest levels of non-compliance are often the most reluctant to trigger investigations through complaints due to their immigration status, lack of knowledge of rights, or fears about employment security. Even the laws, which set forth the worker protections DOL agencies are charged with enforcing, have limitations in the 21st- century business community. Compounding all of the above, agencies charged with labor inspections have limited budgets and stretched staffing levels, coupled with a very complicated regulatory environment.
These challenges, however, reach beyond the number of investigators available to the DOL or to the Wage and Hour Division (WHD) in particular. Profound changes in the workplace, including the splitting up of traditional employment relationships, the decline of labor unions, and the emergence of new forms of workplace risk make the task facing DOL agencies far more complicated. In addition, expectations and demands on all regulatory agencies to demonstrate progress toward achieving outcomes and the resulting impacts on how government agencies are overseen by Congress, accountability agencies, and the public have created intensified pressure and scrutiny.
A complaints-based system also presents challenges and problems for employees. Often they lack knowledge that their rights have been violated. Fear of reprisals is also a documented reality.
When an employee does initiate a complaint, that employee bears the costs associated with the initiation of the complaint while the benefits of their resolution may spill over to other employees who receive redress as a result of the complaint. Many fear reprisal if they do complain. Professor Banks put it this way:
The literature reviewed below suggests that fear of reprisal and the challenges and opportunity costs associated with pursuing a claim can each be a significant barrier to pursuing complaints, and that this is particularly so for workers who are low paid and lack job security. Such workers are disproportionately women and/or members of ethnic or racial minority groups who are more likely to face linguistic and cultural barriers or stereotyping. (Statistics Canada, 2000, at 103; Vosko, 2010, at 634; Thomas, 2009, at 24; Noack et al, 2015, at 89) They are more likely to be persons with disabilities, who often face stereotyping in the labour market and often do not have access to accommodations that they need in order to work with equal opportunity (Banks, Chaykowski & Slotsve 2013). Low-wage workers are less likely to be unionized, or to have access to health and disability benefits that improve income security. (Chaykowski 2005, Marshall 2003, Zeytinoglu & Cooke 2004) Workers in a temporary or otherwise insecure residency status, recent immigrants, racialized workers, and people with disabilities are all over-represented in precarious forms of employment (Noack et al, 2015, at 89). While members of racialized groups comprise approximately 13% of the Canadian population, through the late 1990s and into the 21st century they have been disproportionately represented in low-income, low-security occupations such as those of harvesting labourers (40%), sewing, textile and fabric workers (40%), and electronics assemblers (42%) (Thomas, 2009, at 25).
Consistent with these observations, research suggests that the frequency of individual complaints may not be an accurate indicator of a larger sectoral problem of non-compliance. This is the point made by Vosko, Noack and Tucker who assert that:
the source and type of complaints may not be aligned with the underlying problems in the labour market.
Claims resolution is an incomplete response to these concerns. It does not address matters never raised as claims. It therefore may not be fully effective, or very effective at all, as a strategy for securing compliance with legal duties and obligations imposed by statute. It may therefore not be sufficient on its own to give effect to the purposes of the Act.
The changing workplace raises squarely the question of whether the traditional approaches to investigation of complaints and to enforcement are sufficient. As Weil states:
fissuring means that enforcement policies must act on higher levels of industry structures in order to change behavior at lower levels, where violations are most likely to occur.
While it is recognized that the investigation and remediation of individual complaints of violation will likely remain an important aspect of the ESA regime, the current policy of investigating all complaints must be reassessed. It is expensive and time consuming and sometimes the expense and time involved is disproportionate to the magnitude of the claim as well as not being the most effective means of identification and remediation of larger patterns of non-compliance. The opportunity cost of not changing the system of processing and investigating every complaint is significant. It means that the Ministry is on a constant treadmill trying to clear its backlog and not concentrating on taking important proactive steps to enforce the law, addressing the larger priorities of employees as a whole. The only way in which the Ministry can fulfill its obligation to strategically enforce the statute is by changing the fundamental way it does business with respect to the processing of complaints.
It should also be underscored that recommending a policy of not investigating every claim is not intended to minimize or diminish the importance of a claim, no matter how small, to an individual claimant. It is rather meant to be a recognition that, in an environment of scarce resources, different and more effective strategies related to enforcement must be implemented and resources be shifted to focus, in part, on such strategies.
Simply stated, with limited resources, the most effective strategies to foster a culture of compliance will involve investigating some, but not all individual complaints and implementing other strategies designed to foster compliance. Cases of alleged reprisal and complaints that may lead to an expanded investigation in a workplace should be given priority. This should free up resources for other enforcement strategies like inspections.
- The Employment Standards Act, 2000 should be amended to make it clear that the Employment Standards Program is not required to, and will not, investigate all claims.
- The claims given priority for investigation should be claims of alleged reprisal and complaints that will likely lead to an expanded investigation in the workplace.
- The Ministry of Labour should develop on-line assistance for complainants and employers in relation to complaints that are not being investigated, which will provide both parties step-by-step guidance and information regarding the available procedure for processing and filing complaints.
5.3.9 An accessible process for complainants to have claims, not investigated by the Ministry of Labour, adjudicated
As discussed, scarcity of resources and the large number of complaints poses too much of a burden on the current enforcement regime. Individual complainants whose complaints are not investigated must be provided access to some simplified expedited dispute resolution process for claims adjudication.
In other jurisdictions, such as the UK, employees are responsible for presenting their own case to an employment tribunal.
Elsewhere in the Report (when dealing with Reviews), we discuss the advantages of increased regional access to the review process to make adjudication more accessible and more efficient for the parties. A similar recommendation is advanced in this section of the report to facilitate hearings of individual complaints where employees have been informed that the Ministry will not be conducting an investigation. This recommendation is intended to make adjudication for individual complainants accessible and cost effective.
The existing tribunal with ESA expertise is the OLRB. It currently hears ESA reviews, some Occupational Health and Safety Act (OHSA) matters and is responsible for the administration of the Labour Relations Act, 1995 (LRA) and for the adjudication of labour cases within its exclusive jurisdiction.
The Ministry of Labour should appoint part-time vice-chairs to deal exclusively with ESA matters in 7 of the 8 judicial districts in Ontario. The judicial districts are: Central East, Central South, Central East, East, Northeast, Northwest, Southwest and Toronto. The OLRB in Toronto could hear cases from the Toronto Region. These part-time vice-chairs will have training and expertise in the ESA and will conduct hearings into complaints (and hear applications for review) on a regional basis thus providing an accessible forum to hear complaints that are not investigated by an ESO. Establishing such a cadre of vice-chairs will make attending and participating in the complaint process more accessible and less expensive for both employees and employers.
The appointment of local ESA vice-chairs of the OLRB is similar to a proposal Professor Arthurs made to the federal government to deal with the special needs of distant communities.
should be experienced in conducting hearings and knowledgeable about labour relations and/or labour standards.
The Ministry of Labour or the OLRB should facilitate access by self-represented parties by providing explanatory materials in plain language with respect to both the procedure and the applicable principles of law, including the burden of proof and basic rules of evidence. These sorts of memoranda have proven to be of great assistance to self-represented individuals in other legal proceedings.
The complaint process should be consistent with the requirements of fairness and natural justice and easy to access for self-represented employers and employees.
The real issue on a complaint made directly to the OLRB is whether the ESA has been violated. The burden of proof is on the applicant to show a on a balance of probabilities that a violation has occurred. Since there has been no prior adjudication, this complaint process may necessitate an adversarial proceeding in which evidence is called on some issues, facts are found and a decision is rendered. Access to justice for both employers and employees requires a process that is user-friendly without sacrificing the quality or fairness of outcomes.
In order to accomplish this, vice-chairs of the OLRB who hear complaints in the first instance should be given, by statute, the power to consult with the parties as part of the decision-making process. Consultation is less formal and less costly and more efficient than an adversarial process and should result in a better understanding and definition of the issues in dispute and as a forum to decide whether it is necessary to hear evidence in the case. The OLRB has successfully used such a consultative process for some cases under the LRA. The adjudicator, the vice-chair, plays an active role in a consultation. The goal of the consultation is to expeditiously focus on the issues in dispute and to determine whether any statutory rights have been violated. The OLRB describes the consultation process as being designed to:
draw out the facts and arguments necessary to decide whether there has been a violation of a statute.
In sum, the vice-chair in a consultation process decides procedural issues if required and helps the parties define the issues and determine whether evidence is required on particular matters. The vice-chair then decides the case.
Special procedures, like pre-review meetings with the parties could be scheduled in advance with LROs to ensure narrowing of the issues, agreement on facts and perhaps settle cases, much like pre-trials in civil cases.
A number of cases could be scheduled and heard on the same day.
Employers who elect to contest a complaint should be required to bring to the hearing copies of all documents and business records relevant to the complaint and to its response.
The recommendations below are not intended to restrict the power of the Director of Employment Standards under s. 96.1 of the ESA to require among other things that
the complainant shall give the Director such evidence and other information in writing as the Director considers appropriate for assigning the complaint to an employment standards officer for investigation. It will be the Director who assigns a complaint for investigation or advises the complainant that the complaint should be filed as a complaint directly with the OLRB.
- The Ontario Labour Relations Board should be the forum for the adjudication of individual complaints not investigated by the Ministry of Labour, provided the Director of Employment Standards approves such complaints as ones to be filed and processed by the complainant.
- The Director of Employment Standards should determine whether a complaint is to be investigated or processed by a complainant to the Ontario Labour Relations Board and, in making such a determination, the Director should have the authority not to approve a complaint to be heard by the Ontario Labour Relations Board, just as the Director is permitted, in certain circumstances, to decline to assign the complaint to an employment standards officer for investigation under the Employment Standards Act, 2000.
- The Ministry of Labour should appoint part-time vice-chairs in each of the seven judicial districts in the Province of Ontario outside Toronto to hear complaints that are not investigated by an employment standards officer.
- Vice-chairs who hear complaints in the first instance should have all the powers of an employment standards officer and the requisite authority to adjudicate complaints and make orders necessary to compel remediation of the violations found to have occurred. In addition, without restricting the generality of the foregoing, the vice-chair should have the right to award wages, fees and compensation, interest on wages owed and the right to order the posting of notices in conspicuous places at the place of employment of the complainant or in other places deemed appropriate.
- Vice-chairs of the Ontario Labour Relations Board who hear complaints in the first instance should have the power to consult with the parties as part of the decision-making process.
- Employers who elect to contest an employee complaint (where there has been no investigation) should be required to produce copies at the hearing of all documents and business records relevant to the complaint and to the employer’s response.
- The Ontario Labour Relations Board, or the Ministry of Labour in consultation with the Board, should create explanatory materials for unrepresented parties regarding both the complaint procedure and the applicable principles of law, including the burden of proof and basic rules of evidence.
5.4 Education of employees and employers – increasing awareness of rights and obligations
Providing… information to employees is a crucial step in ensuring that they have access to the enforcement of their rights. Providing information to employers responds directly to the needs of many. The literature treats this as a cost-effective means of increasing compliance, though it contains no systematic demonstration that this is the case. Nonetheless, there are reasonable grounds to suppose that it is. … [T]he motivations of many employers will dispose them to comply if they know what is required of them. Once produced, informational materials can be reproduced and distributed at relatively low cost. (Banks, p. 57)
5.4.1 The proposed Workplace Rights Act
We recommended in the introduction, that the critical components of workplace rights be packaged together under a common umbrella, to be communicated and marketed together as a comprehensive Workplace Rights Act in order to underscore and communicate to all Ontarians that employment carries with it rights that need to be respected and enforced. The repeated reference, over many years, in workplaces and elsewhere, to a Workplace Rights Act that sets out workplace rights is a simple but effective measure to increase awareness among both employees and employers.
5.4.2 Education and outreach
The Ministry currently engages in several educational and outreach initiatives that are designed to help employees and employers understand the rights and obligations that are set out in the ESA. These include: the provision of videos and explanatory materials on the Ministry website; a call centre to provide general information about the ESA in multiple languages; and the delivery of seminars to employee and employer groups.
Employment Standards Officers, who are charged with enforcing the Act, are required to follow the Director’s policies. The Employment Standards Act, 2000 Policy and Interpretation Manual, which is written by Ministry of Labour staff, sets out in detail the policies and interpretations of the Director of Employment Standards. Until recently, the Manual was published by a legal publishing firm and was available for purchase by external stakeholders such as clinics, law firms, unions, employers and human resource professionals. The Manual is no longer available for purchase. The Ministry will provide an electronic version of the Manual on a USB key to individuals on request. Individuals must periodically makes requests to the ES Program for new USB keys to ensure they have the most recent version of the Manual.
The Act requires employers to post and provide employees with a statutory ESA poster that provides a brief description of the Act and provides the Ministry’s web address and a phone number if employees or employers wish to obtain more information.
It is a self-evident truth that knowledge and understanding of rights and obligations will assist in achieving higher levels of compliance. As Professor Banks stated in his CWR Report:
There is broad consensus in the literature that agencies responsible for compliance and enforcement should make information on what compliance requires readily available, and should actively disseminate it to targeted groups of employers and employees who may need it the most… Providing this information to employees is a crucial step in ensuring that they have access to the enforcement of their rights. Providing information to employers responds directly to the needs of many. The literature treats this as a cost-effective means of increasing compliance, though it contains no systematic demonstration that this is the case. Nonetheless, there are reasonable grounds to suppose that it is. As discussed above, the motivations of many employers will dispose them to comply if they know what is required of them. Once produced, informational materials can be reproduced and distributed at relatively low cost.
First, for many employers an effective compliance strategy simply entails dissemination of clear information on what compliance requires. These employers will probably tend to be those that provide terms and conditions well above minimum standards in order to pursue a competitive strategy based on retaining and rewarding employees with marketable skills and abilities. These employers have few if any incentives not to comply.
There are groups of employers and employees in sectors where non-compliance is a greater problem than in other sectors. Targeted information on rights and obligations may alleviate this problem.
In our view, complaint patterns and outcomes can be of assistance in identifying sectors for educational outreach. For instance:
Complaints related to the accommodation and food services industry are most likely to have violations, with 78% of assessed complaints resulting in violations … Violations are also more likely to be found for complaints filed against small firms.
The Ministry should also actively collaborate with employers, unions and worker advocacy groups to identify targets for pro-active strategic and targeted communications to employees and employers in sectors where there are many vulnerable employees and high incidents of non-compliance. Professor Banks stated:
Case study literature also points to the value of partnerships with employer, worker and other organizations in disseminating compliance information, drawing on the access and trust that they enjoy with their constituencies (Hardy, 2011, at 130-1; LCO 2012, at 69).
The Ministry should be aware of and consider the efficacy and cost-effectiveness of implementing educational and outreach strategies used in other jurisdictions. Professor Banks noted the following as worthy of evaluation:
Free Tailored Education: Australia Fair Work Ombudsman (FWO) has established a National Employer Program that delivers free tailored education to employers with more than 1000 employees to help them understand and apply Australia’s employment standards laws. FWO has targeted industries in which illegal unpaid work arrangements are more prevalent, and industries with high levels of procurement in an effort to increase compliance among subcontractors (Vosko et al., 2014, citing FWO 2012 and 2013). FWO also has a National Franchisees Program that works with franchisors aiming to improve the employment standards compliance performance of their franchisees. Participating employers have demonstrated satisfaction with the program. This is a purely voluntary program, as firms derive no legal advantage in the form of reduced inspection. While is [sic] has been pointed out that both programs may be targeting resources towards compliance where it is most easily achieved (Vosko, Grundy & Thomas 2014), this may be an efficient means of raising compliance if the costs of the program are low. There is no costing of these programs in the literature.
Saunders and Dutil (2005) endorse the suggestion of Quebec enforcement officials that labour ministries target accountants, who often provide book-keeping services to small firms and therefore are in a good position to ensure their clients’ compliance. Ontario officials inform me that in their experience many accountants and bookkeepers are unfamiliar with the requirements of the ESA.
In a complaint-based system, employee knowledge of rights is important, but so is their willingness to use them. All efforts to encourage reporting of violations must be accompanied by efforts to communicate information on the anti-reprisal provisions of the ESA to employees and to employers, as well as by rigorous enforcement of those provisions. Education and awareness of rights and obligations and of anti-reprisal provisions could be increased by giving publicity to cases of reprisal.
In this regard, David Weil stated that:
A concerted and well-publicized effort to prohibit the intimidation of employees who complain would encourage greater use of rights as well as discourage illegal employer behavior.
The publication of investigations may have deterrent ripple effects on other employers in the same sector. In canvassing the benefits of transparency, Weil states:
In general, the WHD should make its investigation activities in a geographic area more transparent. WHD District Offices publicize directed investigations in a variety of ways (press releases, letters to employer organizations, outreach to worker advocates). These should be evaluated to assess their comparative impact. New methods of conveying information about WHD activities, drawing on the web and social networks, should also be explored.
The Stronger Workplaces for a Stronger Economy Act, 2014
As outlined in the Interim Report, employee advocacy groups, unions and employers all stressed the value of education. Employee advocacy groups and unions recommended that the government ensure that educational materials are easy to understand and are provided in multiple languages, and supported launching extensive public awareness campaigns about the ESA. Employers suggested, among other things, that the employer community would benefit from: the use of simple, clear language in all communications that explain the ESA; public ESA information campaigns in multiple languages; working more with community agencies to maximize outreach; providing easy access to the Ministry’s Policy and Interpretation Manual; and providing links in the online ESA to clear and concise interpretations of the provisions.
ESA instruction is not a mandatory part of the provincial high school curriculum, whereas occupational health and safety education has been part of the provincial high school curriculum since 1999. Basic instruction on the rights and entitlements of employees under the ESA would be a useful addition to the high school curriculum.
Industry and professional human resource associations could be more effectively utilized to educate employers.
The education of employees and employers will involve multiple communications, educational and outreach strategies.
Education and outreach are essential tools in creating a culture of compliance. We therefore recommend:
- The government should consider including basic instruction on the rights and entitlements of employees under the Employment Standards Act, 2000 in the high school curriculum.
- The Ministry of Labour should make its Policy and Interpretation Manual available on-line to be accessible by everyone.
- The Ministry of Labour should continue to actively collaborate with employers, unions, worker advocacy groups, and employer associations to identify candidates for pro-active, strategic and targeted communications aimed at employees and employers in sectors where there are many vulnerable employees and high incidents of non-compliance.
- The Ministry of Labour should target employers for self-audits pursuant to section 91.1 of the Employment Standards Act, 2000, particularly in sectors where there are many vulnerable employees and high incidents of non-compliance. In addition, the Ministry of Labour should assess the impact of the self-audit provisions on compliance and awareness.
- The Ministry of Labour should continue to explore, be aware of and consider the efficacy and cost-effectiveness of implementing educational and outreach strategies, including those suggested by stakeholders and those used in other jurisdictions.
5.4.3 Internal responsibility
Related to education and awareness, the Interim Report advanced as an option that consideration be given to the implementation of an internal responsibility system (IRS ) that is intended to formalize a focus by employers and employees on both the substance of the law and on compliance.
The purpose of an internal responsibility system is to give voice to employees in the workplace, to heighten awareness of rights and obligations and to increase compliance with the ESA. Internal responsibility does not assume that the Government’s role in administration and enforcement will be reduced or that responsibility for compliance will be off-loaded or made subordinate to any system of internal responsibility. Quite the contrary, to be effective, a system of internal responsibility must be accompanied by strong and robust enforcement strategies. An IRS should supplement and not replace inspections, investigations of individual complaints and other strategic initiatives designed to achieve compliance.
As stated in the Interim Report, the impetus for this approach comes largely from the IRS established by the OHSA that some argue has been effective in making Ontario’s workplaces safer and healthier. Under OHSA, both employers and employees have responsibility for health and safety in the workplace and both play a role in endeavoring to achieve compliance with the Act. In this regard, joint health and safety committees or, in smaller workplaces, health and safety representatives, have contributed to a strengthening of a health and safety culture than would otherwise be the case. Committees and representatives have raised employee and employer awareness of health and safety issues and, in many workplaces, have contributed to the identification and elimination of hazardous conditions and to a safer workplace.
The IRS under OHSA is not without its critics. While agreeing that worker involvement has and can have a positive role in making workplaces safer, some critics (for example, the Labour OHCOW Academic Research Collaboration) have expressed concern that the precariously employed are less likely to be able to exert an influence in the workplace than those with more secure employment. In a paper written in 2010, the authors state:
The key concern is that the increased precariousness of employment resulting from extensive economic restructuring is undermining the capacity of workers to exercise their responsibilities and rights under the law. … The common theme is that employment is much more insecure, an insecurity that is further aggravated by reductions in social assistance with lower employment insurance (EI) and welfare payments, stricter qualification requirements, and pension shortfalls. Increased levels of stress, declining union and worker solidarity and associated health and social problems are all commonly observed consequences of these developments (Siegrist and Marmot, 2004).
The authors conclude:
As the above evidence indicates, this increased vulnerability to management resistance, pressure and intimidation also means that precarious workers are less likely to report injuries. This clearly has significant implications for the reliability of injury compensation data in as much as it suggests that precariousness may be leading to more under-reporting (Hall et al., 2010; Lewchuk, Clark and de Wolff, 2009). This problem may be greatly enhanced when management is motivated to conceal or repress complaints or injury reporting. … Rather than making the changes that are needed, workers are cajoled, persuaded or threatened to conceal their injuries and/or conceal their seriousness (Eakin et al., 2003; Thomason and Burton, 2000).
If precariously employed workers in a non-union environment are less likely to report injuries, it is reasonable to conclude they may also be less likely to report or act on ESA violations. On the other hand, where there is no intentional violation of the ESA by an employer, employee and employer representatives with a formal information gathering and monitoring role could lead to improved education, awareness and compliance.
Before discussing a potential IRS in more detail, it is perhaps useful to mention once again the provisions of s. 91.1 of the ESA that permit the ordering of a self-audit by employers. This provision enables an ESO to require an employer to conduct an examination of the employer’s records, practices or both to determine whether the employer is in compliance with one or more provisions of this Act or the regulations and report the results to the ESO by a specified date. The ESO can specify the methodology to be used, the format to be followed and the information to be included in the self-audit. The employer can also be required to identify if employees are owed wages and the details of any payments made to remedy the non-compliance. If the employer’s report includes an assessment that the employer has not complied with this Act or the regulations but no employees are owed wages as a result of the failure to comply, the employer is required to include in the report a description of the measures that the employer has taken or will take to ensure that this Act or the regulations will be complied with. The ESO may also order wages to employees based on the audit. In sum, the MOL already has the authority under the ESA to require simplified audits relating to compliance with all or portions of the ESA. To require employers to conduct simplified compliance audits should result in an increased awareness by some employers of their obligations and of employee rights and in increased compliance.
Employer audits could be an essential tool in making an IRS effective. Employers could be required by the Ministry to audit compliance with selected standard(s) identified by the Ministry. The requirement of the employer audit with respect to selected standard(s) could be announced to employers and employees in advance with targeted communications and education. A compliance audit on standard(s) could easily provide a basis for an agenda for employee and employer representatives to meet and discuss compliance and issues related thereto.
In the EU, Consultation Committees are mandated in workplaces with more than 50 employees. The EU directive for informing and consulting with employees requires information to be given and advice sought with respect to a number of subjects including the economic situation of the business and decisions likely to lead to organizational change. Australia has similar legislation. The federal Canada Labour Code contains provisions for the establishing of joint committees to deal with the consequences of mass redundancy.
We endorse, in a general sense, establishing consultation committees to give employees both information and a voice in the workplace. However, we have concluded that Consultation Committees or other Internal Responsibility Systems for employment standards should be encouraged but not mandated by law.
If a Consultation Committee were to be established by an employer, its mandate could be much broader than ESA compliance. Employee committees could receive information and be consulted on a number of subjects and decisions related to the enterprise that might be of interest to or have significant impact on employees like potential major changes in production, organization, or technology. Information about employee rights and compliance with the ESA is only one of many subjects that might be the business of Consultation Committees.
With respect to ESA matters, such a Committee might be given authority to:
- receive information from employees related to alleged non-compliance;
- ask for and receive information with respect to specific issues of alleged non-compliance;
- receive copies of compliance audits and simplified audits from the employer;
- share the results of such audits with all employees to assist in promoting accountability and awareness;
- discuss measures that the employer has taken or will take to ensure that the Act or the regulations will be complied with; and
- generally to educate employees in the workplace to increase awareness of their rights and of employer obligations under the ESA.
The employer might agree to:
- meet with the Committee on a regular basis;
- provide relevant information with respect to ESA compliance to the Committee when requested;
- share the results of compliance audits and simplified audits in a timely fashion;
- meet with the committee to review audits;
- discuss the measures that the employer has taken or will take to ensure that the Act or the regulations will be complied with; and
- generally to educate employees in the workplace to increase awareness of their rights and of employer obligations under the ESA.
There is no obvious need for an IRS for unionized employees as the union already has the responsibility to collectively bargain for bargaining unit employees, and to deal with ESA issues on behalf of bargaining unit employees, including non-compliance. However, for non-union employees in the same enterprise, an IRS could be a useful way of heightening both awareness and compliance.
An additional benefit of an IRS might be that employees are more willing to report alleged violations to other employees where there is an IRS rather than to complain directly to the Ministry. Inquiries by Committee members regarding specific issues of potential non-compliance may not require identification of specific employees, but rather may initiate general monitoring of compliance with an employment standard by the Committee with their managerial counterparts. Establishing an IRS may result in the Ministry ordering an audit with respect to compliance with a certain standard or standards. It may result in employers who are not in compliance because of lack of knowledge or mistaken understanding of their legal obligations voluntarily remedying non-compliance without the ministry’s involvement. An IRS should be consistent with encouraging voluntary compliance initiatives by employers who are motivated to comply with the ESA.
It must be clear that the anti-reprisal protections of the ESA apply to Committee members. The success of any IRS system depends on employees being confident that they have meaningful protection in fulfilling their monitoring and educating role.
- The Ministry of Labour should encourage the establishment of internal responsibility systems by employers.
- The Ministry of Labour should provide assistance and advice to employers who wish to establish such systems.
5.5 Increased protection for employees who seek to enforce their rights
5.5.1Greater protection for employees from reprisals
The current ESA provides broad protection to employees against reprisal.
The Act prohibits employers, and anyone acting on their behalf, from intimidating, dismissing or otherwise penalizing an employee or threatening to do so because the employee attempted to exercise, or did exercise, his or her rights under the ESA. More particularly, an employer is prohibited from reprising against an employee because the employee:
- asks the employer to comply with this Act and the regulations;
- inquires about his or her rights under this Act;
- files a complaint with the Ministry under this Act;
- exercises or attempts to exercise a right under this Act;
- gives information to an ESO;
- testifies or is required to testify or otherwise participates or is going to participate in a proceeding under this Act; or
- participates in proceedings respecting a by-law or proposed by-law under section 4 of the Retail Business Holidays Act;
Employers are also prohibited from penalizing an employee in any way because the employee;
- is or will become eligible to take a leave;
- intends to take a leave or takes a leave under Part XIV of the ESA; or
- because the employer is or may be required, because of a court order or garnishment, to pay to a third party an amount owing by the employer to the employee.
The burden of proof that an employer did not engage in a reprisal against an employee is on the employer.
In sum, the anti-reprisal provisions (s. 74) in Ontario’s ESA prohibit employers from intimidating, dismissing, otherwise penalizing or threatening employees because they ask about their rights, ask the employer to comply with the Act, file a claim or participate in any investigations. This protection covers whistleblowers. The anti-reprisal protections of the ESA also cover assignment workers placed in a business by a temporary help agency (THA) and protect them from reprisal by both the THA and by the client employer to whom they are assigned to perform work.
If an employer is motivated in whole or in part by an unlawful motive, its conduct is unlawful. An employer who takes into account the exercise by an employee of rights under the ESA in dismissing or otherwise penalizing an employee is acting unlawfully.
Employees who believe they have been subject to reprisal may file a claim with the Ministry, which will investigate.
If an ESO determines that a reprisal occurred, the officer may order that the employee be compensated for any loss incurred as a result of the contravention or that the employee be reinstated, or may order both compensation and reinstatement.
Reprisal claims are currently not given priority by the Ministry. It takes approximately 90 days before claims are assigned to a Level 2 ESO for investigation, and on average it takes approximately 51 days to conclude an investigation.
In recent years, approximately 12% of claims
In the Ministry’s experience, most employees who have been terminated do not seek reinstatement. In our view, this is understandable given the long delays in the current process, but the hope is that this may change under an expedited procedure.
The reality of the workplace for many employees in Ontario
There are many employers who are interested in and committed to compliance, and where contraventions occur, if at all, it is likely as a result of inadvertence or lack of knowledge and not because of intentional violation of the ESA. In this kind of corporate environment, it is likely that reporting alleged non-compliance by an employee would be dealt with responsibly without risk of reprisal to the employee. Unfortunately, this is not always the case.
Many sources contend that fear of reprisal presents a major barrier to filing employment standards complaints.
Professor Banks, while acknowledging that there is relatively little statistical research on the influence of fear of reprisal on willingness to report concludes:
What evidence is available does however indicate that fear of job loss and other forms of employer reprisal most likely does undermine the willingness of many workers to complain about employment standards violations in Ontario.
In his review of the literature, Professor Banks also states:
Other suppositions are about how workers actually perceive the risk of reprisal and the accuracy of those perceptions: that many workers perceive that there is a significant risk of dismissal or other forms of reprisal if they file an employment standards claim against their employer; and that workers may perceive that the risk of dismissal will be greater where their employment is already precarious, such as in relatively low paid positions with high turnover (Procyk, 2014 at 1).
The consequential risks associated with job loss will often be higher for workers with low incomes or short job tenures. Low-income workers are more likely to have little or no savings upon which to draw to meet basic needs during a period of unemployment (Weil, 2012, at 3). Many workers with short job tenure are not eligible for employment insurance benefits, which in Ontario cover only 41 per cent of unemployed workers, and in any event replace only 55% of wages (Vosko, 2011, at 33). Migrant workers face additional risks associated with dismissal. Workers engaged under temporary work permits are most often tied to a single employer such that dismissal may result in their repatriation. (LCO 2012) Undocumented workers face the risk that their status may be reported to immigration authorities, resulting in deportation (Noack et al, 2015, at 92; Vosko, 2011, at 33).
Berhhardt et al’s survey [of] low-wage workers in New York, Chicago and Los Angeles about violations of their rights under employment standards laws found that 20 per cent of their sample did not file a complaint during the prior year despite having experienced serious problems such as dangerous working conditions, discrimination, or not being paid a minimum wage. (Bernhardt et al, 2009, at 24). The most common reason, cited by 51% of those who chose not to complain, was fear of job loss (Weil, 2012, at 6).
The Federal Labour Standards Review Commission also noted that the number of complaints is small in relation to the likely prevalence of labour standards violations (FLRSC, at 192). Similarly, a study by Weil and Pyles examining complaint rates under the US Fair Labor Standards Act for the period 2000-2004 found that there were about 25 complaints for every 100,000 workers, and that it took on average about 130 violations of the overtime provisions of the Act to elicit a single complaint. (Weil & Pyles, 2006) While other factors such as the low value of some complaints or difficulties in accessing claims procedures probably play a role in these low complaint rates, it is quite likely in light of the other evidence and considerations reviewed here that fear of retaliation plays a very important role in these trends.
Vosko, Noak and Tucker state:
The real and/or perceived risks of reprisal for making an ES complaint either directly to one’s employer or to state officials, or for suing one’s employer are well-documented in the scholarly literature (Ruckelshaus 2008; Alexander 2013; Griffith 2015), suggesting that employees often choose to remain silent and not complain.
There can be little doubt based on common sense, academic research and scholarly articles of the accuracy of the assertion by one researcher referred to in the Report by Professor Banks that:
many workers perceive that there is a significant risk of dismissal or other forms of reprisal if they file an employment standards claim against their employer; and that workers may perceive that the risk of dismissal will be greater where their employment is already precarious, such as in relatively low paid positions with high turnover (Procyk, 2014 at 1).
There is statistical support for this conclusion.
Over 90% of the approximately 15,000 complaints made every year are by people who have left their jobs voluntarily or after they have been terminated.
The Ontario Auditor General found in 2004 that 9 out of 10 workers who file claims for unpaid wages and entitlements in Ontario do so after they have left the job. (Vosko, 2011, at 34). Similarly, the Federal Labour Standards Review Commission found that 92% per cent of complaints filed under Part III of the Canada Labour Code by persons no longer employed in the same workplace. (FLSRC at 192). While these studies do not identify the reasons of workers for waiting until after they have left the job, it is reasonable to infer that fear of reprisal is an important reason, since most complaints concern fundamental issues such as non-payment of wages, benefits or overtime that arise during the employment relationship (FLSRC, at 192-3).
The fact that so many complaints are filed by employees after they have left the employ of the contravening employer is strong circumstantial evidence supporting the conclusion that fear of reprisal is a factor that dissuades many employees from reporting a violation of the ESA.
Economically vulnerable workers, even if aware of the anti-reprisal provisions, may reasonably regard them as insufficient protection of their interest in continued employment. Such workers may be unwilling to risk a period of unemployment while a claim under section 74 is decided. Even the prospect of reinstatement with back pay may not be enough to offset the risk of a lengthy period of unemployment. Studies of reinstatement in non-union environments cast some doubt on potential effectiveness of this remedy (England).
Delay in investigating and remedying a valid complaint of reprisal, as a matter of common sense, is a factor that likely acts as a disincentive to reporting contraventions, particularly for the most vulnerable employees. If the delay in investigation and remedy were reduced, particularly in cases where dismissal has resulted, the reporting of non-compliance by employees may increase.
Creating an expedited process for reprisal investigations may also prevent compounding contraventions and minimize the chilling effect of the reprisal on other employees. One result might also be an alleviation of sub-standard conditions for other employees who may feel more confident that reprisals based on the exercise of rights under the ESA will be taken seriously by law enforcement.
An expedited process for the investigation and determination of reprisal complaints would have the effect of emphasizing to employers the importance of the ESA’s anti-reprisal provisions, particularly if combined with the imposition of appropriate sanctions designed to deter such conduct.
Education and awareness of rights and obligations and of anti-reprisal provisions generally could be increased by giving publicity to reprisal cases, with the added benefit of deterring other employers from engaging in similar conduct.
In addition, we have recommended that an office of Director of Enforcement be created which could seek significant administrative penalties of up to $100,000 per infraction against an employer where, after investigation, it appears that there are reasonable and probable grounds to believe a serious reprisal has occurred. This would provide an important element of deterrence to dissuade employers from engaging in such practices and reflect the public policy importance of the issue.
As noted above, reprisal claims are currently not given priority by the Ministry. It takes approximately 90 days before claims are assigned to a Level 2 ESO for investigation, and on average it takes approximately 51 days to conclude an investigation. This is unacceptable in cases where an employee has been terminated. Most employees are simply not prepared to suffer potential unemployment while waiting 6 months for the possibility of being awarded the remedy of reinstatement and back pay, particularly if the delay in reinstatement is less likely to be meaningful or effective after that length of time.
Reprisal complaints alleging termination of employment should be given priority and not just put in a queue to be dealt with by investigators as soon as is practicable. In this regard, the Ministry should not only announce to the public that reprisal complaints alleging termination of employment will be given priority, but it should also develop tight timelines in to deal with complaints. These complaints should be investigated and completed within a matter of days.
Timely and effective investigation of reprisal complaints and timely and effective remediation of claims found to be established go hand in hand with effective law enforcement. Fear of reprisal must be combatted by a rigorous, timely and effective response, by those responsible for enforcement of the ESA, to cases of alleged reprisal and by the availability and imposition (in appropriate cases) of meaningful sanctions to deter such conduct by employers.
- The Employment Standards Program should develop, implement and publicize a policy for the speedy investigation of complaints by employees, including whistleblowers, alleging termination of employment based on the exercise of rights under the Employment Standards Act, 2000.
- The policy should emphasize that reprisals, where termination of employment has occurred, will be given priority by the Ministry of Labour and that investigations will normally be commenced within five days of receipt of the complaint.
- Complaints of termination of employment warranting speedy investigation should include cases where an employer has refused to allow an employee to return to work after a leave of absence, pursuant to the Employment Standards Act, 2000.
- The Ministry of Labour should publish the policy and, in doing so, take steps to clearly communicate the purpose and substance of the anti-reprisal protections of the Employment Standards Act, 2000.
5.5.2 Temporary foreign workers
Both the Law Commission of Ontario
In the case of temporary foreign workers, no termination of employment – whether for reprisal or for other alleged reasons – should be effective unless and until a neutral adjudicator makes an order permitting such termination. Given the federal and provincial jurisdictional issues involved, the Ministry should work with the federal government to establish an adjudication process that will protect TFWs against repatriation in cases of dismissal and prior to the expiry of a work permit. This may mean co-ordination and agreement with Immigration, Refugees and Citizenship Canada, Employment and Social Development Canada and the Canada Border Services Agency to ensure that there is an effective and efficient adjudication process recognized by both governments.
- The Ministry of Labour should work with the appropriate federal agencies and ministries to develop and implement an expeditious and accessible procedure, which is available to address cases of alleged reprisals that result in termination or unjust dismissal for temporary foreign workers prior to repatriation under the terms of their work permit.
5.6 Access to justice
5.6.1 Improving the complaint and review process - assistance to employee complainants
Both in the existing claims system and in the new model we have proposed for employees to have carriage of claims where the Ministry does not investigate, employees may need assistance and advice in preparing and presenting claims, including in a review.
The Ministry makes available a toll-free telephone information service. Employees can phone the Employment Standards Information Centre (ESIC). Ministry officials advise that the ESIC will not assist claimants in how to fill out the form per se, but it will help claimants to identify the issue, and tell them where they can find the claim form and other documents that can assist them in filling it out. The ESIC handles about 200,000-300,000 calls per year from employers and employees.
The Ministry also makes available a
before you start kit and a worksheet to calculate amounts that may be owed. Online resources are available in many languages. Self-help documents and the claim form itself have been recently updated in an effort to make them more user-friendly. Once a claim is filed it is sent to a Claims Centre for review. If a claim is lacking required information a Provincial Claim Centre representative will contact the claimant seeking that information. However, since around 2006, claimants have not had access to person-to-person assistance prior to filing a claim, or to face-to-face assistance in order to complete an incomplete claim. Those kinds of support ended when the Ministry closed down its intake offices and moved intake into select Service Ontario offices.
Professor Banks states:
Given the growing importance of employment standards to an increasing share of the Ontario workforce, the question of whether services equivalent to those offered to occupational safety and health, workers’ compensation and discrimination claims should be addressed.
While the literature convincingly raises this issue, it does not provide enough information on alternative service delivery or funding models to assess, cost or recommend options.
This is a subject addressed in the Interim Report where it was suggested that the Ministry consider the possibility of engaging the Office of the Worker Advisor (OWA) to assist employees in various aspects of the claims process. OWA is an independent agency of the Ministry of Labour. The OWA mandates are set out in the Workplace Safety and Insurance Act, 1997 (WSIA) and the OHSA. Its costs are currently paid by the Workplace Safety and Insurance Board (WSIB).
The OWA currently provides free and confidential services to non-unionized workers (advice, education, and representation) in workplace safety insurance matters (formerly called workers’ compensation) and on occupational health and safety reprisal issues. The OWA delivers all of its services in English and French. In addition to representing workers at the WSIB, and the Workplace Safety and Insurance Appeals Tribunal (WSIAT), it also represents workers in proceedings before the OLRB in health and safety reprisal cases. It provides self-help information for workers to handle their own claims where appropriate. The OWA develops community partnerships with other groups that assist injured workers or who promote health and safety in the workplace. The OWA also provides educational services in local communities on topics related to its mandates. The OWA has offices in Toronto, Scarborough, Ottawa, Downsview, Hamilton, Mississauga, St. Catharines, London, Sarnia, Waterloo, Windsor, Sault Ste. Marie, Sudbury, Thunder Bay, Timmins and Elliot Lake.
The OWA could be given an enhanced jurisdiction and a new funding model developed to help employees handle their own claims under the ESA and perhaps to represent such employees on reviews. An expanded mandate would be consistent with their current mandate to assist workers with workplace issues. If the mandate of the OWA were expanded, the result would be legal or paralegal support for employees and some employees would be able to obtain assistance in filing claims as well as other help, for example, in reprisal cases, in representation of employees in meetings with ESOs, in presenting complaints and at review proceedings before the OLRB.
Lists of lawyers willing to provide pro bono legal assistance should be developed and published on the MOL website. There are many lawyers in Ontario who deal with employment matters who may be prepared to help employees and employers prepare claims or respond to claims as part of their commitment to public service. Similarly, there should be publication of the names of worker advocacy groups, trade unions, legal clinics and others who are willing to assist employees.
- Increase the resources and expand the mandate of the Office of the Worker Advisor with a new funding model developed to help employees with claims under the Employment Standards Act, 2000.
- The Ministry of Labour should, in all judicial districts in Ontario, develop and publish on its website a list of lawyers in those districts who are prepared to provide pro bono assistance to employees and employers.
- The Ministry of Labour should develop and publish a list of worker advocacy groups, trade unions, legal clinics and others in Ontario who are prepared to provide assistance to employees.
5.6.2 Removing a barrier to claimants
Employees not covered by a collective agreement can file a claim with the Ministry of Labour if they believe their employer (or former employer) has not complied with the ESA. Unionized employees must generally enforce their ESA rights under the grievance and arbitration provisions of the collective agreement.
In 2010 the Act was amended so that the Director of Employment Standards could require that a complainant employee first contact his or her employer about the employment standards issue before a claim will be assigned to an ESO for investigation. There are template letters and other supporting material on the Ministry’s website that employees can use. This has been referred to as the
self-help requirement contained in s.96.1 of the ESA.
As a matter of Ministry policy, there are exceptions to the general rule that employees first contact their employer. These exceptions are identified on the claim form and in Ministry material explaining the claims process and include situations where an employee is afraid to do so because of fear of reprisal. As a practical matter, we are advised that claims are not rejected by the Director because the employee has not contacted his or her employer first, although the claims processor typically asks for the reason the employer was not contacted.
The research study commissioned for this Review suggested that there has been a significant decline in the number of claims filed over a period of years and that some of this decline may be associated with the introduction of the self-help requirement. Indeed the authors of the study concluded that:
the balance of evidence suggests that the decline in complaints corresponds to the introduction of the OBA [the self-help provision] the requirements of which may be dissuading workers from pursuing their rights.
The ESA currently provides broad protection for employees against reprisal by an employer for exercising his/her rights under the ESA, including filing a claim.
Unions and employee advocates assert that fear of reprisal can significantly deter employees from making timely complaints and that a requirement to inform the employer before filing a complaint exacerbates the problem of accessing ESA entitlements. They point to the large number of complaints that are made by employees after they have left the employ of the employer as evidence supporting a conclusion that the obligation to inform their employer is a barrier to accessing justice.
the workers most likely to suffer from deliberate non-compliance are also those who are most likely to be vulnerable in the event of employer reprisal. To the extent that employees have well-founded fears of reprisal, a requirement to first approach the employer is likely to constitute a significant barrier to access.
The fact that the majority of ESA claims are filed by former employees after they have quit or their employment has been terminated
In our view, concerns about the potential adverse impact of the self-help provision are well founded.
The Act should be amended by removing the authority of the Director to require that the complainant inform the employer of the basis for his or her view that this Act has been or is being contravened and, if he or she is of the view that wages are owed, the amount of the wages. This is not intended to be a criticism of the Director. Even if the Director were never to impose this requirement (which is not the case), its inclusion in the Act is likely a deterrent for potential claimants who may be discouraged from reporting violations because of concerns that they may be required to disclose first to their employer.
In sum, the requirement that an employee report alleged violations first to his employer has a negative impact on reporting and on compliance and amounts to a barrier in accessing justice to the most vulnerable employees.
In making this recommendation, we would be remiss not to mention that we are aware that there are many employers who are interested in and committed to compliance and where contraventions occur, if at all, as a result of inadvertence or lack of knowledge and not because of intentional violation of the ESA and where good faith internal reporting of alleged non-compliance by an employee would be dealt with responsibly without risk to the employee and often without the necessity for any external involvement. We are also aware that there are respected labour law experts and jurists who support internal reporting as a preferred first step in dealing with a complaint of alleged violation of employment standards legislation. For a succinct overview of this perspective, we refer to the opinion of Justice Binnie in: Merk v. International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, Local 771.
- The Employment Standards Act, 2000 should be amended to remove the Director of Employment Standards’ ability to require that an employee who is of the view that the Act has been or is being contravened inform the employer of the basis of his or her view.
5.6.3 Anonymous, third party, whistleblower and individual complaints and confidentiality of identity of the complainant
126.96.36.199 The current provisions of the ESA
Section 96(1) of the Act provides that:
A person alleging that this Act has been or is being contravened may file a complaint with the Ministry in a written or electronic form approved by the Director.
The ESA does not specifically refer to complaints made by anonymous or third party complainants, but the section as currently drafted permits such complaints to be filed.
188.8.131.52 Anonymous complaints
As a matter of Ministry practice, all information provided anonymously to the Employment Standards Information Centre about possible violations is passed to the appropriate Ministry staff for review and for possible proactive activity. In other words, anonymous information may lead to an inspection under the Ministry’s proactive enforcement program, but it does not serve as the basis for a complaint that may be sent for investigation. This seems a reasonable way to deal with complaints in circumstances where the identity of the complainant is not known to the Ministry staff who, in cases of an anonymous complaint, are not in a position to ask questions of the complainant in order to obtain additional relevant information, to assess the validity of or motive behind such a complaint, including whether the complaint is vexatious. Ministry staff will have to make a judgment call on whether to initiate an inspection based on a number of factors including, but not limited to, the specificity of the factual allegations and the sector. This seems to be a reasonable approach.
There is not, at present, a
Tip’s line where callers can report alleged violations of the ESA on an anonymous basis. The use of a hotline could assist the Ministry in deciding where a targeted inspection might be warranted and to help identify specific sectors that may warrant proactive enforcement measures. In order to combat insurance fraud, the Financial Services Commission has such a Hotline on their website providing a telephone number and a form to file an on-line complaint. It is a useful precedent.
Vosko, Noack and Tucker also support initiatives to expand options for the filing of anonymous complaints:
Due to the clear evidence of fear, particularly among employed complainants, consideration could also be given to expanding options for third-party and anonymous complaints where employees remain on the job.
- The Ministry of Labour should make available, and widely publicize on its website and elsewhere, an Employment Standards Act, 2000 Hotline for the receipt of tips by telephone or online.
Whistleblowing in the ESA context occurs when employees reveal real or perceived employer wrongdoing to the ESB. The purpose of the whistleblower protection in the employment standards context is
to encourage employee cooperation with government officials in labour matters… See: Merk v. International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, Local 771.
Subsection 74 (1) of the ESA contains whistleblower protection. It provides in part that:
No employer or person acting on behalf of an employer shall intimidate, dismiss or otherwise penalize an employee or threaten to do so,
- because the employee,
- (i) asks the employer to comply with this Act and the regulations,
- (iii) files a complaint with the Ministry under this Act,
- (v) gives information to an employment standards officer,
- (vi) testifies or is required to testify or otherwise participates or is going to participate in aproceeding under this Act,
In cases of whistleblowers, there are invariably going to be circumstances where fear of reprisal is a significant factor in discouraging any reporting of violations of the ESA, either internally or externally. To be sure, there will be other cases where employees may feel completely comfortable in reporting their concerns directly to management. For example, some companies have codes of ethics stating a commitment to complying with all applicable laws, and have developed internal policies and procedures to protect any employee who in good faith comes forward with concerns about corporate non-compliance with any applicable law. However, we are concerned with employees who wish to report directly to the law enforcement authorities that violations of the ESA are occurring in their workplace. This is the activity that is encouraged by the whistleblower protection in the legislation. This is the activity that must be protected.
The protection of whistleblowers from reprisal by the employer in the ESA reflects the legislature’s awareness that whistleblowers are vulnerable to demotion, dismissal or other negative treatment from their employer after disclosure – either internally to those responsible for managing the company or directly to the authorities. Statutory protection of whistleblowers is not enough. Vigorous law enforcement is required. The Ministry must be seen as the protector of the rights of whistleblowers and should respond quickly and effectively in cases where reprisal is alleged.
As a matter of probability, there is little doubt that fear of disclosure of identity and an accompanying fear of reprisal discourages reporting of violations by potential whistleblowers. Professor Banks says:
There is also an extensive literature on internal and external whistleblowing in the United States with respect to corporate wrongdoing. In the US there are dozens of federal health, safety, and environmental statutes that contain provisions that prohibit retaliation by private employers against employees for engaging in whistleblowing activity (Berkowitz et al, 2011, at 17). Researchers have observed that organizations with strong threats of retaliation and those without support mechanisms for employees disincentivized whistleblowing (Yeoh, 2014, at 465), and that lack of anonymity was among the main factors discouraging reporting of wrongdoing (Yeoh, 2014, at 464; see also ERC/KPMG 2011).
The real issue to be investigated in a complaint initiated by a whistleblower is whether there is non-compliance. The identity of the whistleblower complainant is - in virtually all cases - going to be irrelevant to the determination and resolution of the issue(s) related to allegations of non-compliance. As discussed below in the section dealing with individual employee complaints, in any case involving allegations of non-compliance the facts of any alleged violation, including the names of employees whose rights allegedly have been violated and/or who may be entitled to a remedy, must be disclosed to the employer in order to permit an informed response to the complaint and to enable the employer to take steps in order to comply in the future - if any are required. The disclosure of the particulars of the alleged violations to the employer does not require the disclosure of the identity of the whistleblower.
There is no policy or legal reason why the identity of the whistleblower ever needs to be made known to the employer by the ES Program in the course of an investigation where the whistleblower complainant wishes to have his/her identity kept confidential. As stated above, the real issue is whether there is non-compliance – not the identity of the whistleblower. The identity of the whistleblower in virtually all cases is going to be irrelevant and completely unnecessary to the determination and resolution of the issue(s) related to allegations of non-compliance by the employer.
Furthermore, there is no reason why the name of the whistleblower complainant needs to be disclosed by the Director to an ESO assigned to investigate the complaint. Neither is there any obvious need to disclose the identity of a whistleblower complainant in any documents given to the ESO. Developing and implementing such an internal policy would help ensure that whistleblower identity is not revealed during the course of an investigation by inadvertence or innocent mistake.
If a whistleblower is identified because the trier of fact in a court or tribunal believes such disclosure is relevant, then the identity of the whistleblower may have to be made known. Having said that, however, it is not obvious when the identification of a whistleblower would ever be relevant, even where testimony is given in a legal proceeding. If required to give testimony, to be given any weight by the court or tribunal, evidence given will usually have to be evidence based on personal knowledge relating to the alleged violation(s) (not hearsay) and the credibility of such evidence would not usually depend on a person’s status as a whistleblower, which would not be a factor to be taken into account in assessing credibility. Tribunals and courts will also be sensitive to the risks and implications of requiring any person to disclose whether that person is a whistleblower and are unlikely to make such an order unless convinced that the identity must be revealed in order to provide a fair hearing to the employer.
As with anonymous complaints, the Ministry should consider whether the nature and the specificity of the complaint, the nature and extent of violations alleged, together with other factors warrant a targeted inspection. It is within the Ministry’s authority to act without any complaint or information being made by any person.
Third party complaints
Third party complaints are those filed by non-employee persons who may make claims on behalf of an individual employee or group of employees and who may or may not represent employees in any subsequent internal investigation or ESA proceeding resulting from the complaint. A third party is entitled to file a complaint because the third party is a
person within the meaning of subsection 96(1) of the Act, which provides that
a person alleging that this Act has been or is being contravened may file a complaint.
As with whistleblowers, the real issue to be investigated in a complaint initiated by a third party is whether there is non-compliance, and the identity of the third party complainant is irrelevant to the determination and resolution of the issue(s) related to allegations of non-compliance. As discussed below, in any case involving allegations of non-compliance the facts of any alleged violation, including the names of employees whose rights allegedly have been violated and/or who may be entitled to a remedy, must be disclosed to the employer in order to permit an informed response to the complaint and to enable the employer to take steps in order to comply in the future - if any are required. The disclosure of the particulars of the alleged violations to the employer does not require the disclosure of the identity of the third party.
Although third party complainants may not have reason to fear workplace related reprisals like whistleblowers, they may wish to keep their identity confidential for a number of reasons. Some may think their effectiveness in a particular sector and/or in a particular community of vulnerable employees will be compromised if the employer and the employer community become aware of their identity. Others may wish to have their identity known so others may come to them for help if their names are disseminated. The Ministry is in no position to question the reasons why a third party wants to preserve confidentiality of identity. It should try to accommodate that request when made.
As with anonymous complaints, the Ministry should consider whether the nature and the specificity of the complaint, the nature and extent of violations alleged, together with other factors, warrant a targeted inspection. It is within the Ministry’s authority to act without any complaint being made by any person.
The current practice of the ESP is that claimants who file an ES claim must provide their name, which is shared with the employer during the claims process.
At one time, the Ministry permitted employees to file a claim confidentially (i.e., where the employee’s name was known to the Ministry, but not disclosed to the employer). This practice was changed in response to an OLRB ruling that employees would have to identify themselves to enable the employer to know the case it had to meet.
We have no hesitation in agreeing that the facts of an alleged violation(s), including the name(s) of employee(s) allegedly adversely affected, should be made known to the employer regardless of how the complaint is initiated. This information should be provided to the employer before any order is made. If, as a result of an investigation, the ESO decides to make an order, it should disclose the names of those employees whose rights have been found to have been violated, the names of all employees who are found to be entitled to relief and the nature and quantum of relief ordered for each employee.
Whether the name of the employee complainant must be provided to the employer is a separate issue. We see no reason why the identity of the employee complainant needs to be disclosed to an employer as long as the employer is in a position to respond to the complaint.
As in any case involving alleged non-compliance, the real issue is whether there is non-compliance - not the identity of the complainant. The identity of the employee complainant in some cases will be irrelevant to the determination and resolution of the issue(s) related to allegations: for example, where the facts resulting in a finding of contravention are agreed by the employer it would not be necessary to disclose the name of the employee complainant.
There are, however, other circumstances where the identity of the employee complainant will be disclosed in fact or by necessary implication. As a practical matter, particularly where there is only one complaint being investigated, the disclosure to the employer of the facts of the alleged violation(s), including the name of the employee allegedly adversely affected, may amount to a disclosure of the name of the complainant. It may be reasonable in some circumstances for the identity of the complainant to be disclosed by the investigating officer as part of the investigation. Where a complainant provides a version of the facts that are disputed by the employer, identification of the complainant is likely necessary not only as a matter of fairness to the employer, but also such disclosure may facilitate agreement on the facts and the resolution of the complaint. There are other occasions where the identity of the complainant will be obvious even if not disclosed. In endeavoring to find the facts, pursuant to the authority in s. 102 (1) of the ESA, an officer is empowered to convene a meeting that gives an officer the authority to require the attendance of both an employee and the employer. While convening such a meeting may not require the identification of the employee as the complainant, in many circumstances, it will be apparent to the employer that the employee and the complainant are the same.
The identity of the complaint may also become known because of being required to give testimony in a legal proceeding before the OLRB or a court (in contempt proceedings, for example) or because the trier of fact believes such disclosure to be relevant.
In many circumstances, the confidentiality of the individual employee complainant seeking a remedy cannot be protected in a meaningful way while at the same time being fair to an employer in disclosure of the case to be met. It would be potentially misleading to an employee when a complaint is filed to give any such assurances.
In conclusion, there are many circumstances where identity of the employee complainant may become known to the employer in the course of an investigation and/or in legal proceedings and an ESO cannot and should not give assurances that the identity of the complainant will not be disclosed to the employer during the investigation or during legal proceedings that might result.
This is another reason to focus attention on reprisal protection for employees and a reason why targeted and proactive measures must be given high priority.
- In relation to education, awareness programs and initiatives by the Ministry of Labour, it should be emphasized that good faith whistleblower reportings of violations are encouraged and protected under the Employment Standards Act, 2000.
- The stated policy of the Employment Standards Program should be to protect against the disclosure to the employer of the identity of a whistleblower complainant who wishes to keep that information confidential, with the qualification that the whistleblower’s identity may be disclosed by order of a court or tribunal resulting from the investigation of the complaint.
- Complaints from a whistleblower of alleged reprisal by an employer should be given priority by the Employment Standards Program, as should cases of reprisal brought by employees as discussed in 5.5.1 above.
- The stated policy of the Employment Standards Program should be to protect against the disclosure to the employer of the identity of a third-party complainant who wishes to keep that information confidential, with the qualification that the third party’s identity may be disclosed by order of a court or tribunal resulting from the investigation of the complaint.
- The Ministry of Labour should implement a policy to not disclose (in documentation or otherwise) the identity of the whistleblower or third-party complainant to the employment standards officer assigned to investigate the complaint, to ensure that confidentiality is not inadvertently breached.
- In cases of a complaint by an employee, whistleblower or third party, the Ministry of Labour should consider whether a targeted inspection or other strategic initiative is warranted instead of, or in addition to, conducting an investigation of a complaint.
5.6.4 Applications for review
Employers, corporate directors and employees who wish to challenge an order issued by an ESO or the refusal to issue an order are, in most cases, entitled to apply for a review of the order by the OLRB.
The ESOs, in fulfilling their roles to investigate alleged ESA violations, do not hear evidence in the traditional sense of hearing testimony under oath and receiving into evidence documents filed by the parties in accordance with rules of evidence. The ESOs investigate a complaint by interviewing the complainant and employer, and sometimes other employees and others who may have relevant information. They will also gather and evaluate the relevant employer and employee records and other relevant evidence. If, based on the investigation, the ESO concludes there has been a violation, the employer is typically given an opportunity to pay the amount owing without an order being issued. If payment is not made, the necessary order issues. The fact that an enforceable order has been made (or not made) may give rise to an application for review by the party against whom the order has been made or by the person denied relief that he/she believes is warranted.
The ESA provides that applications for review may be made where: 1) an ESO makes an order to pay wages, compensation, fees, to reinstate and/or to comply; 2) an ESO refuses to make an Order; and, 3) where a Notice of Contravention is issued.
The application for review must be made in writing to the OLRB within 30 days after the day on which the order, Notice of Contravention, or notice of the refusal to issue an order was served on the party wishing to apply for review. The OLRB has jurisdiction to extend the time for applying for review if it considers it appropriate to do so. In the case of an order directed against an employer, the employer must first pay the amount owing as determined by the ESO, plus the administrative fee, to the Director of Employment Standards in trust.
The OLRB applies a
self-delivery model to ESA appeals. Under this model, applicants are required to deliver a copy of the application and supporting documents to the responding parties, including the Director of Employment Standards before filing them with the OLRB. If the case is scheduled for a hearing the parties are required – no later than 10 days before the hearing – to deliver to the other parties and file with the OLRB copies of all documents they will be relying on in the hearing.
Currently, the ESA review process is a de novo process meaning that the parties can call evidence and what occurred at the ESO stage does not strictly matter. This distinguishes an ESA review from a pure appeal where, save in very unusual circumstances, an appellate tribunal does not hear evidence but decides an appeal on the basis of the written record which often includes a record of the evidence heard by the court or tribunal whose order is being appealed. The OLRB is required to give the parties full opportunity to present their evidence and make submissions. As a result, either party may put evidence before the OLRB either by oral testimony or by filing documentary evidence. In essence, the review hearing before the OLRB is like a trial. This means that if a party wants the OLRB to consider any documentary or other information (including information that he or she gave to the ESO), the party will have to adduce evidence before the OLRB. The OLRB makes its determination based on the evidence and argument presented by the parties. The OLRB on a review of an order, may amend, rescind or affirm the order or issue a new order; on a review of a refusal to issue an order, the Board may issue an order or affirm the refusal. Parties to the review may retain a legal advisor. In practice, we are advised that most parties are self-represented.
For reviews of orders (or failures to issue an order), the ESA provides that the OLRB shall determine its own practice and procedure (s. 116(9)) and authorizes the OLRB to make rules governing those practices and procedures (s. 118)). One of the OLRB’s rules allows it to summarily dismiss an application without a hearing because it does not make out an arguable case. According to Vosko, Noack and Tucker, approximately
one-fifth of all applications for review are dismissed summarily, that is without a hearing. … Employer and director applications are summarily dismissed about 24% of the time, while employee applications are summarily dismissed about 13% of the time.
The Ministry’s Director of Employment Standards is a party to the review and the Director’s representative participates in some but not all hearings. The Director’s representative does not directly support either workplace party but advocates for an application of the ESA that is consistent with the Director’s interpretation of the relevant section(s). As a result, the current regime is essentially a two-party process with a complainant employee and a respondent employer being the principal parties to the dispute with responsibility for the litigation at the review stage before the OLRB. With some exceptions, the parties are therefore in a position to resolve their own litigation. The OLRB assigns a LRO to work with the parties to attempt to settle the case. If the parties do not settle, it will be referred to a hearing. Recently, hearing dates have been set approximately 4 months after the settlement meeting.
Approximately 80% of ESA review applications are settled. Of those cases that do not settle and a determination on the merits is made, almost twice as many applications were dismissed than were granted.
In recent years, approximately 735 review applications have been filed annually (representing a review rate of approximately 6.5% of claims in which an officer made a decision). A majority of review applications are by employers and directors of companies.
The OLRB generally processes ESA reviews in the order that they are received.
The OLRB does hear some cases in regional centers in Ontario but there are few, if any, vice-chairs resident in these communities. The cost of travel including the time consumed in travel by vice-chairs from Toronto makes these hearings outside Toronto expensive and impractical for the volume of cases where the vice-chairs always have to travel. For employees and employers living outside Toronto and far from locations where the OLRB holds ESA review hearings, attending such hearings is a very expensive and time-consuming process.
The record currently before the OLRB on a review consists of the ESO’s order and the reasons for the order that may refer to relevant employer records.
As a de novo proceeding, the applicant for review is, in essence, asking for a trial on the merits of the case. Under the current system, the employer applicant is saying to the complainant whose complaint has been allowed in whole or in part by an ESO: I do not accept the result, so prove your case before another neutral adjudicator. And an employee applicant whose complaint has been dismissed by an ESO is saying: I do not accept the result. I want the chance to prove my case before another adjudicator.
A simpler process for employee complainants
On an application for review, the process should be simplified and easy to access for self-represented employers and employees.
On a review of an ESO order, there is currently no rebuttable presumption that the ESO order is issued in accordance with the applicable law.
The real issue on a review of an order should be whether the ESO order is based on sustainable findings of fact and on a correct application of the law. The burden should be on the applicant for review to show, on a balance of probabilities, that the ESO order is wrong as a matter of fact and/or law.
This may still necessitate a trial-like adversarial proceeding in which evidence is called on some issues, facts are found and a decision is rendered. However, the process can be made more user-friendly than it currently is for those who appear before the OLRB on applications for review.
Vice-Chairs of the OLRB who hear reviews should have the power to consult with the parties as part of the decision-making process. As explained above, consultation is less formal and less costly and more efficient than an adversarial process, and should result in a better understanding and definition of the issues in dispute and as a forum to decide whether it is necessary to hear evidence in the case. The goal of a consultation is to expeditiously focus on the issues in dispute and to determine whether any statutory rights have been violated. The vice-chair in a consultation process decides procedural issues if required and helps the parties define the issues and determine whether evidence is required on particular matters. The vice-chair then decides the case.
Special procedures, like pre-review meetings with the parties could still be scheduled with LROs in advance to ensure narrowing of the issues, agreement on facts and perhaps settle cases, much like pre-trials in civil cases.
Increased regional access to the review process will facilitate access to justice. If our recommendations with respect to complaints and a complaints process accessible to employees is implemented, the Ministry of Labour will appoint part-time vice-chairs of the OLRB in various cities around the province (in 7 of the 8 judicial districts in Ontario) who have training and expertise in the ESA and who will conduct reviews on a regional basis. The judicial districts are: Central East, Central South, Central East, East, Northeast, Northwest, Southwest and Toronto. The OLRB in Toronto would hear cases from the Toronto Region. Appointing vice-chairs in these 7 judicial districts outside the Toronto District would make attending and participating in the review process more accessible and less expensive for both employees and employers.
The OLRB or the Ministry of Labour, in consultation with the OLRB, should be asked to create explanatory materials for unrepresented parties. There will always likely be a significant number of unrepresented parties at the OLRB. One straightforward way to assist is by ensuring that documents in plain language are prepared to assist self-represented individuals, both employees and employers, with respect to both the procedure and the applicable principles of law, including the burden of proof and basic rules of evidence. These sorts of documents have proven to be of great assistance to self-represented individuals in other legal proceedings, including in criminal prosecutions where an understanding of the burden of proof, the applicable law, the rights of the accused and some basic rules of evidence in a criminal prosecution are of fundamental importance.
ESOs should be required to include copies of all of the documents that they relied upon when reaching their decision (e.g., payroll records, disciplinary notices, medical certificates) when they issue the reasons for their decision. This will help to ensure that the OLRB has a complete record before it of the documents relied on by the ESO in making an order or in denying a complaint. Such a mandatory process should lead to a more consistent quality of decision-making by ESOs and would help explain the decision to the affected parties and to the OLRB, as well as providing a more complete record to the OLRB sitting in review. For an employee who seeks a review of a decision, this procedure would also alleviate – at least to some extent – any obligation to produce some, or all, of the documentary evidence relevant to a review. This would not preclude the parties from adducing other documentary evidence relevant to the disposition of the case.
If our recommendations are accepted, not every case of alleged violation of the ESA will be investigated. This means that some employee complainants will have to bring their complaints directly to the OLRB without being investigated. In such cases, where the burden is on the complainant to show a violation of the ESA, we also recommend the less formal consultation process described above.
- Employment standards officers, when they issue the reasons for their decision, should be required to include copies of all of the documents that they relied upon when reaching their decision (e.g., payroll records, disciplinary notices, medical certificates).
- The Employment Standards Act, 2000 should be amended to provide that, on an application for review, the burden of proof is on the applicant party to prove, on a balance of probabilities, that the decision made by the employment standards officer is wrong as a matter of fact and/or law and should be overturned, modified or amended.
- Increase regional access by appointing part-time vice chairs of the Ontario Labour Relations Board to sit and hear review applications and employee complaints in each of the seven judicial districts in Ontario outside Toronto.
- Vice-chairs of the Ontario Labour Relations Board who hear applications for review should have the power to consult with the parties as part of the decision-making process.
- The Ontario Labour Relations Board, or the Ministry of Labour in consultation with the Board, should create explanatory materials for unrepresented parties regarding both the review procedure and the applicable principles of law, including the burden of proof and basic rules of evidence.
- In all judicial districts in Ontario, the Ministry of Labour should develop and publish on its website lists of lawyers and legal clinics in those districts willing to provide pro bono legal assistance to parties with respect to applications for review.
The Act permits parties to settle their ESA issues in a number of different circumstances. Settlements can be facilitated by ESOs, or parties can settle the matter themselves and inform the ESO. If the employee and employer comply with the terms of the settlement, the settlement is binding, any complaint filed is deemed to have been withdrawn and any order made by an ESO in respect of the contravention or alleged contravention is void (except a compliance order).
Settlements are void if the employee (or in the case of a settlement facilitated by an ESO, the employer) demonstrates that it was entered into as a result of fraud or coercion.
Even where a settlement occurs, the Ministry may still choose to continue prosecution proceedings against the employer if a violation was found.
ESOs may introduce the idea of a settlement in exercising their discretion under ESAs.101.1. If either party introduces the idea of a settlement, an ESO may relay offers and may describe the case of a party to the other party. ESOs who are charged with the responsibility of issuing orders should be careful about weighing in on the merits of cases when the facilitation occurs prior to an order being made. They are in a practical sense not only the face of law enforcement but also the first adjudicator of the complaint and must try to preserve, and be seen to preserve, their neutrality in that role. Consistent with this role, ESOs often do not comment on the strength of a case, but do have discretion to offer, where they consider it appropriate, an evaluation of the strengths and weaknesses of the case to either both or one of the parties. Importantly, however, ESOs are directed not to participate in settlement discussions once they have made a determination, or to delay an investigation pending settlement discussions. Ministry officials report that most settled cases are more complex matters where there are issues of credibility that are difficult to resolve, the facts are unclear, the application of the law is uncertain, or the parties’ positions are equally strong or weak. Banks concludes:
This approach appears to offer appropriate safeguards, provided of course that the role of the ESO is clearly communicated at the outset to both parties.
Approximately 15% of claims were settled with the assistance of an ESO or by the parties themselves in the 2014/15 year.
The OLRB has a cadre of professional mediators – Labour Relations Officers (LROs) – who are assigned to assist the parties to help resolve matters in advance of the tribunal hearing applications for review of an officer’s decision. Approximately 80% of ESA reviews are settled.
The Ministry of Finance (MOF), as the designated collector of unpaid orders and notices, is authorized to enter into a settlement with the debtor, but only with the agreement of the employee. If the settlement would provide the employee less than 75% of the amount he or she is entitled to, the approval of the Director of Employment Standards must be obtained.
In Ontario, the settlement of cases is almost always encouraged by adjudicative tribunals and courts charged with the duty of final adjudication. There are many reasons for this. Judicial resources are strained and could not handle the volume of cases initiated without settlements. Without settlements, too many cases would go on for too long and there would be an excessive burden on already strained adjudicative resources. Settlements virtually always save time and money for the litigants because the costs (including the costs of time off work) of proceedings before the court or administrative tribunal can be onerous. The stress of an adversarial proceeding on an individual can be burdensome. In cases where there is an on-going relationship a settlement can facilitate restoration of a
normal relationship. Where a specific outcome at trial or before the tribunal administrative proceeding is not predictable, settlement may be a very rational way to manage risk.
Without the possibility of settlements, any legal process becomes more time consuming and more expensive for the parties and for society as a whole.
The facilitation of settlements by an experienced mediator is beneficial. Most tribunals and courts do not have skilled mediators available to facilitate dispute resolution. This is an important service to provide to the parties.
- No changes are recommended.
5.7 Remedies and penalties
Enforcement mechanisms that encourage compliance, deter non-compliance and provide appropriate and expeditious restitution to employees whose ESA rights have been violated are an essential part of an effective compliance strategy.
Thousands of complaints are filed with the Ministry of Labour for ESA violations every year. Approximately 70% of assessed complaints lead to confirmed violations of the ESA.
5.7.1 The current law
Employees may choose to pursue their ESA rights through the civil courts rather than the ES Program. Employees who are covered by a collective agreement work through their union to enforce their ESA rights.
Ministry ESOs investigate claims filed by employees who believe their current or former employer has contravened the ESA, and proactively inspect workplaces to check compliance. ESOs are empowered, among other things, to:
- enter and inspect any place (except for a personal dwelling, which requires a warrant or consent);
- interview/question any person on matters that may be relevant;
- demand the production of records and to examine those records and remove them for review and/or copying; and
- require parties to attend meetings with the ESO for purposes of advancing the investigation of a claim or an inspection.
If an ESO determines that there was a monetary contravention, the employer (or other entity who has been found liable under the ESA) is often given the opportunity to pay the amount owing without an order being issued (this is referred to as voluntary compliance). If the employer does not voluntarily comply, the ESO has the authority to issue an order requiring payment. An administrative fee of 10% of the amount owing (or $100, whichever is greater) is added on to the amount of the order. Orders to Pay Wages are the most frequently issued sanction when employers do not voluntarily comply.
Employees can generally recover money owing under the Act through an Order as long as a claim is filed within 2 years of the contravention. In an inspection, ESOs can issue an Order to recover money owing up to 2 years before the date that the inspection was commenced. There is no statutory limit on the amount of money that can be recovered for employees.
Directors of corporations that fail to pay its employees can be held liable under the ESA for some of the unpaid wages (up to 6 months’ wages and 12 months’ vacation pay, but not termination or severance pay). The ESA’s director liability provisions generally mirror those in the Ontario Business Corporations Act but provide for enforcement through the ES Program rather than through court proceedings that are typically more protracted and expensive.
ESOs may also issue compliance orders ordering that a person cease contravening the Act, directing what action (other than the payment of money) the person shall take or not take to comply with the Act, and specifying a date by which the person must do so.
Compliance orders may be enforced by injunction obtained in the Superior Court of Justice, although MOL has never used this process. Compliance orders are the primary tool used in response to violations found in workplace inspections.
In some circumstances, for example in cases of reprisal, the ESO can issue an order to compensate and – if the reprisal took the form of a termination – reinstate an employee. The types of damages that can be included in a compensation order include amounts representing the wages that the employee would have earned had there been no reprisal, damages for emotional pain and suffering and other reasonable and foreseeable damages.
ESOs are empowered to issue a Notice of Contravention (NOC), which involves the imposition of an administrative monetary penalty, where the ESO finds a contravention of the Act. The penalty is payable to the Ministry of Finance (MOF) and becomes part of the province’s general revenues. The amount of the NOC for failing to post or provide the Ministry’s ESA poster, or to keep proper payroll records or make them readily available for an ESO are: $250 for a first contravention; $500 for a second contravention in a 3-year period; and $1000 for a third or subsequent contravention in a 3-year period. For contraventions of other provisions of the ESA, the penalties are: $250 for the first contravention multiplied by the number of employees affected; $500 for a second contravention in a 3-year period multiplied by the number of employees affected; and $1000 for a third or subsequent contravention in a 3-year period multiplied by the number of employees affected.
ESOs may initiate a prosecution under Part I (
tickets) of the Provincial Offences Act (POA).
The ESO may recommend a prosecution under Part III of the POA but the final decision to prosecute under that Part rests with the Ministry of the Attorney General (MAG). In general, deterrence tools such as NOCs and POA prosecutions are used less frequently than other measures to bring employers into compliance.
Whether or not a contravention is found, ESOs can require an employer to post in its workplace any notice the ESO considers appropriate or any report concerning the results of an investigation or inspection. In practice, ESOs order employers to post documents only in the inspection context, not in the claim investigation context.
The Ministry publishes the name of anyone convicted under the POA of contravening the ESA on its website.
Despite the high rate of confirmed ESA violations, relatively few penalties are issued.
On some occasions, employers provide the statutorily required payments to an employee after a claim is filed and the employee withdraws the claim and, as a result, the Ministry closes the claim without an investigation and without making a finding that the employer contravened the Act. Similarly, if the parties enter into a binding settlement, the claim is deemed to be withdrawn and any order made in respect of the contravention or alleged contravention is void. Approximately 15% of claims were settled in the 2014-15 year. Settlements do not terminate prosecutions.
In addition to the above, the ESA provides that the Director of Employment Standards may, with the approval of the Minister of Labour, determine a rate
of interest and manner of calculating interest for the purpose of the Act
Part III prosecutions are relatively rare. When Part III prosecutions do occur, they are usually for failure to comply with an order to pay.
5.7.2 Voluntary compliance measures
Voluntary compliance approaches should be preferred in dealing with non- deliberate non-compliance, particularly where an employer is willing to commit to meaningful measures to eliminate current and future non-compliance. As Professor Banks states:
This approach can be efficient because it reserves more costly punitive actions for cases in which less costly compliance approaches have proven ineffective. It can enhance effectiveness by enlisting, sometimes under the implicit threat of sanction, the cooperation of regulated enterprises through less adversarial interactions. In employment standards regulation a willingness to take a less adversarial stance may also enhance the perception of the legitimacy of employment standards within the population of employers who are contingently disposed to comply…
Appropriate sanctions must be available and used in cases of intentional violation and for repeat offenders.
5.7.3 Enforceable undertakings
Consistent with the objective of achieving voluntary compliance, the ES Program has compliance orders as a tool in its enforcement toolkit. A compliance order requires an employer to take steps to achieve compliance. It does not include orders to pay wages owing as a result of non-compliance.
Some jurisdictions have provision for enforceable undertakings as a compliance tool. Professor Banks describes such undertakings as:
a statutory agreement between a regulator and an alleged wrongdoer which sets out a number of promises or commitments intended to rectify past contraventions and encourage future compliance
fix a problem and make sure it doesn't happen again after an investigation or inspection has shown non-compliance and where the employer agrees to voluntary remediation. In such agreements, the employer also agrees to preventative actions for the future.
Such agreements commonly include:
- identification of the employer managers who have responsibility for managing operations including compliance with the law;
- an outline of the non-compliance and an acknowledgement by the employer that the law has not been followed;
- an outline of wages owed and whether payment has been made;
- an agreement by the employer to do certain actions to fix the breach (eg. remedying an underpayment, apologizing, printing a public notice)
- an agreement to have a compliance audit or a series of audits;
- to provide training (by an approved trainer) related to compliance for persons who have managerial responsibility for human resources, recruitment or payroll functions;
- a commitment by the employer to future compliance measures (e.g., regular internal audits, future reporting to the Fair Work Ombudsman);
- a provision that the FWO can rely on the admissions made in any subsequent case involving future non-compliance, including enforcement proceedings related to alleged non-compliance with the undertaking.
If the FWO decides that an enforceable undertaking is appropriate, the Office of the FWO prepares a draft agreement. The employer can provide input and seek independent legal advice before signing the agreement.
The use of enforceable undertakings is designed to engage employer commitment to compliance on a co-operative basis without the imposition of sanctions in a way that avoids legal proceedings. Such undertakings can combine the virtues of a voluntary compliance approach - avoiding the potential costs of legal proceedings associated with sanctions - and opportunities to enlist employer cooperation in future compliance initiatives.
According to the research material provided, the Australian experience is that enforceable undertakings are a
valuable and effective tool at the disposal of the regulator. The research indicates that enforceable undertakings, in addition to being non-punitive, have several advantages where they have been implemented. First, as mentioned, they engage employer commitment to on-going and sustained compliance on a co-operative basis. They are designed to create cultural change. Additionally, enforceable undertakings are tailored and responsive to individual businesses and industry. Banks cites a study
In sum, enforceable undertakings offer a number of distinct advantages over prosecution: they are generally quicker, less costly and more certain. Further, these benefits do not necessarily come at the expense of deterrent, rehabilitative or restorative outcomes.
However, for intentional and repetitive non-compliance, more serious sanctions are required.
- The Employment Standards Act, 2000 should be amended to provide for enforceable undertakings to be entered into on a voluntary basis between the Ministry of Labour and an employer.
- Enforceable undertakings should be enforced by the Ontario Labour Relations Board.
5.7.4 The current approach to sanctions and proposed changes
The currently most-favoured Ministry response to violations where sanctions are imposed is the issuance of a ticket resulting on conviction in the imposition of a fine in the aggregate amount of $360.00 ($295.00 plus a surcharge and a fee for court costs). The current practice of issuing tickets has been summarized by Professor Banks as follows:
Where sanctions are imposed, Ministry policy apparently favours the imposition of tickets over Notices of Contravention, which carry potentially greater monetary consequences. The penalty [through a Notice of Contravention] for a first contravention (other than of provisions dealing with posters and records) is $250 multiplied by the number of employees affected. It is possible that the cost to the employer of paying compensation plus a ticket, when that cost is weighted by the risk of detection, will often be less than the money saved through non-compliance. If so, while tickets may serve a reminder function in dealing with employers disposed to voluntarily comply, it is difficult to see how they could deter employers who are not so disposed because of such cost considerations. The evidence reviewed above suggests the likelihood that many if not most instances of deliberate non-compliance will result from an employer facing incentives that dispose it not to comply.
In sum, like other critics, Banks suggests that, for some employers, the magnitude of the fine is simply viewed as a cost of doing business and is insufficient to deter future non-compliance. The question is whether the current system - as a practical matter - contains sufficient disincentive to discourage intentional and repetitive non-compliance. In addition, since
tickets under Part 1 of the POA will still be issued, there is a question whether the amount of the fine currently established by the Schedule to the POA for ESA violations is sufficient. In our view, the minimum amount payable on a plea or a conviction under Part 1 should be increased both to underscore the importance of compliance and to make the sum payable more than just another cost of doing business.
Until recently, Notices of Contravention have been used sparingly but the Ministry has begun to use them more often. As stated above, the amount of the penalty varies with the number of employees affected per violation, and doubles and redoubles if the contravention is a first, second or third contravention within a three-year period. Thus the amount of the penalty can be more significant if there are many employees and multiple contraventions. The penalties have not increased since 2001, whereas the rate of inflation since that time has increased by approximately 35%.
We are of the view that while Part III prosecutions (which are rarely utilized) are available to the Ministry, they are not the best way to deal with intentional or repeat offenders. Tickets issued pursuant to Part I of the Provincial Offences Act are in most cases likely insufficient to have any deterrent effect on the employer charged or on other employers who might otherwise be motivated to change their views on the importance of compliance.
In the Interim Report, there was a discussion of whether the OLRB should be given jurisdiction to impose, where appropriate, administrative monetary penalties on non-compliant employers in addition to other remedial authority, for example, the authority to make orders to compensate employees where violations are shown to have occurred and to issue prospective compliance orders.
Other tribunals have statutory authority to impose administrative monetary penalties. The Ontario Securities Commission, if in its opinion it is in the public interest to do so, may make an order requiring a person or company to pay an administrative penalty of not more than $1 million for each failure to comply with Ontario securities law (section 127(1)9 of the Securities Act). The Securities Commission also has jurisdiction in appropriate cases, after conducting a hearing, to order a respondent to pay the cost of the investigation and the cost of the hearing incurred by the Commission. Additionally, the Securities Act provides that revenue generated from the exercise of a power conferred or a duty imposed on the Commission does not form part of the Consolidated Revenue Fund but can be used for various purposes including: for use by the Commission for the purpose of educating investors or promoting or otherwise enhancing knowledge and information of persons regarding the operation of the securities and financial markets.
In Rowan v. Ontario Securities Commission,
Penalties at the level of $1 million almost certainly have a deterrent purpose, but that does not make them penal in nature. As the Supreme Court of Canada held in Re Cartaway Resources Corp., 2004 SCC 26,  1 S.C.R. 672, in carrying out their regulatory and preventative mandate provincial securities commissions may legitimately consider deterrence when imposing a monetary penalty. Writing for the court, Le Bel J. stated, at para. 60, thatit is reasonable to view general deterrence as an appropriate, and perhaps necessary, consideration in making orders that are both protective and preventative.
In Rowan, the OCA approved the following statement of the Securities Commission:
In pursuit of the legitimate regulatory goal of deterring others from engaging in illegal conduct, the Commission must, therefore, have proportionate sanctions at its disposal. The administrative penalty represents an appropriate legislative recognition of the need to impose sanctions that are more thanthe cost of doing business. In the current securities regulation and today’s capital markets context, a $1,000,000 administrative penalty is not prima facie penal.
It is a legitimate regulatory goal to have administrative deterrent sanctions that are not penal. The Ministry of Labour is charged with the responsibility of endeavoring to create a workplace environment for all working Ontarians in which compliance is the norm and non-compliance is the exception. Unfortunately, as concluded elsewhere in this Report, non-compliance with the ESA currently affects thousands of Ontarians and is a significant societal as well as a workplace problem.
The OLRB is an expert tribunal with expertise in the interpretation, application and administration of the ESA. It is a Tribunal with an on-going interest in and commitment to ESA compliance and enforcement. If the OLRB were given a broader jurisdiction to impose significant monetary penalties, the imposition of such penalties in appropriate cases will act as a significant deterrent to other employers as well as providing a penalty for non-compliance to a particular employer. The OLRB would also develop a broader employment standards jurisprudence that would have an educative as well as jurisprudential value. Giving the OLRB jurisdiction to impose monetary penalties may not only have the desired deterrent effect but also, as the Securities Commission stated, be an
appropriate legislative recognition of the need to impose sanctions that are more than the cost of doing business.
In our view, the imposition of an administrative monetary penalty should be the result of state action in the public interest and be initiated directly by the Ministry of Labour or by the Ministry of the Attorney General against a named respondent or respondents. For this purpose, it will be necessary to have a designated officer of the Crown act as a Director of Enforcement – a person with specific responsibility to determine when to initiate proceedings in which an administrative monetary penalty is sought and to take carriage as the applicant in the proceedings. If a Director of Enforcement is given the authority to take cases directly to the OLRB, the Director could elect to initiate proceedings when, after receiving advice from the Director of Employment Standards, it is determined that there is a public policy interest in achieving an outcome that would better reflect the seriousness of the violation(s) alleged, for example – where after an investigation:
- it appears that there are reasonable and probable grounds to believe a serious reprisal has occurred; or
- in cases where there are multiple violations disclosed either by an ESO investigation or by an inspection or an audit; or
- where the employer has been found to have violated the ESA on previous occasions; or
- in cases of intentional violation.
In cases where the Director of Enforcement initiates or takes carriage of proceedings seeking the imposition of an administrative monetary penalty over and above a remedy for the claimant(s) or other employees whose rights have been violated, the respondent must be advised not only of the details of the alleged violations, but also of the amount of the administrative monetary penalty that is being sought by the Director. At any hearing, the burden of proof would be on the Ministry.
The current complaints driven process is essentially a two-party process with the complainant and a respondent employer/corporate director being the parties. With some exceptions, the parties are therefore in a position to resolve their own litigation. A settlement with respect to one or more employees should not bar the Director from assuming carriage of a case and taking it to the OLRB to seek an administrative monetary penalty and/or compensation for employees with whom there is no settlement and for whom no complaint has been made – for example, compensation for others if violations are uncovered during an inspection or during the investigation of an individual claim. In a proceeding before the OLRB where the Director of Enforcement decides to take carriage of a complaint or to initiate a complaint and seek a monetary penalty, the employee claimant(s) will not be responsible for preparing the case or for taking the matter to a hearing before the OLRB.
A complaint initiated by the Director of Enforcement should not preclude a settlement agreement between the Director and the employer on the question of remedy for adversely affected individuals and on the question of the administrative penalty – the latter being subject to the approval of the OLRB. The Director will be in the best position to assess the strengths and weaknesses of the case, to assess how best to serve the public interest and to take into account the views and the rights of adversely affected employees, all of which would – of necessity – be taken into account by the Director of Enforcement in deciding whether and on what terms to settle. One would assume that – as a matter of policy – counsel acting on behalf of the Director of Enforcement would ensure that the employees receive any monies owed based on the proper application and interpretation of the ESA.
Giving the OLRB jurisdiction to impose monetary sanctions for violation of employment standards law will not only underscore the important public policy objectives of compliance, but would also act as a deterrent to respondents and others from engaging in future conduct that violates the ESA.
- Schedule 4.2 of O. Reg 950 under the Provincial Offences Act currently sets fines for violations of the Employment Standards Act, 2000 at $295. Schedule 4.2 should be amended to set the fine for a Part 1 prosecution under the Provincial Offences Act in the amount of $1000 for the specified violations of the Employment Standards Act, 2000.
- The penalties for notices of contravention should be raised from $250/$500/$1000 to $350/$700/$1500, respectively.
- The Ontario Labour Relations Board should be given an expanded jurisdiction to impose administrative monetary penalties of up to $100,000 per infraction and the jurisdiction to order an unsuccessful respondent to pay the costs of the investigation.
- The Ontario Labour Relations Board should be given the same remedial authority as an employment standards officer to make orders to compensate employees where violations have been shown to have occurred and to issue prospective compliance orders.
- The Ministry of the Attorney General or the Ministry of Labour should appoint a designated officer of the Crown to act as a Director of Enforcement – a person with specific responsibility to determine when to initiate proceedings in which an administrative monetary penalty of up to $100,000 per infraction is sought against a named respondent(s) and to take carriage of the case as the applicant in the proceedings.
Note: This recommendation to give the Ontario Labour Relations Board jurisdiction to impose administrative monetary penalties is intended to replace the Part III Provincial Offences Act prosecution process.
- Either the Director of Employment Standards should set interest rates pursuant to section 88 (5) of the Employment Standards Act, 2000;
The Employment Standards Act, 2000 should be amended to provide that when orders are made by an officer or by the Ontario Labour Relations Board, complainants are to be awarded pre-order and post-order interest, calculated in accordance with the Courts of Justice Act.
5.8 Security for employee remuneration
[Note: We are grateful to E. Patrick Shea, LSM., CS, for his guidance and advice in this area.]
5.8.1 The concern
The concern we deal with here is that the ESA does not have an effective mechanism that grants priority to debts owed to employees for vacation pay, wages, severance and termination pay, and lags behind other provinces.
In the case of vacation pay, the ESA creates a lien or charge on the employer’s assets,
The ESA also creates a deemed trust for vacation pay
enforce the trust. The legal principles applicable to common law trusts are not easily adapted to the traditional debtor-creditor relationship and the legislation that creates the trusts typically does not provide enforcement mechanisms.
5.8.2 Other provinces
Other provinces have employment standards legislation that provides broader protection for employees than the ESA/PPSA regime.
The Employment Standards Act
BCESA) provides for a priority lien and charge in favour of the Director against all of an employer’s property to secure unpaid employee remuneration
The Employment Standards Code
AESC) creates a statutory deemed trust for all employee remuneration and a priority charge to secure up to $7,500 of employee remuneration.
The Employment Standards Code
MESC) creates a statutory deemed trust and a priority charge to secure up to $2,500 of employee remuneration.
The Saskatchewan Employment Act
SEA) creates a deemed trust and a priority charge to secure employee remuneration claims.
EMJA) also provides employees who obtain judgments against their employers with an enhanced ability to recover amounts owing as compared to Ontario. The EMJA provides employee (and other) judgment creditors with a security interest over assets to secure a judgment and provides for the appointment of a receiver to recover amounts owing under a judgment.
The Labour Standards Code provides for a statutory lien to secure orders made by the Board.
5.8.3 Practical impact of bankruptcy
It is important to understand that because of the supremacy of federal bankruptcy legislation, in the Canadian context, statutory charges created by provincial legislation to secure employee remuneration
drop away in a formal insolvency proceeding. However, the Bankruptcy and Insolvency Act
BIA), and Companies’ Creditors Arrangement Act
strategic bankruptcies. An employer or secured creditor impacted by the operation of the priority charge in favour of employees under provincial employment standards legislation can, for example, commence bankruptcy proceedings and the result is that the priority charge created by provincial legislation
drops away and is replaced by the charge in favour of employees created by the BIA. Whether or not formal insolvency proceedings are commenced is determined on a case-by-case basis, based largely on the economics of the situation. There are cases where there will be no formal insolvency proceedings commenced and employees will be able to exercise whatever remedies are provided by the ESA.
5.8.4 Federal protection for employee remuneration claims
Federal insolvency legislation provides some protection for employee remuneration claims in formal proceedings under the BIA and the CCAA. The Wage Earner Protection Program Act
WEPPA) provides for the payment of certain amounts to employees where their employment is terminated immediately prior to or as a result of certain insolvency proceedings. The WEPPA covers wages, vacation pay, and severance and termination pay, but there is a cap on the maximum amount that an employee may recover.
The intention of the current legislation is to protect vacation pay owing as against other creditors but it is ineffective because the deemed trust provision does not work appropriately to provide that protection. Similarly, the statutory charge that is created is not given priority under the PPSA and accordingly its priority depends on when it arose as compared to other creditors. This situation generally compares unfavourably to the situation in the western provinces where all employee remuneration is given priority protection, not just vacation pay, and where statutory charges are created which can be more effective in granting priority to employee claims over other creditors.
A statutory priority is intended to have the same effect as a deemed trust – to provide a right to recourse against property to secure payment of an obligation. It will be no more effective in Bankruptcy proceedings than other statutory charges but it will give better and recognized protection for claims than deemed trusts.
In our view, it should be the policy of the law in Ontario to protect employee remuneration over other creditors to the extent it is reasonable, that is to say with a cap per employee. There is no policy reason to protect only vacation pay and not other remuneration owing including termination and severance pay. Since the deemed trust provision is ineffective, it should be replaced by a statutory charge and there should be an effective enforcement mechanism for that charge.
As to an enforcement mechanism, the government should provide for a statutory charge against real property in favour of Her Majesty to secure claims. This is used in the BIA and CCA to secure claims relating to environmental matters.
Further, Ontario should consider the Saskatchewan mechanism allowing judgment creditors a security interest over assets to secure a judgment and provides for the appointment of a receiver to recover amounts owing under a judgment.
- Ontario should repeal the deemed trust and statutory lien provisions in the Employment Standards Act, 2000 and Personal Property Security Act and replace them with legislative provisions that:
- create a priority statutory charge in favour of the Director of Employment Standards against all of an employer’s property to secure unpaid employee remuneration, up to $10,000 per employee, similar to the priority charge arising under section 23 of the Retail Sales Tax Act, including provisions with respect to the enforcement of that charge in the same manner as a contractual security interest enforced under the personal property security legislation.
- enable the Director of Employment Standards to take security for the payment of employee remuneration, give the Director direct rights of action to recover employee remuneration, and give the Director the ability to take security for the payment of employee remuneration, similar to the rights afforded under subsections 37 (1) and (2) of the Retail Sales Tax Act.
- provide that the remedies should be available to the Director of Employment Standards, or to employees or a representative of the employees where the Director does not act.
- eliminate the requirement to file a certificate in a court of competent jurisdiction (except for reciprocal orders) and, instead, make an order valid and binding upon issuance, similar to section 18 of the Retail Sales Tax Act. However, it may be preferable to state in the legislation that the order of the Director of Employment Standards is enforceable like a judgment and no certificate is required, as a provision similar to section 18 of the Retail Sales Tax Act may not be effective in making the order a judgment. The intent would be to allow for immediate enforcement, similar to a judgement of the Court.
- provide for the ability to cancel and reissue an order for the purpose of making corrections without having to cancel the original order, for example, where a director named in an order turns out not to have been a director at the time the money became payable.
- provide the Ministry of Finance with the authority to demand information and to share information for the purposes of the administration and the enforcement of the Employment Standards Act, 2000.
- Ontario should repeal the deemed trust and statutory lien provisions in the Employment Standards Act, 2000 and Personal Property Security Act and replace them with legislative provisions that:
5.8.6 Director liability for employee remuneration
The issue here is that the ESA and the Business Corporations Act
OBCA) are ineffective in advancing employee claims against directors for unpaid wages and vacation pay.
Both the ESA and the OBCA impose personal liability on the directors of business corporations for unpaid wages and vacation pay,
due diligence defence to directors.
The OBCA contemplates that shareholders may remove the directors’ obligation to manage or supervise the management of the corporation’s business and affairs in a unanimous shareholder agreement.
A. Employment standards Act, 2000
Under the ESA, a director is liable for up to six (6) months wages for work performed for the corporation and up to twelve (12) months of accrued vacation pay
i. Relevant provisions
- the employer is insolvent, the employee has caused a claim for unpaid wages to be filed with the receiver appointed by a court with respect to the employer or with the employer’s trustee in bankruptcy and the claim has not been paid;
- an employment standards officer has made an order that the employer is liable for wages, unless the amount set out in the order has been paid or the employer has applied to have it reviewed;
- an employment standards officer has made an order that a director is liable for wages, unless the amount set out in the order has been paid or the employer or the director has applied to have it reviewed; or
- the Board has issued, amended or affirmed an order under section 119, the order, as issued, amended or affirmed, requires the employer or the directors to pay wages and the amount set out in the order has not been paid.
An order to pay made under the ESA has the same effect as a judgment obtained by an employee against a director.
ii. Barriers to effectiveness
The administrative remedy in the ESA with respect to directors contemplates a relatively streamlined process that results in a judgment against the directors without the need for a civil action to be commenced under the Rules of Civil Procedure.
The barriers to the effectiveness of the ESA as a direct remedy for employees against directors are:
- the requirement that there be formal court-based insolvency proceedings commenced in respect of the employer before the employees may pursue the directors;
- the requirement that the employee file a proof of claim and wait to determine if there will be a distribution in the insolvency before the employees may pursue the directors; and
- there is no ability for one employee to act as a representative of all employees in an action against directors for unpaid remuneration.
The requirement that the employer be bankrupt or be subject to a court-appointed receivership before employees are permitted to pursue claims against directors for unpaid remuneration effectively requires that employees initiate bankruptcy, or wait until the employer or some other creditor(s) commence bankruptcy proceedings.
The requirement that an employee file a proof of claim in a bankruptcy or receivership is, in and of itself, not a significant barrier. However, while there is a statutory claims process in bankruptcy proceedings, there is no statutory requirement that a receiver appointed under the Courts of Justice Act or the Bankruptcy and Insolvency Act (the
BIA) conduct a claims process, and therefore an employee may not be able to file a proof of claim in a receivership.
The requirement that the employee’s claim in the bankruptcy or receivership be unpaid limits the effectiveness of the remedy against the directors. Even where there is a claims procedure, it can often be months, or even years, before it is determined whether there will be a distribution to unsecured creditors.
In addition, the scope of the insolvency proceedings referenced in the ESA is not complete in that it contemplates only bankruptcy and the appointment of a receiver by the court. The ESA does not contemplate a secured creditor taking steps to appoint a receiver under a security agreement over all or substantially all of an employer’s assets. The ESA also fails to contemplate the possibility that reorganization proceedings may be commenced under the BIA or the CCAA in which employee claims for remuneration pay may not be fully satisfied and in respect of which payment to employees may be significantly delayed. The BIA and the CCAA both provide protection to employees,
The ESA contemplates the possibility of a person representing the interests of parties with the same or similar interest before the OLRB,
B.Business Corporations Act
i. Relevant provisions
Under the OBCA corporate directors are jointly and severally liable for up to six (6) months of wages and twelve (12) months of vacation pay owing to employees for services performed for the corporation while they were directors where.
- the corporation has been sued for the debt and the judgment cannot be satisfied from the assets of the corporation; or
- the corporation is subject to winding-up, liquidation or bankruptcy proceedings and a claim for the debt owing has been proven.
ii. Barriers to effectiveness
The barriers to the effectiveness of the OBCA as a direct remedy for employees against directors are:
- the requirement that, in the absence of formal liquidation proceedings, a judgment be obtained against the corporate employer as a pre-condition to the directors being personally liable;
- there is no ability for one employee to act as a representative of all employees in an action against directors for unpaid remuneration; and
- the list of insolvency proceedings that will
triggerdirector liability is incomplete.
Unlike the ESA, the OBCA requires only that a proof of claim is filed by the employees where formal liquidation proceedings are commenced in respect of an employer. This does not create an unreasonable barrier or undue delay. However, the OBCA does not contemplate the possibility that a receiver may be appointed over an employer’s assets by the court or a security agreement and, as is the case with the ESA, there is a
gap in the OBCA in that it does not contemplate reorganization proceedings under the BIA or the CCAA. As noted above, while the BIA and the CCAA provide protection to employees in reorganization proceedings, the possibility exists that employees will have an unsecured claim in a re-organization.
The reason personal liability is imposed on directors is to ensure that employees are paid. There ought to be effective remedies to ensure prompt payment of what is owed. The existing procedures and requirements place unnecessary, time consuming and expensive barriers in the way of employees receiving the wages and vacation pay they are owed. Where liability is based on the fact that the employer is insolvent and unable to pay (and there are other circumstances where liability arises without a formal insolvency), there should be no need for formal proceedings to be commenced before the employee can take direct action. The fact that employee remuneration has not been paid, in and of itself, ought to provide the basis for employees to take proceedings against the directors of a corporate employer. Changes that do not expand the liability of directors beyond what it is today but provides an effective means to obtain payment should be the objective.
When the directors pay the remuneration owing they would be subrogated to (or stand in the shoes of) the employees’ claims against the corporation, including any claims the employees might have in a bankruptcy or receivership.
There is no sound policy reason why the employees’ ability to pursue directors under the OBCA, for unpaid remuneration ought to be limited to those cases where the employee has first obtained judgment against the employer. In fact, this barrier is unjustifiable given the very high cost of litigation and the fact that the OBCA does not contemplate representative proceedings on behalf of all employees. This criticism does not apply to the ESA.
Requiring that employees obtain a judgment against the corporation before pursuing directors makes the directors
true guarantors. The law as it stands is not consistent with modern commercial practice where most guarantees are structured as
primary obligor guarantees, where there is typically recourse against the guarantor without requiring the debtor to first pursue the primary obligor.
As is the case with enforcing judgment against an employer in Ontario it should be easier to enforce a judgment against directors. It should be possible to obtain a security interest in the amount of the judgment and to be able to appoint a receiver.
There is inconsistency between the ESA and the OBCA in terms of the availability of a remedy against directors. For example:
- in the case of a bankrupt employer, the ESA requires that a proof of claim be filed and there be no distribution to employees, but the OBCA requires only that a proof of claim be filed;
- the ESA provides relief to employees where a receiver is appointed by the court over the employer’s assets, but the OBCA does not.
Harmonization of the ESA and the OBCA would make it easier for employees to understand their remedies vis-a-vis directors and for the directors to understand their potential liabilities vis-a-vis employees.
Adopting this approach, the effectiveness of the personal liability remedies provided by the ESA and the OBCA would be enhanced without altering the scope or extent of the liability to which directors (and shareholders) are exposed. The changes would be more efficient and effective for employees without exposing directors (or shareholders) to new or increased liabilities. Given the difficulties inherent in enforcing judgment against corporations, it is very important that the existing liability of directors be made effective. Our recommendations in this regard simply takes the existing purpose of the law and seeks to make important changes that will make it effective. It will be important, however, for the Ministry to devote adequate resources to pursue directors in order to recover the amounts owing.
- The existing provisions of the Employment Standards Act, 2000 and the Ontario Business Corporations Act should be amended to provide that up to six months’ wages and up to 12 months’ accrued vacation pay are the responsibility of the directors of a corporation and that the only condition that must be met in order for an employee to receive these amounts is that the employee has not been paid these sums by the corporation.
- The provisions of the Employment Standards Act, 2000 and the Ontario Business Corporations Act should be consistent.
- An employee representative should be able to take proceedings or make a claim against directors on behalf of all employees.
- The Ministry of Labour should ensure that adequate resources are allocated, or continue to be allocated, and utilized for the recovery from directors of unpaid amounts owing by a corporation to an employee.
- footnote Back to paragraph Harry Arthurs, Fairness at Work: Federal Labour Standards for the 21st Century (Gatineau: Human Resources and Skills Development Canada, 2006), 53.
- footnote Back to paragraph Law Commission of Ontario, Vulnerable Workers and Precarious Work (Toronto: Law Commission of Ontario, 2012), 56.
- footnote Back to paragraph Kevin Banks, Employment Standards Complaint Resolution, Compliance and Enforcement: A Review of the Literature on Access and Effectiveness (Toronto: Ontario Ministry of Labour, 2015), 43. Prepared for the Ontario Ministry of Labour to support the Changing Workplaces Review.
- footnote Back to paragraph Leah Vosko, Andrea M. Noack, and Eric Tucker, Employment Standards Enforcement: A Scan of Employment Standards Complaints and Workplace Inspections and Their Resolution under the Employment Standards Act, 2000 (Toronto: Ontario Ministry of Labour, 2016), 29. Prepared for the Ontario Ministry of Labour to support the Changing Workplaces Review.
- footnote Back to paragraph David Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It (Cambridge, MA: Harvard University Press, 2014). Numerous scholarly and other works have suggested that fear of reprisals is widespread and the research study done for this Review confirms those facts.
- footnote Back to paragraph David Weil, Improving Workplace Conditions through Strategic Enforcement, a Report to the Wage and Hour Division. Boston: Boston University, 2010, 75.
- footnote Back to paragraph Banks, 55.
- footnote Back to paragraph Weil (2014).
- footnote Back to paragraph Banks, 59-60.
- footnote Back to paragraph Banks, 60-61.
- footnote Back to paragraph Vosko, Noack, and Tucker, 39-40.
- footnote Back to paragraph Ibid., 40.
- footnote Back to paragraph Ibid., 42.
- footnote Back to paragraph Ibid., 42-43.
- footnote Back to paragraph Banks, 60.
- footnote Back to paragraph Banks, 61.
- footnote Back to paragraph Weil (2010), 81.
- footnote Back to paragraph Banks, 62-63.
- footnote Back to paragraph David Weil, A Strategic Approach to Labor Inspection Article in International Labour Review 147(4): 349 - 375 · December 2008, 365.
- footnote Back to paragraph Weil, 1.
- footnote Back to paragraph Banks, 63.
- footnote Back to paragraph Ibid., 63-64.
- footnote Back to paragraph Ibid., 64.
- footnote Back to paragraph Banks, 65.
- footnote Back to paragraph Weil (2010, 88-9.)
- footnote Back to paragraph Banks, 76-77.
- footnote Back to paragraph Weil (2010), 79.
- footnote Back to paragraph Ibid., 87.
- footnote Back to paragraph See Australia’s Fair Work Ombudsman website
- footnote Back to paragraph FWO website.
- footnote Back to paragraph Banks, 5.
- footnote Back to paragraph An exception is the Ministry’s defence of Notices of Contravention at the OLRB which it has started to use significantly more since the onset of this Review.
- footnote Back to paragraph R. v. Boucher,  SCR 16, page 24-25
- footnote Back to paragraph Vosko, Noack, and Tucker, 11.
- footnote Back to paragraph Vosko, Noack, and Tucker, 6.
- footnote Back to paragraph Weil (2010), 1.
- footnote Back to paragraph Banks, 13.
- footnote Back to paragraph Vosko, Noack, and Tucker, 11.
- footnote Back to paragraph Banks, 12.
- footnote Back to paragraph Weil (2010), 1.
- footnote Back to paragraph Arthurs, 207.
- footnote Back to paragraph Ibid., 207.
- footnote Back to paragraph Board Processes & Forms, Adjudication
- footnote Back to paragraph Banks, 57.
- footnote Back to paragraph Banks, 56.
- footnote Back to paragraph Banks, 54.
- footnote Back to paragraph Vosko, Noack, and Tucker, 29.
- footnote Back to paragraph Banks, 57.
- footnote Back to paragraph Banks, 57-58.
- footnote Back to paragraph Weil (2010), 87.
- footnote Back to paragraph Ibid., 83.
- footnote Back to paragraph S.O. 2014, c. 10.
- footnote Back to paragraph Labour OHCOW Academic Research Collaboration, Internal Responsibility: The Challenge and the Crisis, 10.
- footnote Back to paragraph Ibid, 14-15.
- footnote Back to paragraph Vosko, Noack, and Tucker, 24.
- footnote Back to paragraph Ibid., 30.
- footnote Back to paragraph Vosko 2011; WAC 2015; Weil 2010; Weil & Pyles 2007.
- footnote Back to paragraph Weil (2012), 3.
- footnote Back to paragraph Banks, 16.
- footnote Back to paragraph Banks, 15-17.
- footnote Back to paragraph Vosko, Noack, and Tucker, 22.
- footnote Back to paragraph Banks, 15.
- footnote Back to paragraph Vosko, Noack, and Tucker.
- footnote Back to paragraph Ibid., 5.
- footnote Back to paragraph Banks, 16-17.
- footnote Back to paragraph Banks, 18.
- footnote Back to paragraph LCO (2012), 73.
- footnote Back to paragraph Arthurs, 244.
- footnote Back to paragraph Banks, 25.
- footnote Back to paragraph Banks, 40.
- footnote Back to paragraph Ibid., 40
- footnote Back to paragraph Vosko, Noack, and Tucker, 19.
- footnote Back to paragraph Vosko, Noack, and Tucker
- footnote Back to paragraph Banks, 22.
- footnote Back to paragraph Vosko, Noack, and Tucker.
- footnote Back to paragraph 2005 SCC 70.
- footnote Back to paragraph Vosko, Noack, and Tucker, 24.
- footnote Back to paragraph Op. cit., para 30.
- footnote Back to paragraph Banks, 17.
- footnote Back to paragraph Cineplex Odeon Corporation v. Ministry of Labour, (1999) CanLII 20171, ON LRB.
- footnote Back to paragraph Exception: the amount that has to be paid into trust to appeal a compensation order is limited to $10,000.
- footnote Back to paragraph Vosko, Noack, and Tucker, 60.
- footnote Back to paragraph Banks, 20.
- footnote Back to paragraph Interim Report, 288.
- footnote Back to paragraph Vosko, Noack, and Tucker, 5.
- footnote Back to paragraph Vosko, Noack, and Tucker, 6.
- footnote Back to paragraph The time limits on recovery through an order and the limit on the amount that can be the subject of an order were amended effective February 20, 2015: the $10,000 cap on an Order to pay wages for a single employee was removed, and the provision that limited Orders to covering only those wages that became due in the 6 months prior to the date the claim was filed (or 12 months in the case of vacation pay and repeat contraventions) was changed to two years. The previous limitations apply only with respect to wages that became due prior to February 20, 2015.
- footnote Back to paragraph Vosko, Noack, and Tucker, 6.
- footnote Back to paragraph For example, damages representing the loss of an employee’s reasonable expectation of continued employment with the former employer, expenses incurred in seeking new employment, and damages representing lost benefit plan entitlements that an employee was wrongfully deprived of.
- footnote Back to paragraph Vosko, Noack, and Tucker, 6.
- footnote Back to paragraph See Section 88(5).
- footnote Back to paragraph See Sections 81(8), 119(12), 88(7), 117(3) and 117(4).
- footnote Back to paragraph Banks, 67-68.
- footnote Back to paragraph Banks, 72.
- footnote Back to paragraph Hardy, Tess & John Howe. Too Soft or Too Severe? Enforceable Undertakings and the Regulatory Dilemma Facing the Fair Work Ombudsman, Federal Law Review. 41.1 (2013): p. 1-33, at 7.
- footnote Back to paragraph Banks, 73.
- footnote Back to paragraph Banks, 71.
- footnote Back to paragraph 2012 ONCA 208
- footnote Back to paragraph Ibid., para. 51.
- footnote Back to paragraph , para. 52.
- footnote Back to paragraph ESA, s. 40(2).
- footnote Back to paragraph R.S.O. 1990, c. P.10.
- footnote Back to paragraph Textron Financial Canada Limited v. Beta Brands, 2007 CanLII 43908 (ON SC).
- footnote Back to paragraph See ESA ss. 40(1).
- footnote Back to paragraph PPSA, s. 30(7). See also Textron Financial Canada Limited v. Beta Brands, 2007 CanLII 43908 (ON SC).
- footnote Back to paragraph ESA, s. 40(2).
- footnote Back to paragraph BIA, s. 67(2) and (3).
- footnote Back to paragraph See, for example, British Columbia v. Henfry Samson Belair Ltd., 1898 CanLII 43 (SCC ), Husky Oil Operations Ltd. v. Canada (Minister of National Revenue), 1995, CanLII 69 (SCC ) and IBL Industries Ltd. (Re), 1991 CanLII 7223 (ON SC).
- footnote Back to paragraph It should be noted that most provinces include the protection in a single piece of legislation.
- footnote Back to paragraph R.S.B.C. 1996, c. 113. See CIBC v. Wildflower Productions Inc., 2000 BCSC 193 (CanLII) and Vancouver City Savings Credit Union v. Avicenna Group Holdings (Chilliwack) Ltd., 2015 BCSC 31 (CanLII).
- footnote Back to paragraph BCESA, s. 87.
- footnote Back to paragraph BCESA, ss. 92 – 94.
- footnote Back to paragraph BCESA, s. 89.
- footnote Back to paragraph R.S.A. 2000, c. E-9.
- footnote Back to paragraph AESC, s. 109.
- footnote Back to paragraph C.C.S.M. c. E110.
- footnote Back to paragraph MESC, s. 100 - 107.
- footnote Back to paragraph S.S. 2013, c. S-15.1.
- footnote Back to paragraph SEA, ss. 2-64 – 2-67.
- footnote Back to paragraph S.S. 2010, c. E-9.22.
- footnote Back to paragraph It should be noted, however, that the EMJA has yet to be tested in an insolvency proceeding to determine whether the security interest created by the EMJA will survive a bankruptcy.
- footnote Back to paragraph R.N.S. 1898, c. 246, ss. 85 and 88. See also Ross Estate v. Police Association of Nova Scotia, 2014 NSSC 42 (CanLII).
- footnote Back to paragraph R.S.C. 1985, c. B-3.
- footnote Back to paragraph R.S.C. 1985, c. C-36.
- footnote Back to paragraph See, for example, Husky Oil Operations Ltd. v. Canada (Minister of National Revenue), (1995), CanLII 69 (SCC ).
- footnote Back to paragraph See, for example, CIBC v. British Columbia (Director of Employment Standards), (2001) BCCA 159 CanLII.
- footnote Back to paragraph S.C. 2005, c. 47, s. 1.
- footnote Back to paragraph BIA, ss. 14.06(1.1) and (7), and CCAA s. 11.8(8).
- footnote Back to paragraph We are grateful to E. Patrick Shea, LSM., CS, for his guidance and advice in this area.
- footnote Back to paragraph R.S.O. 1990, c. B.16.
- footnote Back to paragraph ESA, Part XX and OBCA, s. 131.
- footnote Back to paragraph ESA, s. 81(3). Under the OBCA, liability is for amounts owing for services performed and this has been found to not include severance and termination: See Barrette v. Crabtree Estates, 1993 CanLII 127 (SCC ) (applying parallel provisions of the Canada Business Corporations Act, R.S.C. 1985, c. C-44, s. 119).
- footnote Back to paragraph Note that the Canada Business Corporations Act provides a due diligence defence: see Canada Business Corporations Act. R.S.C. 1985, c. C-44, s. 123(4).
- footnote Back to paragraph ESA, ss. 97 and 98.
- footnote Back to paragraph OBCA, s. 115(1).
- footnote Back to paragraph ESA, ss. 79 and 80, and OBCA, s. 108. Note that s. 80 of the ESA does not reflect the possibility that corporations incorporated otherwise than the OBCA and the CBCA are operating in Ontario: see Extra-Provincial Corporations Act, R.S.O. , 1990, c. E.27.
- footnote Back to paragraph OBCA, s. 115(4). This provision applies to anyone other than officers and professional that step in and take over managing or supervising the management of the corporation’s business and affairs.
- footnote Back to paragraph ESA, s. 81.
- footnote Back to paragraph ESA, ss. 81(1).
- footnote Back to paragraph See Enforcement of Money Judgments Act, S.S. 2010, c. E-9.22.
- footnote Back to paragraph ESA, ss. 81(1).
- footnote Back to paragraph Rules of Civil Procedure, R.R.O. 1990, Reg 194, Rule 60.
- footnote Back to paragraph ESA, Parts XXI and XXII.
- footnote Back to paragraph The BIA, for example, requires that certain employee claims be paid: see Bankruptcy and Insolvency Act, R.S.C. 1985, B-3, s. 60(1.3).
- footnote Back to paragraph ESA, s. 119(2).
- footnote Back to paragraph OBCA, s. 131.
- footnote Back to paragraph The ESA contains to express subrogation provisions, but the doctrine of equitable subrogation would apply to put the director into the shoes of the employees vis-a-vis the corporation.
- footnote Back to paragraph ESA, s. 81(2).
- footnote Back to paragraph It should be noted that even in the case of true guarantees the law provides procedures that permit a debtor to obtain relief directly as against a guarantor without first pursuing the primary obligor.