Skip to main content

Part III - How this Act applies

Part III (How this Act Applies) contains provisions dealing with the application of the Employment Standards Act, 2000 and sets out some basic matters that are critical to its operation.

Section 3 – To whom act applies

To whom Act applies – section 3(1)

Section 3(1)(a) indicates that the Employment Standards Act, 2000 applies to all employees whose work is to be performed in Ontario and their employers. However, the fact that some work is performed in Ontario may be insufficient to bring the employee in under the jurisdiction of the ESA 2000. For example, if the employee's work in Ontario is merely a continuation of the work performed in another jurisdiction, then the laws of the other jurisdiction may apply rather than the ESA 2000.

Section 3(1)(b) provides that the Act applies to employees whose work is to be performed in Ontario and who also perform work outside of Ontario but only where the work is a continuation of the work performed in Ontario.

Examples of the implications of section 3(1)(b):

  1. A salesperson, or truck driver (in a provincial jurisdiction operation), who is employed and has a home base in Ontario will fall under the Act's jurisdiction, notwithstanding that they work both in and out of Ontario in the course of their employment. The work performed outside Ontario is a continuation of work performed in Ontario.
  2. A bricklayer working for a construction company on a project that is located partly in Ottawa and partly in Hull, Quebec will be subject to Ontario's jurisdiction (even though they may also fall under Quebec' s jurisdiction) because the Quebec work will be considered a continuation of the work in Ontario. Therefore, where the bricklayer worked 40 hours in Ontario and 20 in Quebec in one week, all the work is subject to Ontario jurisdiction and all the hours worked are included for the purposes of the ESA 2000, i.e., the employee would be entitled to overtime pay for 16 of the 60 hours worked in the week.
  3. The same approach as in (2) would apply to a service truck driver of that Ottawa construction company, where they drove the truck in Hull to service projects in both cities.
  4. An employee works for five years for ABC Company in England, then is transferred to Ontario where they work for ABC for two years. Because the work in England was not a continuation of the work in their entitlements under the Act.

It should also be noted that, in some situations, there might very well be dual jurisdiction over the matter. For example, a person may be performing work in Newfoundland as a continuation of the work in Ontario, and Ontario would have jurisdiction over the contract of employment, notwithstanding that Newfoundland may have as well.

Factors that are not relevant to the Act's application include where:

  • The offer of employment was made or accepted;
  • The contract of employment was signed;
  • The employee resides;
  • The head office of the employer is located;
  • The wages are to be paid; and
  • The employer is incorporated.

In Shearing v James Way Construction Inc., 2007 CanLII 15197 (ON LRB), the issue was whether the overtime provisions of ESA 2000 applied to work performed in the United States. The employee worked building fast food outlets for a construction business that was based in Kitchener. Occasionally, the employer sent the employee with a loaded truck of building materials to the United States to build similar outlets there, following which the employee would return to Ontario to resume his duties. The Board found that the employee’s work in the United States was a continuation of his work in Ontario within the meaning of s. 3(1)(b) and that the overtime provisions applied.

In Karpowicz v Valor Inc., 2016 CanLII 49203 (ON LRB), the Board considered whether the ESA 2000 applied to an employee who performed  almost all of his work in the U.S. for an employer with headquarters in Ontario. The employment contract stated that the parties wanted to laws of Ontario, including the ESA 2000, to apply to their employment relationship. However, the employee was based in Michigan, where he performed almost all of his work, even the work that related to clients based in Ontario. He came to Ontario on a few occasions to attend meetings, but the Board determined that this was incidental to his work in Michigan and constituted a continuation of his work outside of Ontario. The Board gave little weight to the intention of the parties and found that the ESA 2000 did not apply because s. 3(1)(b) was inapplicable.

Exception, federal jurisdiction – section 3(2)

This provision, introduced by the ESA 2000, clarifies that the ESA 2000 does not apply to employees and employers that are federally regulated and who are therefore subject to the Canada Labour Code rather than the ESA 2000. Section 3(2) codifies the common law and the Program policy applied under the former Employment Standards Act

Section 2 of the Canada Labour Code provides a definition of “federal work, undertaking or business” which fall under federal jurisdiction:

However, despite this definition it is not always clear whether an employer is federally or provincially regulated. Generally, it should be presumed that employment standards are provincially regulated, and therefore fall within the jurisdiction of the ESA 2000.  If it is unclear whether an employer is provincially or federally regulated, it is recommend that guidance be sought. Additionally, see the sections below for further information on federal vs provincial jurisdiction in employment.

Constitution Act, 1867

In Canada, law-making functions are divided between the Parliament of Canada and the provincial legislatures by the Constitution Act, 1867 (formerly called the British North America Act). Section 91 of the Constitution Act, 1867 assigned to the federal government a residual authority to make laws concerning the Peace, Order and Good Government of Canada (referred to as the "POGG power"). The courts have determined that such matters as aeronautics, radio and television broadcasting are within federal jurisdiction under this clause. In addition, s. 91 sets out 31 classes of exclusive federal power. These include such matters as unemployment insurance, the military, criminal law and divorce. Finally, pursuant to s. 91(29), Parliament may make laws concerning any classes of works or undertakings expressly excepted from the subjects assigned to provincial jurisdiction in s. 92.

Section 92 of the Constitution Act, 1867 assigns jurisdiction to the provinces over such subjects as provincial taxation, municipal institutions within the province, property and civil rights in the province, and the administration of provincial courts. It also establishes exceptions from provincial jurisdiction in ss. 92(10)(a)-(c) for local works or undertakings that connect provinces or extend beyond the province, steamship lines between a province and a foreign country, and those undertakings that are declared to be of national interest. Note that the combined effect of s. 91(29) and s. 92(10)(a) is to provide Parliament with jurisdiction over interprovincial transportation and communications works and undertakings, and the combined effect of s. 91(29) and s. 92(10)(c) is to allow the federal government to declare its jurisdiction over grain elevators and various kinds of mills and warehouses.

As a general rule, the regulation of labour relations and working conditions (which includes employment standards) falls within provincial jurisdiction pursuant to the province's constitutional authority over Property and Civil Rights in the Province, as per s. 92(13) of the Constitution Act, 1867.

It should be noted that notwithstanding this general rule, Parliament has jurisdiction over labour relations and working conditions when such jurisdiction is an integral part of Parliament's jurisdiction over an area of primary federal authority.

Principles of federal jurisdiction

The constitutional principles that have been applied in determining whether Parliament has jurisdiction over employment and labour matters were reviewed by the Supreme Court of Canada in Northern Telecom v Communications Workers, [1980] 1 SCR 115, 1979 CanLII 3 (SCC) and summarized as follows:

As a result, employees are governed in their employment relationships by federal legislation if the enterprise or operation in which they are engaged is a federal work or undertaking as determined through the exercise of the POGG power or as enumerated in s. 91 of the Constitution Act, 1867, including matters excepted from provincial jurisdiction under s. 92(10). The employer may also fall under federal jurisdiction if it is found to be integral to a federal undertaking, though this requires, among other things, a high level of operational connection between the local and federal undertakings.

Where a federal undertaking carries on an operation unrelated to federal jurisdiction, that operation will be subject to provincial employment and labour law. In Canadian Pacific Railway Co. v Attorney-General of British Columbia, [1948] SCR 373, 1948 CanLII 18 (SCC), also known as the Empress Hotel case, the Supreme Court of Canada held that employees of the railway's hotel (as opposed to the employees working on the railway itself) were subject to provincial labour laws because the operation of the hotel was entirely divisible from the operation of the railway and as such was not an integral element of the operation of the railway. In other words, the hotel operation was not a federal work or undertaking, and the employees were governed by provincial law.

In general, employees of a federal work or undertaking, or of a work or undertaking that is integral to a federal undertaking, will fall under federal jurisdiction, and it is assumed in most instances that management of the undertaking in terms of employment and labour matters is essential and vital to the undertaking as a whole. Therefore, such employees will fall under federal employment law.

Examples of federal jurisdiction in employment matters

The following is a brief review of employees and industries in which employment matters fall under federal jurisdiction.

Federal government employees

Each jurisdiction has full and exclusive competence to legislate with regard to its own employees. Therefore, employees of the federal government will fall under federal rather than provincial jurisdiction.

Federal crown corporation employees

Employees of a federal Crown Corporation may or may not fall under federal jurisdiction. Such employees are governed by federal law only where the corporation is engaged in a federal work or undertaking. See the discussion of the Empress Hotel case above.

Nuclear facilities

In Ontario Hydro v Ontario (Labour Relations Board), [1993] 3 SCR 327, 1993 CanLII 72 (SCC) the Supreme Court of Canada held that jurisdiction over employees working in Ontario Hydro's nuclear operations was federal rather than provincial. Following this decision, the Canada Labour Code was amended so as to authorize the federal government to make regulations that effectively made the terms of provincial legislation, instead of what was in the Canada Labour Code, apply to these employees. Federal regulations to do this were made and came into force on April 1, 1998. As of that date, Ontario Hydro nuclear operations employees became subject to Ontario's employment standards legislation and are covered (both with respect to the standards and enforcement) under the ESA 2000 just as employees in non-nuclear operations are - see federal regulation SOR/98-181. Note that the federal regulation applies to the Pickering and Darlington nuclear facilities owned and operated by Ontario Power Generation and to the Bruce nuclear facility operated by Bruce Power because the regulation defines a nuclear facility as one other than Ontario Hydro if, on the day on which the regulation came into force (April 1, 1998) or after, the facility was owned and operated by Ontario Hydro.

This federal regulation is supported by s. 94 of the ESA 2000, which makes it clear that the Ontario Labour Relations Board and other persons having power under the Act (such as employment standards officers and the Director of Employment Standards) have the authority to exercise the powers conferred under the federal regulation, i.e., to enforce the employment standards provisions that are incorporated by reference into the Canada Labour Code. See ESA Part XXI, s. 94 for a further discussion.

There is one exception to the application of the ESA 2000 to Ontario Power Generation's nuclear energy facilities. Under the ESA 2000, if an employment standards officer wishes to enter (without the consent of the occupier) a place that is used as a dwelling, they are required under ESA Part XXI, s. 91(3) to obtain a search warrant issued under ESA Part XXI, s. 92. However, if (in the unlikely event) the dwelling were a nuclear facility, the officer would be required to obtain the search warrant under s. 487 of the Criminal Code because s. 4 of the federal regulation SOR/98-181 specifically refers to the search warrant being obtained under that section of the Criminal Code. Please refer to the discussion of entry into dwellings in ESA Part XXI, s. 92.

Aeronautics

Pursuant to the POGG power, the field of aeronautics was held to be within the federal jurisdiction by the Privy Council in the 1931 decision in The Attorney-General Canada v The Attorney-General of Ontario and others, [1931] UKPC 93 (22 October 1931), also known as the Aeronautics Reference. The Council stated that aerial navigation was of such importance as to affect the body politic of the dominion.

Accordingly, all airlines, air transport undertakings, airports and their employees fall under federal jurisdiction and may include:

  • Employees of a company engaged in refueling, maintenance and ground handling of private, corporate and commercial aircraft;
  • Employees of a maintenance, installation and repair firm where the firm's work is functionally interrelated with an airline; and
  • Employees who service, inspect and certify aircraft (for example, an independent contractor hired by Air Canada to service its planes).

However, the following employees may not be necessary, integral or vital to the functioning of an airport, and may not be under federal jurisdiction:

  • Baggage porters;
  • An airport limousine service's employees (unless they provide transport beyond the borders of the province on a continuous and regular basis);
  • Airport parking lot employees;
  • Maintenance workers at an air traffic controllers' school;
  • Employees of a catering company at an airport operating a coffee shop or restaurant, or contracting with an airline to supply in-flight food and beverages; and
  • Employees performing duties upon an aircraft that do not relate to the aircraft operation, or to transportation (e.g., aerial surveys, aerial photography or advertising).

Note that the fact that an airport is situated on land owned by the federal government is not determinative of jurisdiction. The Crown in right of Canada owns a variety of property including national ports, Indian reserves, public harbours, roads, canals and airports. It is the nature of the undertaking rather than the ownership of the land that determines where jurisdiction will lie.

Communications

Communications includes radio and television broadcasting, cable television, telecommunications and internet service providers.

Radio and television broadcasting fall under federal jurisdiction pursuant to the POGG power in s. 91 of the Constitution Act, 1867. See the Privy Council's decision in The Attorney General of Quebec (Appeal No. 84 of 1931) v The Attorney General of Canada and others, (Canada) [1932] UKPC 7 (9 February 1932), also known as the Radio Reference.

The sale of antenna time and the production of commercials has been held to be program production and not broadcasting and therefore employees engaged in the same fall under provincial jurisdiction rather than federal. See the Supreme Court of Canada's decision in Canada Labour Relations Board et al. v Paul L’Anglais Inc. et al, [1983] 1 SCR 147, 1983 CanLII 121 (SCC).

Cable television, telecommunications and other forms of electronic communications including internet service providers (ISPs) fall under federal jurisdiction through the combined effect of s. 91(29) and s. 92(10)(a) of the Constitution Act, 1867. Together, these provisions provide Parliament with exclusive jurisdiction over interprovincial communications works and undertakings (and transportation).

In Island Telecom Inc. et al., 2000 CIRB 59, the Canada Industrial Relations Board held that internet service providers (ISPs) fall within exclusive federal jurisdiction, including employment matters, because they constitute a federal undertaking carrying on an activity that is within the exclusive jurisdiction of Parliament pursuant to s. 91(29) and s. 92(10)(a) of the Constitution Act, 1867. The basis for this decision was that ISPs provide customers with the ability to communicate across Canada and internationally, i.e., internet service providers provide access to local, inter-provincial and international telecommunications through the Internet.

In Northern Telecom v Communications Workersthe Supreme Court of Canada held that the installation of telephone switching and transmitting equipment was part of the establishment and maintenance of a communications network and employees engaged in such an undertaking were therefore under federal jurisdiction. However, where a company is merely installing telephone receivers, its employees are under provincial jurisdiction. See Communications Workers of Canada v CTG Telecommunications Systems, Inc. (Canadian Telecommunications Group), 1985 CanLII 890 (ON LRB).

Companies such as Bell Mobility Inc. which provide wireless telecommunications services would, as such, fall under federal jurisdiction. Until January 2009, a company called Bell Distribution Inc. (BDI) owned and operated a number of retail stores selling Bell Mobility products. As a retail operation, the stores and employees fell under provincial jurisdiction in employment matters. However, on January 1, 2009, BDI was amalgamated into Bell Mobility Inc. and since that date the retail stores have been owned operated by Bell Mobility Inc. There are 114 such retail store locations in Ontario, which operate under one of three banners: Bell, Bell World and Virgin Mobile. Where such stores are no longer operating as separate and severable entities from Bell Mobility Inc., the employees in those retails stores would be subject to federal jurisdiction.

Banks

The employees of federally-chartered banks fall under federal jurisdiction as banking is a subject enumerated in s. 91 of the Constitution Act, 1867.

However, loan and trust companies, credit unions and insurance companies fall under provincial jurisdiction. This is the case even if they operate in more than one province, perform some banking functions, or are federally-incorporated. See Canadian Pioneer Management Ltd. et al v Labour Relations Board of Saskatchewan et al, [1980] 1 SCR 433, 1979 CanLII 180 (SCC).

Indians and reserves

As noted earlier, as a general rule, the regulation of employment standards and labour relations falls within provincial jurisdiction pursuant to the province's constitutional authority over Property and Civil Rights in the Province, as per s. 92(13) of the Constitution Act, 1867. However, s. 91(24) of the Constitution Act, 1867 gives the federal government jurisdiction over Indians which has been held to encompass all Aboriginal Peoples, including First Nations, Inuit and Métis Peoples. 

Whether any particular workplace is governed by federal legislation is determined on a case-by-case basis after examining the nature, operations and habitual activities of the undertaking. Generally, however, an employer will not be found to be governed exclusively by federal employment standards legislation merely because the business is owned and operated by Aboriginal persons, is located on a reserve or delivers its services in a culturally sensitive manner.

For example, in NIL/TU,O Child and Family Services Society v B.C. Government and Service Employees' Union, [2010] 2 SCR 696, 2010 SCC 45 (CanLII), the Supreme Court considered whether an aboriginal child welfare agency, set up pursuant to provincial child welfare legislation, was federally or provincially regulated with respect to their labour relations. A number of features of the child welfare agency suggested that it would be federally-regulated: it was set up collectively by seven First Nations; the child welfare services were provided primarily by First Nations employees to First Nations clients; the services were designed to protect, preserve and benefit the distinct cultural, physical and emotional needs of the children and families of the First Nations involved; it operated out of offices on a First Nations reserve; and federal funding was provided. The SCC found that the nature of the welfare agency’s operation was to provide child and family services, a matter that falls exclusively within provincial jurisdiction and therefore determined that the child welfare agency was provincially regulated.

There are some circumstances, however, where a workplace located on a reserve will be governed by employment standards legislation pursuant to the federal government's jurisdiction with respect to Indians, and Lands reserved for the Indians as per s. 91(24) of the Constitution Act, 1867. For example, a band council and its employees who are involved in the administration of the reserve are generally subject to the Canada Labour Code, and not the ESA 2000, because their primary function is the provision of Aboriginal governance.

However, this does not mean that any employment activity by a band council is necessarily a matter of exclusive federal jurisdiction. Where a federal undertaking carries on an operation unrelated to federal jurisdiction, that operation will be subject to provincial employment and labour law. The difficult question is whether a band council, when employing persons in the exercise of a particular activity, is carrying on a federal activity, operation or function such that the employment standards and labour relations pertaining to that activity must be federally regulated. This question has given rise to divergent cases depending on the particular band activity at issue.

It is recommended that guidance be sought in files involving Aboriginal employers or employees.

Shipping

The owner and employees on a ship engaged in interprovincial or international shipping will fall under federal jurisdiction.

If the owner of a ship falls under federal jurisdiction, but repairs are done to the ship by the employees of another employer while the ship is in drydock, the employees will generally fall under provincial jurisdiction if their employer would otherwise fall under provincial jurisdiction.

The owner of a ship whose ships operate totally within the province of Ontario (e.g., the Toronto Island and Manitoulin Island Ferries) and its employees will be governed by provincial legislation.

Fisheries

Federal jurisdiction over seacoast and inland fisheries, as set out in s. 91(12) of the Constitution Act, 1867, has not been considered to include jurisdiction over the employment relations of any particular fishing business. The jurisdiction is limited to regulating fisheries in a general way: for example, setting limits on catches and establishing seasons. See United Fishermen and Allied Workers' Union et al v British Columbia Provincial Council, [1978] 2 SCR 97, 1977 CanLII 205 (SCC).

As a consequence, jurisdiction over employment relations in the fishing industry, including persons employed in fisheries and those working on commercial fishing boats on inland waters, lies with the province. See Great Lakes Fishermen and Allied Workers' Union v 538391 Ontario Limited (Peralta Foods), 1987 CanLII 3081 (ON LRB).

Feed mills, flour mills, seed cleaning mills and feed warehouses

Feed mills, flour mills, seed cleaning mills and feed warehouses, wherever located in Ontario, fall under federal jurisdiction. These facilities are under federal jurisdiction as a result of the federal Parliament making a declaration under s. 92(10)(c) of the Constitution Act, 1867 that they are for the general advantage of Canada in s. 55(1.1) of the Canada Grain Act, RSC 1985, c G-10 in s. 76 of the Canadian Wheat Board Act, RSC 1985, c C-24. Occasionally farms have non-commercial seed cleaning mills for their own use. In such cases, it is recommended that advice be sought.

Grain elevators

The federal Parliament also made a declaration under s. 92(10)(c) of the Constitution Act, 1867 with respect to certain grain elevators in s. 55(1) of the Canada Grain Act, RSC 1985, c G-10. The elevators covered by the declaration and that as a result fall under federal jurisdiction are:

  1. All elevators in Thunder Bay and west of Thunder Bay;
  2. All elevators east of Thunder Bay along Lake Superior, Lake Huron, Lake St. Clair, Lake Erie, Lake Ontario, and canals or other navigable waters connecting those Lakes, or the St. Lawrence River or any tidal waters; and
  3. The parts of premises east of Thunder Bay that are used for storing grain which have been designated an elevator under federal regulation.

In other words, pursuant to that declaration, most inland grain elevators east of Thunder Bay fall under provincial jurisdiction. However, it is possible that such an elevator will fall under federal jurisdiction if it is an integral element of a federal operation, e.g., has been purchased and is being operated by a federally regulated employer.

If there is a situation in which this provision potentially arises, it is recommended that advice be sought.

Trucking

The trucking industry is not a subject specifically enumerated in s. 91 of the Constitution Act, 1867 as falling under federal jurisdiction, and accordingly, provincial employment legislation will generally apply.

Nonetheless, a portion of the industry does fall under federal jurisdiction as a result of ss. 91(29) and 92(10)(a) of the Constitution Act, 1867, which bring works or undertakings connecting a province with any other or extending beyond the limits of a province under federal jurisdiction.

The trucking industry provides services in the following ways:

  1.  Common carriers: carriers that offer their services to the public for compensation.
  2. Private carriers: firms whose principal business is something other than trucking but who transport their own goods or supplies, or those firms whose principal business is trucking but are not common carriers in that they perform their services exclusively for a related firm (whose principal business is something other than trucking).
  3. Carrier services: firms who lease drivers or vehicles to common carriers but who do not themselves offer the services of a common carrier.
Common carriers

The courts have held that where a common carrier's extraprovincial activity is continuous and regular it will be considered to be a federal work or undertaking and fall under federal jurisdiction. In R v. Toronto Magistrates, Ex Parte Tank Truck Transport Ltd., 1960 CanLII 120 (ON SC), only six per cent of the firm's business consisted of extraprovincial haulings, yet the court found that the extraprovincial aspect of the business was continuous and regular. The fact that the volume of intraprovincial work exceeded the extraprovincial aspect was not relevant.

In R v Cooksville Magistrate's Court, Ex parte Liquid Cargo Lines Ltd., 1964 CanLII 162 (ON SC), only 1.6 per cent of the company's business was extraprovincial, but the court held that:

Viewed from the point of view of the applicant company, it is clear that its customers are provided with extraprovincial service consistently and without interruption whenever they apply to the applicant for such service. The applicant stands ready at any time to engage in hauls outside the boundaries of the Province of Ontario at the instance of any of its customers.... Further, the evidence is clear that it has made such trips frequently....

Therefore, if the trucking firm is willing and able to engage in extraprovincial activity whenever requested, and if it does in fact so engage, the extraprovincial activity will be considered continuous and regular and employment matters will be subject to federal jurisdiction.

Consequently, the Program takes the position that if a company operating as a common carrier holds an extraprovincial license it will fall under federal jurisdiction unless:

  1. The extraprovincial license is only used on rare occasions (i.e., it is not used on a continuous and regular basis); or
  2. The extraprovincial license is held by an organizationally distinct division that is separate from the rest of the operation, in which case only the division holding the extraprovincial licence will fall under federal jurisdiction.
Private carriers

As a general rule, the delivery operation of a company whose principal operation is manufacturing, processing or selling will not fall under federal jurisdiction, even if the company makes extraprovincial deliveries. This is so even where the extraprovincial trips are regular and continuous. See Milk and Bread Drivers, Dairy Employees, Caterers and Allied Employees (International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Local Union No. 647) v Dominion Dairies Limited, 1978 CanLII 443 (ON LRB), Humpty Dumpty Foods Ltd. v U.I.T.B.C.A., Local 333 and United Steelworkers of America v Pepsi-Cola Canada Ltd., 1995 CanLII 9942 (ON LRB).

This is so because it is the principal operation of the undertaking that determines its essential character; if the pith and substance is one of manufacturing, processing or selling of goods, and not transportation, then the undertaking does not fall under s. 92(10)(a) of the Constitution Act, 1867 and is not a federal undertaking.

Unless the nature of the principal operation puts the undertaking within some other head of federal jurisdiction, the entire undertaking, including the extraprovincial hauling is within provincial jurisdiction. See General Truck Drivers' Union, Local 879 v William R. Barnes Co. Ltd. and Re Mason Windows Ltd.

Carrier services

Generally, companies that supply only the drivers of vehicles to other companies will not fall under federal jurisdiction, even if the drivers are assigned to work for companies who transport goods across provincial or national borders on a common carrier basis. This is so because it is the normal or habitual activities of a business that define the nature of its operation. In this situation, if the nature of the operation is one akin to a staffing company or temporary employment agency for truck drivers and not transportation, then the undertaking would not fall under s. 92(10)(a) of the Constitution Act, 1867 and is not a federal undertaking. See Woodmac Services Ltd. v Macklam (July 19, 1979), ESC 644 (Saxe).

Likewise, a company that leases vehicles does not fall under federal jurisdiction as a federal undertaking, even if the vehicles are driven beyond the boundaries of the province in which the lease is effected. The lessor is not operating the vehicles and therefore the leasing company's operation is not considered to be one that connects provinces or extend beyond the limits of a province as per s. 92(10)(a) of the Constitution Act, 1867.

However, in some situations, a staffing company or a company that leases vehicles could fall under federal jurisdiction if it is found to be integral to a federal undertaking.

The test that must be applied to find a seemingly provincial undertaking to be integral to a federal undertaking (e.g., a carrier service that crosses provincial or national borders) is rigorous and requires an extensive analysis of the facts.

The Supreme Court of Canada has laid out four general inquiries to help with the analysis of whether a seemingly local undertaking is integral to a federal undertaking:

  1. What is the general nature of the local undertaking's operation?
  2. What is the nature of the corporate relationship between the local undertaking and the companies that it serves, notably any federal undertaking?
  3. What is the importance of the work done by the local undertaking for the federal undertaking as compared with its other customers?
  4. What is the physical and operational connection between the local undertaking and the federal undertaking?

The above test (and most particularly the inquiry under four above) has a high threshold. As a result, it is rare that a company leasing drivers and/or vehicles to a common carrier that transports goods across provincial boundaries would be found to be integral to that federal undertaking and thereby fall under federal jurisdiction.

Bus lines

The same principles apply to bus lines as those set out under trucking. Although a bus line is engaged principally in transporting people as opposed to hauling goods, in pith and substance it may be an undertaking that connects the province with any other or extends beyond the limits of the province. In that event, it would fall under federal jurisdiction.

For example, in Ontario (Attorney General) v Winner (c.o.b. Mackenzie Coachlines), [1954] UKPC 8 (22 February 1954), the Privy Council held that a bus line operating from Boston through Maine and New Brunswick to Nova Scotia that also picked up and set down passengers at intermediate points was an undertaking connecting the province of New Brunswick with that of Nova Scotia, and was therefore within exclusive federal jurisdiction.

In some cases, a municipal bus line or a local school bus service is operated by and functionally integrated with a federally regulated interprovincial bus or transportation company. In particular, the bus service and the rest of the interprovincial transportation company may be subject to common management, control and direction. In such cases, it may be that the bus service which is operating wholly within the province is nonetheless considered to fall under federal jurisdiction.

Courier companies

The same principles apply to courier companies as those set out under Trucking and Bus Lines above.

A courier company may in pith and substance be an undertaking that connects the province with any other, or extends beyond the limits of the province. In that event, it would fall under federal jurisdiction.

In order for the courier company to fall under federal jurisdiction, the courier company has to transport the items across the border itself, rather than being a freight forwarder (i.e., a middleperson that picks up packages then hands them off to another company to transport over a border). In addition, the transport over a border has to be continuous and regular. For information on the meaning of continuous and regular, see the discussion about Common Carriers under Trucking above.

Sale of a business across jurisdictions

When a business has been sold, ESA Part IV, s. 9 normally applies to provide continuity of employment for any of the vendor's employees hired by the purchaser. Refer to ESA Part IV, s. 9 for further discussion.

Generally, it is Program policy that ESA Part IV, s. 9 does not apply in a cross-jurisdictional sale (i.e., where the sale, lease, transfer or other disposition transforms a federal undertaking into a provincial undertaking or vice-versa.) There cannot be deemed continuity of employment in such a transfer because the Employment Standards Act, 2000 applies only to those employers who are within the legislative jurisdiction of the province. See Western Stevedoring Co. v Pulp, Paper & Woodworkers of Canada and Brotherhood of Railway, Airline and Steamship Clerks, Freight Handlers, Express and Station Employees v Canadian Pacific Ltd. and Marathon Realty Co. Ltd. For the contrary view, see Canada (Attorney-General) v Standard Trust Co., 1994 CanLII 7516 (ON SC) and Arthur et al v A.A.S. Telecommunications Services Ltd. (February 17, 1998), 1262-97-ES (ON LRB).

Of course, a provincial business could be sold to a federal business and still remain under provincial jurisdiction if it was a discrete, severable part of the federal business and thereby retained its provincial character. In that case, ESA Part IV, s. 9 continuity would require the purchaser to give credit for service to those of its employees who had worked for the vendor.

In Canada (Attorney-General) v Standard Trust Co., a decision made under the former Employment Standards Act, the court held, contrary to Program policy, that the sale of business provisions do apply in a cross-jurisdictional sale. In that case, the assets of Standard Trust (which operated as a trust company and therefore was under provincial jurisdiction) were sold by the liquidator to Laurentian Bank (which was going to use the assets in a bank operation falling under federal jurisdiction). Most employees of Standard were hired by Laurentian, which voluntarily agreed to recognize the employees" length of employment with Standard. The Court held that as s. 13 of the former Employment Standards Act, now ESA Part IV, s. 9(1), provided for continuity of employment where a purchaser hired the employees of the seller and deemed the employment of those employees not to have been terminated, and as there was nothing in the legislation that said the purchaser must be within provincial jurisdiction, former employees of Standard were not entitled to termination and severance pay if they had been hired by Laurentian.

The reasoning in the Canada (Attorney-General) v Standard Trust Co. decision was followed by an adjudicator in the Arthur et al v A.A.S. Telecommunications Services Ltd. decision. There, Rogers Cantel Paging sold part of its business to A.A.S., which resulted in the transformation of a federal undertaking into a provincial undertaking. Shortly after the sale, A.A.S shut down. Adopting the court's reasoning in the Canada (Attorney-General) v Standard Trust Co. decision, the adjudicator rejected the argument that the word employer in s. 13(2) of the former Employment Standards Act, now ESA Part IV, s. 9(1), should be read as if it was modified by the words within the jurisdiction's competence. The adjudicator ruled that s. 13 of the former Employment Standards Act applied to the sale and that there was continuity of employment. The adjudicator remarked that the argument for the application of s. 13 of the former Employment Standards Act to the sale in this case (federal to provincial) was far stronger than the one in Canada (Attorney-General) v Standard Trust Co. because there was no enforcement problem that flows from finding a formerly federally-regulated business subject to a provincial statutory provision.

Program policy is that neither Canada (Attorney-General) v Standard Trust Co. nor Arthur et al v A.A.S. Telecommunications Services Ltd. should be followed in applying ESA Part IV, ss. 9 and 10. In Rostrust Investments Inc./Investissements Rostrust Inc. v Doxtater, 2006 CanLII 41431 (ON LRB), the Ontario Labour Relations Board distinguished Standard Trust on the basis that the current act, unlike its predecessor, specifically provides that it does not apply to employers and employees if their employment relationship is within federal labour law jurisdiction.

New building service providers

At issue in Rostrust Investments Inc. v Doxtater was whether ESA Part IV, s. 10 applied where the former provider of building services fell under provincial jurisdiction and the new provider fell under federal jurisdiction; since the new provider and any employees it hired would be within federal jurisdiction, the Board held that ESA Part IV, s. 10 did not apply.

While Rostrust Investments Inc. v Doxtater was concerned with ESA Part IV, s. 10 and a change of jurisdiction from provincial to federal, its reasoning is equally applicable to ESA Part IV, s. 9 and to changes in jurisdiction from federal to provincial. Accordingly, regardless of whether one is dealing with a change in building services providers or a sale of a business, and regardless of whether the change in jurisdiction is from provincial to federal or federal to provincial, the continuity of employment provisions do not apply.

Examples of cross-jurisdictional sales
Transformation of business from provincial undertaking to federal undertaking

The sale of a provincial business (i.e., engaged in a provincial undertaking and under provincial jurisdiction) to a federal business may result in a transformation of the provincial undertaking to a federal undertaking (i.e., under federal jurisdiction).

For example: The sale of a boat that has been operated as a floating restaurant to a company that uses the boat to regularly ferry passengers to the United States.

In this case, ESA Part IV, s. 9 has no application to the employment relationship once the employer (and consequently the employment relationship) are no longer under provincial jurisdiction. In other words, the federal purchaser in the above example would not be subject to the provisions of the Employment Standards Act, 2000 and consequently there would be no s. 9(1) liability imposed on the purchaser.

Transformation of business from federal undertaking to provincial undertaking

The sale of a federal business (i.e., engaged in a federal undertaking and under federal jurisdiction) to a provincial business may result in a transformation of the business from a federal undertaking to a provincial undertaking (i.e., it is now engaged in a provincial undertaking and under provincial jurisdiction).

For example: A business operating a Great Lakes ferry that transports passengers to the United States is purchased by a company that uses the boat only as a floating restaurant. Several of the employees who had previously worked on the ferry are hired by the purchaser to work in the restaurant.

In this case, ESA Part IV, s. 9(1) could not be applied so as to recognize as continuous service any period of employment with a business that was, prior to its sale, a federal business. In other words, the employees hired by a purchaser who falls under provincial jurisdiction would not be given any credit for service with their previous federal employer.

Exception, diplomatic personnel – section 3(3)

Section 3(3) provides that an employee of an embassy or consulate of a foreign nation and their employer are not subject to theESA 2000. The nationality of the employee is irrelevant to the application of this exemption. Employees of an embassy or consulate who also work in locations other than an embassy or consulate of a foreign nation are covered by the Act for the work done at any other location.

Employees of foreign trade offices or foreign government tourist offices are subject to the Employment Standards Act, 2000, unless the office is an integral part of the embassy or consulate of the state in question. For a discussion of the distinction between trade offices and consular offices, see Gilligan v Swedish Trade Council and Swedish Trade Office (Canada) Inc. (February 2, 1998), ESC 97-91 (Randall).

Employees of a foreign embassy or consulate who have labour or employment complaints should contact the equivalent of the Ontario Ministry of Labour in the country of the embassy or consulate concerned.

Section 3(4) – REPEALED (Exception, employees of the Crown)

Effective January 1, 2018, the partial exception for the Crown, a Crown agency or an authority, board, commission or corporation all of whose members are appointed by the Crown (collectively, “the Crown”), and its employees, that was previously found in subsection 3(4) was repealed by the Fair Workplaces Better Jobs Act, 2017 (FWBJA). As a result, as of January 1, 2018 Crown employees were no longer covered only by the Parts that were specified in s. 3(4); they were generally covered by all of the ESA. (Note that pursuant to s. 4(4.1), a provision introduced by the FWBJA, the Crown was exempted from the section 4 “related employer” provision effective January 1, 2018.)

Effective March 9, 2018, O. Reg. 285/01 (When Work Deemed to be Performed, Exemptions and Special Rules) was amended to exempt specified election officials employees from sections 17, 18 and 19 of the ESA.

On October 24, 2018, O. Reg. 285/01 (When Work Deemed to be Performed, Exemptions and Special Rules) was further amended to exempt the Crown and its employees from Part VII (Hours of Work and Eating Periods) and from Part VIII (Overtime Pay).

Effective January 1, 2019 , O. Reg. 285/01 was again amended and provides that the Crown and its employees are exempt from every provision of the Act except those listed in the relevant section. See O. Reg. 285/01 Section 2.1 for more information.

Other exceptions – section 3(5)

Students in authorized work experience programs – paragraph 1

Often, as part of the education of its students, a school board will establish a program in which the secondary school students will gain practical work experience. Such programs may be called, for example, practicums or co-ops. When a student performs work in such a program, the student and his or her employer are exempt from the ESA 2000 pursuant to s. 3(5) paragraph 1.

For this exemption to apply, the following criteria must be met:

  1. The individual performing work must be a secondary school student;
  2. The individual must be performing work under a work experience program authorized by a school board; and
  3. The school board that authorized the work experience program must be the same school board that operates the secondary school in which the student is enrolled.

If the person is not a student at the school but is still in the program, or is in a program authorized by another school board, the exemption in s. 3(5)(1) will not apply.

Note that for the purposes of the exemption in s. 3(5), the term student is not limited to a person less than 18 years of age. This is in contrast to the use of the word student for the purposes of the student minimum wage provisions; the student minimum wage applies to a student not otherwise exempted from the ESA 2000 pursuant to s. 3(5) who is under the age of 18 years and:

  1. Does not work more than 28 hours per week while attending school; or
  2. is employed while on school holiday.

For more information on the student minimum wage, see ESA Part IX, s. 23.1.

Only the work in the program is exempt. If the student performs full or part-time work outside of the program (even if it is in the same workplace and for the same employer) the exemption will not apply to that work. For example, if the student performs work at a workplace under a co-op program on certain days of the week, but also performs work at the same workplace on other days, those other days' work would be covered by the ESA 2000 – see s. 3(6) “Dual Roles”.

The exemption will not apply just because an employee obtained their job through an employment or career counselling centre at a school, college or university.

In order for the exemption to apply, the secondary school in which the student is enrolled must be operated by a school board. The Program's position is that this refers to a school board within the meaning of the Education Act,RSO 1990, c E.82. Under s. 1 of the Education Act school board means a district school board or a school authority.  The Education Act contains the following definitions:

As a result, the exemption does not apply with respect to students in private, independent schools as they are not operated by a school board.

Programs approved by colleges of applied arts and technology or universities – paragraph 2

Colleges of applied arts and technology and universities often establish programs that permit students, and others, to gain practical work experience. When an individual performs work in such a program, that individual and their employer are exempt from the ESA 2000 in its entirety, with respect to that work, pursuant to s. 3(5) paragraph 2.

For the exemption to apply, the individual must perform work under a work experience program approved by a college or university. Unlike the secondary school student exemption in paragraph 1, it is irrelevant whether the individuals performing work in the work experience program are students at the college or university, that has approved the program, or at any college or university.

The exemption applies only to work performed under programs of Ontario colleges of applied arts and technology and Ontario universities.  It does not apply to work performed under programs of institutions outside of Ontario. 

In determining whether a particular college of applied arts and technology is an Ontario institution, reference can be made to section 2 of O. Reg. 34/03 under the Ontario Colleges of Applied Arts and Technology Act, 2002.  That provision provides a list of institutions designated as colleges in Ontario.

The exemption applies only to work that is performed under the program; see “Dual Roles” at s. 3(6) for details.

Work performed under an apprenticeship program may be covered by this exemption, since such programs can include classroom training and, as such, form part of a program approved by a college or university.

For a more detailed discussion of the application of the ESA 2000 to apprentices please see the definition of employee in ESA Part I, s. 1.

Individuals in program that is approved by private career colleges – paragraph 2.1

The Fair Workplaces, Better Jobs Act, 2017 added this new provision to the ESA 2000.

Effective January 1, 2018, individuals who perform work under a program that is approved by a private career college registered under the Private Career Colleges Act, 2005, SO 2005, c 28, Sched L and their employers are exempt from the ESA 2000 in its entirety, with respect to that work, pursuant to s. 3(5) paragraph 2.1. It is only work that is performed under programs of Ontario private career colleges that can fall under this exception.  It does not apply to work performed under programs of private career colleges outside of Ontario.

The exemption applies only to work that is performed under the program; see “Dual Roles” at s. 3(6) for details.

The new exclusion for private career colleges is subject to criteria as may be prescribed by regulation. As of the date of writing, there are no prescribed criteria.

Similar to the exemption in paragraph 2, it is irrelevant whether the individuals performing work in the program are students at the private career college.

Work performed under an apprenticeship program may be covered by this exemption, since such programs can include classroom training and, as such, form part of a program approved by a private career college.

For a more detailed discussion of the application of the ESA 2000 to apprentices please see the definition of employee in ESA Part I, s. 1.

Participants in Ontario Works community participation activities – paragraph 3

Social assistance recipients involved in Ontario Works community participation activities, sometimes referred to as Welfare-to-Work programs, are exempt from theESA 2000 pursuant to s. 3(5) paragraph 3.

The criteria that must be met for this exemption to apply are as follows:

  1. The individual must be in receipt of social assistance; and
  2. The individual must be participating in community participation activities.

Persons who are merely referred by Ontario Works to a job placement agency or into training, or who are merely placed with an employer, do not fall into the exemption.

Although social assistance recipients are exempt from the ESA 2000 as a whole if they are engaging in the community participation activities, guidelines for participants’ working conditions have been set by Ontario Works. It is the responsibility of the Ministry of Community and Social Services, not the Ministry of Labour, to ensure that the guidelines are adhered to.

Inmates of correctional institutions participating in work projects or rehabilitation programs – paragraph 4

Note that on a date to be named by proclamation of the Lieutenant Governor, this paragraph will be repealed and substituted with modified wording. These modifications are due to changes to other legislation referenced in this paragraph. For more information, see the legislative section above.

Inmates of correctional institutions and penitentiaries operated by or under the province of Ontario or the federal government and individuals being held in a detention facility under the Police Services Act,RSO 1990, c P.15 or youth custody facility under the federal Youth Criminal Justice Act,SC 2002, c 1, who participate in work projects or rehabilitation programs, are exempt from the ESA 2000, pursuant to s. 3(5) paragraph 4.

Under s. 25 of the Ministry of Correctional Services Act, RSO 1990, c M.22 (MCSA), the Minister of Community Safety and Correctional Services who had the powers and duties of the Minister of Correctional Services Act transferred to them by Order in council approved November 24, 2003 may authorize a rehabilitation program under which an inmate may continue to work at their regular employment or obtain new employment. Under s. 26 of the MCSA, the Minister may authorize an inmate to participate in a work project or a rehabilitation program outside the correctional institution. Finally, under s. 18(1) of RRO 1990, Reg 778, a regulation under the MCSA, an inmate may be required to perform work within an institution.

The requirements that must be met for the exemption in s. 3(5) para. 4 to apply are as follows:

  1. The individual must be an inmate or an offender in a provincial or federal correctional institution or penitentiary, or an individual who is being held in a detention facility or youth custody facility; and
  2. The individual must be performing work in a work project or a rehabilitation program.

Offenders performing work under court order or sentence or under the Youth Criminal Justice Act – paragraph 5

When a person is convicted of an offence, instead of (or as well as) being confined to a detention facility or a place of custody or ordered to pay a fine, the offender (including a young offender) may be ordered to perform a certain amount of work or services, commonly known as community service. When performing this work, the offender is exempt from the subject to the court order is exempt from the ESA 2000 pursuant to s. 3(5) paragraph 5.

Any other employment undertaken by the offender is not exempted by this provision. For example, a person may be working full time as a secretary at a factory but has been ordered by a court to work 10 hours per week at a community centre. The work at the community centre would be exempt from the ESA 2000, but the ESA 2000 would apply to the employment at the factory, subject to other provisions, exemptions and special rules under the ESA 2000.

Individual performing work in simulated job or working environment – paragraph 6

Note: This exclusion was originally scheduled to be repealed on January 1, 2019, pursuant to the Fair Workplaces Better Jobs Act, 2017. However, under the Making Ontario Open for Business Act, 2018 amendments, the repeal was delayed. The provision will now be repealed on a day to be named by proclamation of the Lieutenant Governor.

Under this provision, participants in simulated working environments (for example, a sheltered workshop program) are not covered by the ESA 2000 pursuant to s. 3(5) paragraph 6 if the primary purpose of the workshop is to rehabilitate the participants.

This exemption codifies Program policy and a decision under the former Employment Standards Act, Re Kaszuba and Salvation Army Sheltered Workshop et al., 1983 CanLII 1795 (ON SC). In that case, the Ontario Divisional Court, on judicial review, endorsed in slightly amended form the referee's conclusion that:

It is Program policy that in order for the exclusion under s. 3(5) to apply, economic productivity must be a minor and merely incidental aspect of an individual's participation in the work or services performed at a sheltered workshop. Consequently, not all organizations calling themselves sheltered workshops can consider themselves automatically falling within the exclusion in s. 3(5).

In order to determine whether s. 3(5) applies in a particular instance, consideration might be given to the list of factors set out in Linden J.'s concurring opinion in Re Kaszuba and Salvation Army:

  1. Hours of work;
  2. Method and amount of payment;
  3. Profitability of the work;
  4. Conditions that must be met at work;
  5. Amounts and type of counselling provided;
  6. Quantity and quality of recreational and medical facilities; and
  7. Any other factors that are relevant in determining whether the relationship is one of employment or if it is a therapeutic exercise.

The above factors may be helpful in determining whether, in the words of s. 3(5), paragraph 6, the primary purpose in placing an individual in a simulated job environment is his or her rehabilitation.

There is also a type of relationship where a charitable agency places a worker with a “host” business to reintegrate him or her into the workforce. The relationship typically lasts for a short period, such as eight weeks, and the worker receives payment from the host business. There is no control or training of the worker by the agency, and therefore the agency is not the employer of the worker. Usually, the agency pays the host business, which pays the worker. The agency is in turn reimbursed by a governmental agency such as the Workplace Safety and Insurance Board. Since this is not an arrangement where an individual is placed in a simulated job environment with a view to their rehabilitation, the exclusion in ESA Part III, s. 3(5) would not apply. The issue of whether or not there is an employer-employee relationship between the host business and the worker must be determined based on the relevant common law tests.

Such an arrangement was considered in 379169 Ontario Limited c.o.b.a. Bell Air Conditioning v Prevost (May 15, 1987), ESC 2242 (Fraser) in which the referee held that the applicant host company was an employer under the former Employment Standards Act and that the monies received by the employee pursuant to the former Workers' Compensation Board Vocational Training Program were wages under that Act.

This exemption is also referenced in the definition of employee in ESA Part I, s. 1 see Sheltered Workshop.

Holders of political, religious or judicial office – paragraph 7

Holders of political, religious or judicial office are exempt from the ESA 2000 pursuant to s. 3(5) paragraph 7. This provision reflects the common law position that holders of political, religious or judicial office are not employees.

While it is often obvious whether an individual occupies a religious office, it is not always the case. In Kashruth Council of Canada v Rand, 2011 CanLII 71786 (ON LRB), the OLRB ruled on the question of whether this exemption applied to two Mashgiachim (kosher food inspectors). The OLRB held that while the position of a Mashgiach is a religious one, that does not in itself enough mean that a Mashgiach holds a religious office. The OLRB observed that an essential characteristic of office-holder status is independence. While not ruling out the possibility that there may be situations where a particular Mashgiach is subject to this exemption, it found that the individuals in this case did not have any greater independence than non-religious food inspectors and that the exemption therefore did not apply.

Members of quasi-judicial tribunals – paragraph 8

Members of quasi-judicial tribunals are exempt from the ESA pursuant to s. 3(5) paragraph 8. This provision reflects the common law position that members of quasi-judicial tribunals are not employees.

Holders of elected offices in organizations – paragraph 9

Holders of elected offices in organizations, including trade unions, are exempt from the ESA pursuant to s. 3(5) paragraph 9. This provision reflects the common law position that elected officers in an organization, such as school board trustees, are not employees.

Police officers, except as provided in Part XVI (Lie Detectors) or in a regulation made under clause 141(2.1)(c) – paragraph 10

This paragraph was amended by the Employment Standards Amendment Act (Infectious Disease Emergencies), 2020 effective March 19, 2020 to include reference to a regulation made under clause 141(2.1)(c).

Pursuant to s. 3(5) paragraph 10, police officers are exempt from the ESA 2000 except for the lie detector provisions contained in Part XVI.

If a regulation was to be made with respect to infectious disease emergencies under s. 141(2.1)(c), police officers would also be subject to the provisions of the ESA as provided for in that regulation. At the time of writing, no such regulation was made.

Clause 141(2.1)(c) provides that the Lieutenant Governor in Council may make regulations:

“providing that section 50.1 or any provision of it applies to police officers and prescribing one or more terms or conditions of employment or one or more requirements or prohibitions respecting emergency leave for infectious disease emergencies that shall apply to police officers and their employers”

Directors of a corporation – paragraph 11

Under s. 3(5) paragraph 11, directors are exempt from the ESA 2000 except for those Parts concerning the liability of directors and the administration and enforcement of the ESA 2000:

  • Part XX Liability of Directors
  • Part XXI Who Enforces This Act and What They Can Do
  • Part XXII Complaints and Enforcement
  • Part XXIII Reviews by the Board
  • Part XXIV Collection
  • Part XXV Offences and Prosecutions
  • Part XXVI Miscellaneous Evidentiary Provisions
  • Part XXVII Regulations
  • Part XXVIII Transition, Amendment, Repeals, Commencement and Short Title 

For a more detailed discussion, see the employee definition in ESA Part I, s. 1.

Any prescribed individuals – paragraph 12

At the time of writing, the only prescribed individuals are those described in O Reg 477/18 – Non-Application of Act, which reads:

This regulation came into effect on November 15, 2018.

Pursuant to this regulation, the ESA 2000 does not apply to a “player on a major junior ice hockey team”, if the conditions set out in subsection (2) are met.

“Player on a major junior ice hockey team” – section 1(1)

The regulation applies only to the major junior ice hockey team’s hockey players.  It does not apply to any other individual on a major junior ice hockey team (e.g. equipment managers, trainers, coaches).

The Program is aware of major junior ice hockey teams in the Ontario Hockey League, although there may be others. However, in order for the ESA 2000 to not apply pursuant to this regulation, the condition in subsection (2) must be met

“Scholarship” condition – section 1(2)

The ESA will not apply only if the player on a major junior ice hockey team and the team – or the league in which the team is a member – have entered into an agreement (which pursuant to s. 1(3) of the ESA 2000 must be in writing) that provides that the player is entitled to receive a scholarship for a post-secondary educational program.

The agreement must provide a scholarship for each season the player plays on the team for the condition to be met.

The condition can be met even if the agreement contains eligibility criteria that the player must meet in order to qualify for the scholarship. The regulation does not establish any restrictions on the eligibility criteria that can be included in the agreement and does not establish any minimum amount of money that must be paid in order to qualify as a scholarship.

The condition will be met so long as there is a written agreement in place that contains provisions that provide for the scholarship; it does not matter whether the player ultimately meets the criteria and receives a scholarship.

There may be a period of time where an individual is a player on a major junior ice hockey team but has not entered into a written agreement that meets the condition set out in subsection (2). If there is an employment relationship during that period of time, the ESA 2000 will apply during that period.

Dual roles – section 3(6)

Section 3(6) clarifies that employees who perform both exempt and non-exempt work for a single employer are entitled to the protections of the ESA 2000 in respect of the work that is not exempted from the application of the ESA 2000. See Arctic Pole Business Development Limited, CanLII 5939 (ON LRB) (Jan. 24, 2019) for a decision in the context of a co-op student at a college of applied arts and technology who also performed work that fell outside of the co-op arrangement. For a decision under the former Employment Standards Act, see Brown and Brown v 985156 Ontario Limited o/a 19 Queenston St. (February 4, 1994), ESC 94-25 (Alter).

A question may arise concerning the application of s. 3(6) dual roles versus the majority rule that has been adopted by the Program with respect to the application of certain entitlements or special rules. For example, when an employee performs work that is exempt from the overtime provisions in the ESA 2000 as well as work that is not exempt, the employee's entitlement to overtime will be based on all of the hours worked in a particular work week, so long as the non-exempt hours of work constitute 50% or more of the time the employee spent working. See ESA Part VIII, s. 22(9).

This majority rule has no application with respect to any work done by an individual if that work is exempt from the application of the ESA in its entirety. In other words, when an individual performs dual roles that is, they fall under s. 3(5) with respect to certain work, but is an employee to whom the ESA 2000 applies with respect to other work performed, only the work performed in the latter capacity is considered in determining their entitlements under the ESA.

For example, a student is performing work under a program approved by a college of applied arts. As such, they excluded from the application of the ESA 2000 under s. 3(5). They spend five hours a day, five days a week performing these duties. They also perform clerical duties for this same company that are outside the scope of the program for an additional six hours a day, five days a week. They are covered under the ESA 2000 in this latter capacity by virtue of s. 3(6) and so the ESA 2000 rules regarding hours of work and overtime apply only in respect of the 30 hours per week spent performing clerical duties. The majority rule has no application in this case - for the purposes of the ESA 2000 they are working only six hours a day and 30 hours each week and so there are no issues with respect to either excess hours or overtime pay.

Section 3.1 – Crown bound

This provision was introduced into the ESA 2000 by the Fair Workplaces, Better Jobs Act, 2017, SO 2017, c 22 effective January 1, 2018, at the same time that the former s. 3(4) – which provided that only certain provisions of the ESA 2000 applied to the Crown, Crown agencies or an authority, board, commission or corporation, all of whose members were Crown appointees – was repealed.

This section provides that the ESA 2000 binds the Crown. However, it must be read in conjunction with:

  • s. 4(4.1), which provides that s. 4(2) - which treats “related” entities as one employer under the ESA 2000 – does not apply to the Crown, Crown agencies, or an authority, board, commission or corporation, all of whose members were Crown appointees, and
  • s. 2.1 of O. Reg. 285/01, which provides that the Crown, Crown agencies, or an authority, board, commission or corporation, all of whose members were Crown appointees is exempt from every provision of the ESA 2000 except for those listed in that provision. See the discussion of s. 2.1 of O. Reg. 285/01 for details.

Section 4 – Separate persons treated as one employer

Separate persons treated as one employer – section 4(1)

In law, a person includes a corporation. Further, for purposes of the ESA 2000, person is defined in ESA Part I, s. 1(1) to include a trade union. As a result, corporations, individuals (sole proprietors), partnerships (whether of individuals or corporations), unions and other associations (whether of individuals or corporations) are all potentially within the scope of s. 4.

The definition of employer in ESA Part I, s. 1(1) states:

In order for separate persons to be treated as one employer, the following requirements must be met:

  • Associated or related activities or businesses must be carried on
  • Those activities or businesses must be carried on by two or more entities
  • The intent or effect of the arrangement must be to defeat, either directly or indirectly, the purpose of the ESA 2000 – see note below.

A detailed discussion of these requirements is below.

Note: On January 1, 2018, the Fair Workplaces, Better Jobs Act, 2017 SO 2017, c 22 amended s. 4 to remove the requirement that the intent or effect of the arrangement as described in s. 4(1) must be to defeat, either directly or indirectly, the purpose of the ESA 2000 in order for the employer and other persons to be treated as one employer. If the business relationship existed before January 1, 2018, and the contravention occurred before January 1, 2018, the intent or effect test should be applied.

Note also that while at one time under the former Employment Standards Act, two or more entities could not be treated as related employers unless the employee whose rights were in question was an employee of each of the entities concerned, that requirement was eliminated by amendments made to the former Employment Standards Act in 1987. There is nothing in the language of s. 4 to suggest that an employee must be an employee of each of the entities concerned in order for s. 4 to apply.

Associated or related activities

In determining whether the associated or related test is met, the employment standards officer should consider the following significant criteria. They are listed in descending order of significance with the most important factor listed first:

  • Common management
  • Common financial control
  • Common ownership
  • Existence of common trade name or logo
  • Movement of employees between two or more entities
  • Use of same assets by two or more entities, or transfer of assets between them
  • Common market or customers served by the two or more entities

This list is not exhaustive; there may be other relevant factors in the context of a particular case. It should also be noted that it is not necessary for all of the factors to be present in order for a finding of relatedness or association to be made under s. 4(2). See Verdun v PlateSpin Canada Inc., 2005 CanLII 1637 (ON LRB) for a good discussion of these criteria.

The following is a discussion of each of the criteria.

Common management

The requirement that two entities be under common control or direction appeared in the pre-June 15, 1987 Employment Standards Act. That phrase, however, did not appear in provisions in the former Employment Standards Act that came into force on June 15, 1987, and it does not appear in s. 4(1) of the ESA 2000. As a result, it is not always necessary to show common control or direction or common management to make a finding of relatedness. However, it is the policy of the Program that common management will be a highly significant (although not always a necessary) factor in determining relatedness. For example, if Corporation A exercises control on a regular basis over the internal management of its subsidiary, Corporation B, then the common management test will be satisfied. This form of control may be evident in a number of forms, such as:

  1. Management personnel of the subsidiary are appointed, terminated or transferred by the parent company on a regular basis;
  2. The Board of Directors of A and its subsidiary B are interlocking or have common members, and decisions of B's Board of Directors are made according to A's and B's interests;
  3. Management practices of the subsidiary are determined by the parent corporation.

The concept of a directing mind or controlling mind is often helpful in determining whether there is common management. For example, if several corporations constitute a comprehensive and integrated business and are under the control of an individual who is the directing mind of the business, the common management test will be satisfied. See 550551 Ontario Ltd. v Framingham (Div. Ct.), 1991 CanLII 7388 (ON SC), a decision under the former Employment Standards Act.

If there is a common directing or controlling mind, the common management test may be met even though the corporations involved do not have common directors. See 782368 Ontario Inc. o/a Consolidated Security Services v Powers (December 23, 1990), ESC 2793 (Barnett), another decision under the former Employment Standards Act.

Note, however, that an individual who is the controlling or directing mind of a business would not be made personally liable under s. 4(2) unless the individual is operating as a sole proprietor. See 550551 Ontario Ltd. v Framingham (Div. Ct.) and also Canada Machinery Corporation v Employees (September 18, 1991), ESC 2931 (Mitchnik). A sole proprietorship exists where an individual carries on business themselves, as opposed to where a corporation or partnership carries on the business. A sole proprietor might carry on the business under their own name or they may do so under another name. If the sole proprietor carries on business other than under their own name, the sole proprietor is required to file a declaration under the Business Names Act, RSO 1990, c B.17. This declaration is required to be filed at the Ministry of Government and Consumer.

The mere fact that entity A owns a majority interest in entity B may not be sufficient in itself to satisfy the common management test. If the ownership is in the nature of an investment only, and A does not manage or actually control the affairs of B, the common management test may not be met. In this regard see Modern Mold Ltd. v Finnerty (December 18, 1990), ESC 2802 (Brown), a decision under the former Employment Standards Act. However, if A does manage the affairs of B, the common management test will be satisfied and there will be a strong indication that the two entities are related.

The common law cases in the area of wrongful dismissal are also helpful. At common law, a plaintiff in a wrongful dismissal action against his employer may wish to join the employer's parent corporation as a party to the action, because it has a better ability to pay a judgment or is in a jurisdiction in which it is procedurally more advantageous to sue. In such cases, the common management test is often a key one. See, for example, Manley Inc. v. Fallis and Sinclair v Dover Engineering Services Ltd., 1987 CanLII 2692 (BC SC).

The common management test may also be satisfied even though Corporation B does not commence operations until after Corporation A ceases to do so. For example, if the sole shareholder and manager of Corporation A discontinues the business and sets up Corporation B, in which she or he is also the sole shareholder and manager, the common management test would be met and a finding of relatedness may be made. See Refac Industrial Contractors Inc. v Haygood et al (May 30, 1990) ESC 2703 (Brown), a decision under the former Employment Standards Act. Note this example is not intended to imply that the owner of A must be the owner of B in order for the common management test to be met. If A and B had a common controlling mind, this test will be met.

Common financial control

Examples of common financial control would be a centralized payroll, centralized accounting functions and procedures, and consolidated financial statements. For example, if Corporation A performs the payroll functions for both Corporation A and B, the common financial control test will be met, and there is an indication that the corporations may be related. See for example Laverty Richards Guerrieri Investments Inc. o/a Madame's Mansion Restaurant v McHugh (June 13, 1988), ESC 2347 (Baum), a decision under the former Employment Standards Act.

Common ownership

The common ownership test would be met where, for example, Corporation A owned more than 50 per cent of the shares of each of Corporations Band C. In such a case, Band C would be under common ownership. The common ownership test by itself will likely not support a finding of relatedness - see Modern Mold Ltd. v Finnerty, discussed previously. However, if, in addition to common ownership, one or more of the other factors is present, such as common management, market or customers, then a finding of relatedness may be made.

Existence of a common trade name or logo

The existence of a common trade name or logo may be supportive of a finding of relatedness or associatedness. For example, if one company is X Ltd. and the other is Y Ltd. carrying on business as X, the common trade name or logo criterion will be satisfied. For an example of a decision under the former Employment Standards Act, see Million Dollar Saloon Inc. v MacDougall (October 13, 1989), ESC 2576 (Rose). However, franchisees using the same trade name under license from the franchisor will generally not be related to each other or to the franchisor. There may be some cases, though, where they are related, especially where the relationship between the parties goes beyond a pure franchise arrangement. For example, see Texas Longhorn Café Inc. v Snider et al (September 1, 1992), ES 142/92 (Wacyk), a decision under the former Employment Standards Act, where the arrangement included movement of staff and supplies between two entities as well as overlaps in ownership.

Movement of employees between two or more entities

The requirement for the employee to have been employed by all of the entities considered related appeared in the pre-June 15, 1987 Employment Standards Act. However, neither s. 4(1) nor the corresponding provisions under the former Employment Standards Act that came into force on June 15, 1987 contained such a requirement. Nonetheless, the fact that the employee-claimant or other employees have worked for both entities A and B is significant (although no longer necessary) in determining whether the entities are related or associated under s. 4(1).

The transfer of employees may indicate a functional integration between the two entities suggesting that they are related, especially if there is common management or common financial control. For example, see Million Dollar Saloon Inc. v MacDougall, a case under the former Employment Standards Act. If the entities are covered by the same collective agreement, and there is movement of unionized employees from one entity to the other, it may indicate a possibility that the entities are related. But note that some collective agreements are of a type that is meant to cover several employers who have no connection with each other apart from the fact that they are all in the same industry, e.g., provincial agreements in the industrial, commercial and institutional sector of the construction industry.

Use of same assets by two or more entities

The use of the same assets by two or more entities or the transfer of assets between them may be an indication that the two entities are associated or related under s. 4(1). For example, if the two entities operate out of the same premises or share the same machinery and equipment, this may be an indication that the entities are related or associated, especially if one of the other more significant factors such as common management or common financial control is present. For example, see Synform Design Group Inc. v Onorato (December 25, 1990), ESC 2805 (Baum), a decision under the former Employment Standards Act.

If there is a transfer of assets or a transaction between two entities, and the transfer or transaction is not at fair market value, then there is an indication that the entities are not dealing at arm's length, which suggests that the entities are associated or related. For example, where Corporation A, which owns real estate and leases that property at below market rent to Corporation B, the two corporations may be related. See 550551 Ontario Ltd. v Framingham (Div Ct), decided under the former Employment Standards Act.

Common market or customers served by two or more entities

The common market/customer test was adopted in Refac Industrial Contractors Inc. v Haygood et al, a decision under the former Employment Standards Act. The common market/customers test would be met if, for example, Corporation A sold equipment to its customers and Corporation B serviced that equipment. This test should be used in conjunction with the more significant of the tests.

Another test adopted by the referee in Refac Industrial Contractors Inc. v Haygood et al was the mode and means of production test. It involves consideration of whether the companies are manufacturing the same type of product in the same manner. The mode and means test is considered by the Program to be overly narrow and not to be determinative in any respect.

Two or more entities carrying on business

This requirement is quite straightforward. There must be more than one entity carrying on the associated or related activities, businesses, etc. It is important to note that the activities need not be carried on at the same time, see s. 4(3). Corporation A and B may be a single employer even if B did not start carrying on business until such time as A ceased to do so. Decisions under the former Employment Standards Act, before there was explicit statutory wording to the effect of s. 4(3), include Refac Industrial Contractors Inc. v Haygood et al, 782368 Ontario Inc. o/a Consolidated Security Services v Powers (December 23, 1990), ESC 2793 (Barnett), and Chatters Restaurant and Tavern Inc. and 791818 Ontario Ltd. o/a T.C. Mellons v Morrissey and Yarmoloy (July 28, 1992), ES 121/92 (Wacyk).

Intent or effect of defeating act

On January 1, 2018, the Fair Workplaces, Better Jobs Act, 2017 SO 2017, C 22 amended s. 4 to remove the requirement that the intent or effect of the arrangement as described in s. 4(1) must be to defeat, either directly or indirectly, the purpose of the ESA 2000 in order for the employer and other persons to be treated as one employer. If the business relationship existed before January 1, 2018, and the contravention occurred before January 1, 2018, the intent or effect test should be applied.

This part of s. 4(1) requires that either the intent or effect of the associated or related activities or businesses is to defeat the intent and purpose of the ESA 2000, either directly or indirectly. Therefore, it is not necessary to show that there is an intent to defeat the purpose of the ESA 2000, if the effect would be to defeat it.

Examples of intent or effect criterion

Some examples of the application of the intent or effect criterion are as follows:

Someone carries on a growing business through a number of small corporations and sets up a new corporation every time an existing corporation's payroll starts getting close to $2.5 million, putting any new employees on the new corporation's payroll in an attempt to avoid the $2.5 million severance pay threshold. This is obviously being done with the intent of defeating the intent and purpose of the ESA 2000; accordingly, the several corporations should be treated as one and their individual payrolls all added together for purposes of determining whether severance pay must be paid to eligible employees whose employment has been severed.

Several numbered corporations in associated or related businesses, each with a payroll of less than $2.5 million, carryon under a single trade name and effectively operate as one so far as the general public and employees are concerned. Even if the motive behind having several corporations instead of one had nothing to do with trying to defeat the intent and purpose of the ESA 2000, it is clear that this could be the effect of the arrangement. Accordingly, the corporations would be treated as one and their individual payrolls added together for purposes of determining whether or not severance pay must be paid to eligible employees whose employment has been severed. It should be noted, however, that the payroll of a business that is located outside Ontario will not be added to the payroll of a related business in Ontario.

Corporation A, in an attempt to avoid the claims of its creditors, closes down its business and opens up a new one, Corporation B. Corporation A still legally exists, but is dormant. Corporation B is under the same management and ownership, performing the same or similar operations as the old corporation using funds diverted from the old corporation. It is clear that both corporations should be treated as one under s. 4(1) so that former employees of the old corporation may be paid wages that are owed to them.

Corporation A becomes insolvent and its employees are dismissed. Corporation B, which owns Corporation A and controlled A's operations, is not insolvent. Corporations A and B should be treated as a single employer, since the effect of the existence of two separate corporations, one insolvent and one not, would otherwise be to defeat the Act's intent, which is to enforce the payment of wages earned by employees.

Corporations A and B are both subsidiaries of Corporation C, and are both controlled by it. An employee works four years for Corporation A, then three years for Corporation B, and is terminated by Corporation B. A and B should be treated as a single employer under s. 4(1), in determining the employee's length of employment for the purposes of notice of termination and severance pay. To find otherwise would defeat the intent of the ESA 2000 to ensure that employees receive notice of termination and severance pay in accordance with their length of employment.

Corporations A and B are both owned by the same sole shareholder, who manages and controls both of them. Employees regularly move between the two corporations, which perform similar activities. An employee, in one week, works 40 hours for Corporation A and eight hours for Corporation B. The two corporations should be treated as a single employer under s. 4(1) in determining whether the employee is entitled to overtime pay since to do otherwise would defeat the ESA's intent which is to ensure that employees receive overtime for hours worked in excess of 44 per week.

Corporations A and B are owned by the same shareholders and have common officers and directors. Corporation B was incorporated for the purpose of acquiring a piece of real estate on which Corporation A conducts its manufacturing operations. B leases the property to A at less than fair market rent. Corporation A becomes bankrupt and is unable to pay its employees severance pay. A and B should be treated as one employer under s. 4(1), since even if intent to defeat the purpose of the ESA 2000 cannot be proven, it is clear that the effect of the arrangement would be to defeat the purpose of the ESA 2000, which is to ensure that employees receive severance pay that they have earned through long employment with the employer.

Corporation A and B had interlocking Boards of Directors, a common payroll system, intermingling of employees, and shared facilities. An employee was laid off by A and was made a reasonable offer of alternative employment by B, prior to the expiry of 13 weeks of lay-off. The employee refused the offer. A and B should be treated as one employer under s. 4(1), and the employee should be disentitled to termination pay, since it would be contrary to the Act for the employee to be able to refuse such an offer and still collect termination pay. See Chow v Penta Stolp Corporation (August 7, 1992), ES 128/92 (Wacyk), a decision under the former Employment Standards Act.

Intent or effect of defeating act where alleged related employer is a phoenix

Where an employer becomes bankrupt it is not unusual for a phoenix employer to emerge and commence operations, and very often the first part of the test (associatedness or relatedness) will be met because of common management, financial control or ownership as between the bankrupt and the phoenix.

However, in order to conclude that s. 4 applies, the second part of the test (i.e., the intent or effect of defeating the intent and purpose of the ESA 2000) must also be met. The ruling of the Divisional Court in Carillon Decorative Products Inc. v. Mellon, 2004 CanLII 1535 (ON SCDC) provides provides some guidance on the application of the second part of the test in phoenix situations.

The phoenix employer (Carillon) was a very small-scale, direct import operation with a total of five employees, all immediate family members of the owners; the bankrupt employer (Alderbrook) was primarily a manufacturing operation with approximately 250 employees. Before the incorporation of Carillon, the principals of Alderbrook had sought new financing from alternative sources and had even given personal guarantees to secure a forbearance from its bankers on repayment of money owed to the bank. After Alderbrook became bankrupt, the principals invested $45,000 (raised through mortgaging their homes) to start up Carillon; to keep Alderbrook going would have required a further investment of $2,000,000.

The Court assumed without deciding that the first part of the test has been met; however, with respect to the second part of the test, while the Court agreed that it would have been met had the principals simply walked away from Alderbrook without making reasonable efforts to save it, the Court found that that was not the case. The principals had undertaken considerable efforts to save Alderbrook. In response to a suggestion that the principals might have invested the Carillon start-up capital in Alderbrook instead in an effort to keep Alderbrook going, the Court noted that the $45,000 in question would not have had the slightest effect on the looming disaster confronting Alderbrook.

Based in part on the Carillon decision, the Program takes the view that the intent or effect branch of the test will not be met in phoenix situations unless:

  1. There is some element of impropriety pertaining to the insolvency itself; or
  2. It can be shown that:
    • The principals failed to make all reasonable efforts to avoid the insolvency; or
    • The resources that were invested in the phoenix by the principals would have been sufficient to avoid the insolvency.

Separate persons treated as one employer – section 4(2)

Section 4(2) provides that if the requirements of s. 4(1) are met, the employment standards officer must treat the associated or related activities or businesses as one employer. It is a deeming provision and does not provide for the exercise of discretion by the employment standards officer.

One effect of the non-discretionary nature of the officer's application of s. 4(2) is that employees involved in a civil action against their employer may cite s. 4(2) in the action, arguing that if the requirements of s. 4(1) are met, the Act requires that the section be applied. An employee may propose this because an associated or related business may be better able to pay a judgment.

Businesses need not be carried on at same time – section 4(3)

Section 4(3) clarifies that the test set out in s. 4(1) for relatedness may be met even if the activities or businesses are not carried on at the same time. For example, Corporation A operates from January 1, 2002, to January 1, 2003. Corporation B commences operations on February 1, 2003. If Corporation A and B have common directors, if the business of both corporations is identical and if the employees employed by Corporation A move to Corporation B at the time that Corporation B began doing business, a finding of relatedness may be made despite the fact that Corporations A and B did not operate at the same time. See, for example, the following decisions under the former Employment Standards Act: Refac Industrial Contractors Inc. v Haygood et al, 782368 Ontario Inc. o/a Consolidated Security Services v Powers, and Chatters Restaurant and Tavern Inc. and 791818 Ontario Ltd. o/a T.C. Mellons v Morrissey and Yarmoloy.

Exception, individuals – section 4(4)

Section 4(4) ensures that s. 4(2) is not used to make a finding that Corporation A and the shareholders of Corporation A are related employers. To use s. 4(2) in this way would be to ignore the legal concept of the separate legal identity of corporations.

In law, a corporation is regarded as having a separate existence from the person or persons who own it. Ownership of a corporation is represented by shares. A person who owns more than 50 per cent of the shares is said to own a controlling interest in the corporation.

Section 4(4) establishes the one circumstance in which the legal concept of separate corporate personality (the corporate veil) can be pierced for the purposes of this section. If the shares of a corporation are held by the partners, and the partners, in turn, hold those shares for the purpose of the partnership, s. 4(2) may apply. Section 4(4) effectively prevents a partnership (which at law is not regarded as having a separate existence from the partners who form the partnership) from masquerading as a corporation.

Exception, Crown – section 4(4.1)

This provision was introduced by the Fair Workplaces, Better Jobs Act, 2017 effective January 1, 2018, at the same time that s. 3.1 was added to the Act to provide that the Act binds the Crown. Subsection 4(4.1) states that ss. 4(2), which treats “related” entities as one employer under this Act, does not apply to the Crown, a Crown agency or an authority, board, commission or corporation all of whose members are appointed by the Crown.

The term Crown refers to the government of Ontario. More precisely, it refers to the executive branch of government, as the term Crown does not include the Legislative Assembly or the judiciary.

The determination of whether an entity is a Crown agency and therefore exempted from the application of the s. 4 related employer provisions is generally made on the basis of the common law, which looks at the nature and degree of control which the Crown, through its Ministers, exercises over the entity. For example, see Westeel-Rosco Ltd. v Board of Governors of South Saskatchewan Hospital Centre, [1977] 2 SCR 238, 1976 CanLII 185 (SCC).

For a discussion about the meaning of “the Crown, a Crown agency or an authority, board, commission or corporation all of whose members are appointed by the Crown”, and the history of which provisions applied to the Crown, etc. at which point in time, see O. Reg. 285/01 s. 2.1.

Joint and several liability – section 4(5)

Section 4(5) states that if persons are found to be one employer under s. 4(2), each person will be responsible for all the obligations under the ESA 2000 and regulations of all the other entities, separately and together.

Consider the example of entities A and B and an employee who became entitled to severance pay from entity A. Even if A and B did not become related until sometime after the employee became entitled to severance pay, entity B (as well as entity A) will still be liable for those monies under s. 4(2), if A and B are found to be a single employer under s. 4(2). However, by contrast, if an employee is terminated by employer A, which has a $2.0 million annual payroll, and subsequently A becomes related to employer B, which has a $1.0 million annual payroll, the employee will not be entitled to severance pay from either employer A or B, even though the combined payrolls exceed $2.5 million, the amount that triggers the entitlement to severance pay for an employee with five or more years' employment, under ESA Part XV, s. 64(2). The difference between the two situations is that, in the first situation, employer B is considered to have assumed the pre-existing employment standards obligations of employer A at the time they became related, whereas, in the latter, there was no pre-existing obligation for B to assume.

For a more detailed discussion, see the definition of person in ESA Part I, s. 1.

Section 5 – No contracting out

No contracting out – section 5(1)

Section 5(1) prohibits employers, employees and their agents from waiving or contracting out of any employment standard provided by the Employment Standards Act, 2000, and nullifies and voids any such contracting out or waiver.

The prohibition in s. 5(1) is subject to s. 5(2). Accordingly, an employment standard need not be complied with if the employee is receiving a greater right or benefit with respect to that particular standard.

ESA Part I, s. 1 defines employment standard as follows:

Accordingly, the prohibition on contracting out applies only with respect to the ESA 2000’s provisions that confer a benefit to an employee not with respect to those provisions that confer a benefit on an employer. For example, the ESA 2000 will not prohibit an agreement between an employee and employer to waive the requirement for an employee to provide four weeks' notice of intention to resign at the end of a pregnancy and parental leave.

Numerous referees have dealt with situations in which an employer and employee have come to an arrangement, the effect of which is to waive an employment standard. Such arrangements have been declared void, even in cases where the employee vociferously supported the arrangement. The following decisions under the former Employment Standards Act are some examples of arrangements that have been found unacceptable:

In Arpin Trucking Limited v Proud (November 24, 1981), ESC 1108 (Sheppard), the employees agreed to work at a higher hourly rate than previously, but with no overtime premium. The referee decided that they could not waive the employment standard, despite the fact that none of the employees supported the assessment against the employer.

In Canecon Investments Inc., c.o.b. as G.M. Stamm, Economic Research Associates v Gillezeau (December 11, 1981), ESC 1117 (Bigelow), the referee did not accept the employer's argument that the employee had accepted a yearly salary that supposedly allowed for vacation and public holiday pay, as such an arrangement would have been a waiver of the relevant employment standards.

In James Fibre Glass Manufacturing Co. Limited v Lindsay (Wilson) (December 6, 1984), ESC 1752 (Adamson), the referee found that an oral agreement to work extra hours to make up lost time at regular pay was void, as such an arrangement was a waiver of the employee's right to overtime pay.

In London White Trucks Limited v Martel (May 30, 1977), ESC 425 (Picher), the employer told the employee that he was to be dismissed, and suggested that giving him notice . . . wouldn't be of any value…, The referee held that the employee's agreement with the suggestion was a waiver of an employment standard. Accordingly, the referee declared the agreement void.

In Lindzon v Starr (June 27, 1979), ESC 635 (Picher), the referee held that the employee's written release of her employer from any claims she may have had against him was null and void, with the result that the employer was liable for pay in lieu of notice of termination.

Where an employment contract contains a provision that purports to waive the right to notice of termination under ESA Part XV, s. 57 and 58, this attempted waiver, being null and void, cannot be used to determine the question of whether the employee received reasonable notice at common law. In this regard, see Machtinger v HOJ Industries Ltd., [1992] 1 SCR 986, 1992 CanLII 102 (SCC).

However, the prohibition against contracting out under the ESA 2000 must be distinguished from the settlement of an entitlement under the ESA 2000. For example, under ESA Part III, s. 6, a union could agree to a settlement with respect to entitlements under the ESA 2000, including severance pay. A settlement is distinguished from an attempt to contract out of the ESA 2000 because it is entered into only with respect to an entitlement that has crystallized or whose crystallization is imminent.

Greater contractual or statutory right – section 5(2)

Section 5(2) ensures that where an employee has greater rights under an employment contract (which includes a collective agreement) or another statute, such greater rights will prevail over the minimum standards established by the ESA 2000. Such greater rights include a greater hourly rate, lesser hours of work, a greater percentage of vacation pay, longer vacations, higher public holiday pay and a greater number of public holidays.

(Note that prior to April 3, 2019, section 17.2 of the ESA provided an exception to the application of s. 5(2).  Section 17.2 was repealed on April3, 2019 as a result of the Restoring Ontario’s Competitiveness Act, 2019. Before its repeal, ESA Part VII, s. 17.2 provided that even where a contract gave an employee a greater right than all or part of the hours of work provisions in the ESA 2000, employers were still required to comply with the requirement that existed at the time to obtain the approval of the Director of Employment Standards (or to have an application for approval pending for at least 30 days, as well as meeting certain other conditions) before the employer's employees could work in excess of the weekly limit on hours of work.)

Determining if greater right or benefit exists

Comparing apples and oranges

Consistent with s. 5(2), the Program takes the position that in determining whether the employment contract confers a greater right or benefit, one should not compare apples with oranges, i.e., the fact that a contractual provision or set of contractual provisions relating to the same subject matter as one employment standard provides a greater benefit to employees than that employment standard cannot be used to justify giving employees less than they are entitled to under a different employment standard. For example, the fact that an employee is paid considerably more than the minimum wage does not allow the employer to avoid paying overtime pay.

There is, however, some indication that the Board may take a different view. In Track-Corp Equipment Ltd. v Tremblay, 2007 CanLII 15165 (ON LRB), the employee had agreed to work for a flat rate of $19 per hour, purportedly inclusive of any entitlements to overtime pay, public holiday pay and vacation pay. Following the termination of his employment, he filed a complaint with the ministry. The investigating employment standards officer, finding that the employee was owed overtime pay, public holiday pay and vacation pay, issued an order to pay, which the employer appealed. The Board allowed the appeal. Noting that the employee had been paid over $12,000 during his time with the employer, and that if his rate of pay had been only the minimum wage in effect during that time ($7.45 per hour), his total entitlement, including overtime pay, public holiday pay and vacation pay, would have been just over $5,000, the Board held that:

In other words, it seems that the Board, rather than comparing the benefit conferred by the contractual rights pertaining to the same subject as one particular employment standard with the benefit that would be conferred by that standard, compared the total benefit of the entire contract with the total benefit of all employment standards. The Program's position is that this is not an appropriate approach to take as it would have the effect of depriving virtually any employee earning significantly more than minimum wage of all of their other entitlements under the ESA 2000.

The correct approach, in the Program's view, is that which was taken in C. Fasano Food Market v Bouvier (February 20, 1978), ESC 482 (Satterfield), where the referee rejected an employer's argument that it did not have to comply with the former Employment Standards Act's public holiday provisions because certain payments it had made to the employee for time not worked, voluntary cash payments and payment in trade were a greater benefit to the employee than the employment standard. In responding to that argument, the referee stated:

While the wording of the predecessor greater right or benefit provision is somewhat different than the current provision, the Program is of the view that the differences are not significant and that the approach taken in the C. Fasano Food Market v Bouvier decision is still the appropriate approach to greater right or benefit issues.

Comparing different varieties of apples / Package approach

Although the Program is of the view that one cannot compare apples with oranges in determining whether a greater right or benefit is being provided, one can compare different varieties of apples. This means that one takes into account the entire package of contractual provisions that relate to the same subject as a particular employment standard. In some cases, this will require a comparison of both monetary and non-monetary aspects. For example, where the issue is whether the employment contract confers a greater right or benefit in relation to holidays than Part X, one would look at several features, including the number of holidays recognized, qualifying conditions, whether there is a right to be off work on a holiday, premium pay entitlements for working on a holiday, etc. A Divisional Court decision under the former Employment Standards Act, Re Queen's University and Fraser et al, 1985 CanLII 2260 (ON SC), indicated that this was the proper approach.

This approach gives the employer some flexibility where they are giving a contractual right that on balance is better overall for employees than the corresponding statutory standard, notwithstanding that the contractual right is not better in all respects or perhaps not even as good in some. Note that in order for a contractual provision to be found to prevail over an employment standard under s. 5(2), the right or benefit conferred by the provision must be in fact greater and not merely equal.

Rest periods

It is not a greater benefit for an employee to receive payment in lieu of the required rest periods in ESA Part VII, s. 18 and ESA Part VIII, s. 20. The benefit provided by these required rest periods in the ESA 2000 is time off from work. Therefore, the appropriate comparison to determine whether a greater right or benefit has been provided to an employee with respect to these rest periods is the time off from work. Payment in lieu of time off from work, premium pay for working additional hours or the willingness of the employee to work extra hours are not relevant considerations for the determination of a greater right of benefit for rest periods.

Eating periods

An employer may provide a greater right or benefit with respect to eating periods than that provided under ESA Part VII, ss. 20 and 21. For example, the contract may provide that the employee will be entitled to an hour long eating period within the time limits set out in ESA Part VII, ss. 20(1) and (2).

It is not a greater benefit for an employee to receive payment in lieu of the required eating period. The benefit provided by the eating period in the ESA 2000 is time off from work. Therefore, the appropriate comparison to determine whether a greater right or benefit has been provided to an employee with respect to the eating period is the time off from work.

In All-Way Transportation Services Ltd v Fountain (June 6, 1979), ESC 627 (Brent)the employer argued that an arrangement that allowed wait staff to continue to earn tips constituted a greater right or benefit. The Board, in rejecting that argument, said:

Working cannot be considered a greater right or benefit than not working just because the employee is getting paid. If that were possible, any employer could refuse to give meal breaks as long as the employee was paid. It is implicit in the Act that the break itself is the benefit.

Overtime

In Falconbridge Nickel Mines Limited v Sudbury Mine, Mill and Smelter Workers' Union, Local 598 (July 13, 1981), ESC 1021 (Egan), a hearing was held on the issues of, first, the meaning of “week” in the overtime provisions in s. 25 of the former Employment Standards Act, which corresponds to ESA Part VIII, s. 22, and, second, the meaning of greater right or benefit, collective agreement versus the ESA 2000.

The work week of the employer was established and commenced at 8:00 a.m. Sundays, and was based on a set schedule over a four-week cycle, a series of seven consecutive eight-hour days worked over two work weeks. The union argued that week in former s. 25 referred to any period of seven consecutive days and that, accordingly, overtime was not being paid properly pursuant to the Act's requirement of one and one-half times the regular rate after 44 hours in the week, notwithstanding that overtime was paid, in accordance with the collective agreement entitlement, after 40 hours in a work week. The referee did not accept the employer's argument that week in s. 25 meant work week, but rather held that it means any period of seven consecutive days. Further, he held that since the overtime provisions of the collective agreement, being a package of rights involving premium pay after 40 hours per week, eight hours per day, on Sundays, and call-in pay, did not specifically relate to the particular s. 25(1) overtime standard in a week (being seven consecutive days), it could not be compared.

On judicial review, the Divisional Court in the unreported decision Re Falconbridge Nickel Mines Ltd. and Egan et al (January 18, 1982), (ON SCDC) found that the referee made an incorrect construction of week in s. 25 and of s. 4(2) of the former Employment Standards Act, which corresponds to s. 5(2). The Court determined that the employer has established a work week, the reference to week in s. 25 means the seven-day period which coincides with the work week. The Court also ruled that the referee was obligated by s. 4(2) to compare the rights, benefits, terms or conditions of the collective agreement relative to overtime with s. 25, which was the entire statutory provision regarding overtime.

In Re Falconbridge Nickel Mines Ltd. and Egan et al., 1983 CanLII 1931 (ON CA), the majority of the Court of Appeal affirmed the Divisional Court's decision on the interpretation of the s. 25(1) week issue, but did not comment on the s. 4(2) holding. However, the Divisional Court relied on this form of package comparison having been acceptable when they confirmed that approach in Re Queen's University and Fraser et al.

The fact that a contract of employment may provide for overtime payable after eight hours per day or 40 hours per week does not necessarily render it a greater benefit than that contained in ESA Part VIII, s. 22(1). The entire package must be examined. For example, an employee is paid an hourly rate and an amount for mileage and the collective agreement provides for time and one-half after 40 hours. The collective agreement may at first appear to be providing a greater right or benefit. However, the collective agreement also contains a provision stating that the hours of work in respect of which mileage is paid will not count as hours of work for the purposes of calculating overtime. In the event that pay for mileage plus regular pay plus overtime pay as per the collective agreement is less than the wages otherwise due had ESA Part VIII, s. 22(1) applied, then s. 5(2) would not apply and the ESA 2000's minimum standard would be operative.

Minimum wage

Where a contract of employment (including a collective agreement) provides for greater remuneration than the minimum wage, that greater remuneration prevails over the minimum wage requirements of the ESA. An employment standards officer can assess and enforce the greater remuneration.

Public holidays

Where an employee has greater benefits under an employment contract or collective agreement with respect to public holidays, such greater benefits prevail over the minimum requirements in the ESA.

For example, if an employee's employment contract grants the employee more money for a public holiday than does the calculation of public holiday pay under the ESA, the employee is entitled to that higher amount. For example, the calculation for public holiday pay under the ESA is based on regular wages earned and vacation pay payable, but if that employee's employment contract provides for public holiday pay calculated using all wages earned in the four work weeks, the employee is entitled to that higher amount.

Another example is if an employer's requirements for public holiday pay are not as stringent as those in the ESA 2000, an employee is entitled to that pay if they fulfil those less stringent requirements. In Sturdell Industries Limited v Wilson (March 13, 1979), ESC 593 (Johnston), a case decided under the former Employment Standards Act, employer policy provided for a paid holiday even if the employee did not work the regularly scheduled day after the holiday, as long as they subsequently made up any lost time. The referee held that the employer could not retroactively tighten up the system and attempt to recover holiday pay that it paid, even though the employee would not have been entitled to the pay under the Public Holiday provisions.

In the context of collective agreements, arbitrators have held as follows:

In Canada Cement Lafarge Ltd. v. C.L.G.W., the arbitrator held that a collective agreement under which employees in a continuous operation would receive premium pay of 2 1/2 to 3 1/2 times the regular rate for work on 12 holidays provided a greater benefit than the Act. Accordingly, the agreement prevailed, since the package as a whole was considered to exceed the requirements of the Act.

In Re Queen's University and Fraser et al, the Divisional Court held that no illegality results from the fact that a collective agreement does not treat a particular day (being a public holiday under the ESA 2000) as the holiday, so long as the collective agreement provisions respecting holidays provide a greater right or benefit in total than the provisions of the Act.

Note that while these cases were all decided under the former Employment Standards Act, the principles enunciated in the decisions still apply.

Package approach

Whether dealing with an individual employment contract or a collective agreement, the entire public holiday package, including monetary and non-monetary aspects and the stringency of qualifying conditions, must be reviewed. In order to find that the terms of a contract or collective agreement prevail over the ESA 2000, they must be on balance not just equal to the ESA 2000, but must provide a greater benefit.

The Divisional Court upheld the package approach in Re Queen's University and Fraser et al, where Madame Justice Van Camp, speaking for the majority stated,“One must look at the entirety of the terms in the agreement respecting holidays and not compare each individual item.”

The Program's position is that factors that must be considered when assessing whether a contract provides a greater right or benefit with respect to public holidays include:

  • The number of days off;
  • The pay the employee receives when taking the day off;
  • The pay the employee receives for working on a holiday;
  • The qualifying conditions for the days off;
  • Whether the employee has a right to refuse work on the holiday;
  • Whether and how substitute days off may be arranged; and
  • Whether some or all of the holidays provided under the contract are the same as those provided under the ESA 2000.

Historically, one view of the public holiday entitlement has been that such days are intended to be a common day free from work, to facilitate religious or traditional public celebrations or to spend time with family. As one aspect of the entitlement, it should be considered as one of the factors in determining whether the entitlements under the employment contract provide a greater right or benefit.

Consequently, applying the greater right or benefit provisions of the ESA 2000 could result in a finding that an employment contract provides a package related to public holidays that will prevail over the public holiday entitlements in the ESA 2000, even though the package does not treat for example Family Day, or indeed any one or more of the other public holidays under the ESA 2000, as a public holiday.

In order for a non-statutory benefit respecting public holidays to prevail over Part X provisions, the conditions of employment must confer a greater benefit in relation to the statutory public holiday employment standard and they will only prevail in respect of that standard. The employer cannot rely on a greater benefit in respect of one standard to offset a lesser benefit in respect of another standard.

In C. Fasano Food Market v Bouvier (a decision under former Employment Standards Act), the referee ordered the employer to pay public holiday pay even though he paid for time not worked (sick leave and personal time-off), voluntary cash bonuses and payment in trade, all of which amounted to a figure well in excess of the amount of the order to pay.

In 22 Employees v Christie's Dairy Limited (July 23, 1981), ESC 1030 (Sheppard) (a decision under the former Employment Standards Act), the referee ordered the employer to pay public holiday pay even though he had reduced the employees' work week from a five-day, eight hours per day week (40 hours total) to a four-day, nine hours per day week (36 hours total) with no reduction in salary. He had argued that this new arrangement was a better benefit, so he was justified in not paying premium pay for work on public holidays, especially as the employees had fully consented to the change. The referee did not agree with this argument.

Percentage in lieu arrangements

In some cases, the terms of a collective agreement or individual contract of employment provide for an employee to receive, in addition to their regular earnings, a percentage of those earnings in lieu of public holiday pay for public holidays not worked, or more typically, in lieu of a number of entitlements and benefits including public holiday pay. Since in such cases the employer is not adhering to the public holiday requirements per se, the employer cannot be considered to be in compliance with the ESA 2000 unless the percentage in lieu arrangement constitutes a greater right or benefit within the meaning of s. 5.

In order to determine whether a percentage in lieu arrangement constitutes a greater right or benefit, one must compare what the employee receives in lieu of public holiday pay with what the employee would have received had the employer paid public holiday pay in accordance with ESA Part X. Only if the former exceeds the latter can it be said that a greater right or benefit is being provided.

Where the amount paid under the arrangement is solely in lieu of public holiday pay (and not in lieu of other entitlements or benefits as well), the determination is made by comparing the percentage in lieu figure with the percentage that public holiday pay would have represented had the employer paid public holiday pay in accordance with Part X. This latter percentage may vary for a particular employee from holiday to holiday and year to year, depending, for example, on whether the employee was away from work in the four work weeks before the work week in which the public holiday occurred.

Where the amount paid under the arrangement is in lieu of other entitlements or benefits as well as public holiday pay, one must still determine the appropriate bench mark percentage to determine whether a greater right or benefit is being provided and compare that with the percentage in lieu of public holiday pay provided by the employer.

If the contract or collective agreement breaks down the total percentage in lieu to show how much of it is being provided in lieu of public holiday pay, that is the figure that should be compared with the benchmark.

Where the contract or collective agreement does not break down the total percentage, it will have to be determined whether or not the percentage in lieu is sufficient to fund all the benefits and entitlements it is intended to cover. If it is not sufficient, then the percentage in lieu does not constitute a greater right or benefit than ESA Part X.

In some cases, employees may receive a percentage in lieu for public holidays not worked, but still receive regular wages plus premium pay for any holidays that they do happen to work. Where this occurs, the amount paid for public holiday work may have to be taken into account along with the percentage in lieu in order to determine whether the employee received a greater right or benefit than what they would have received had the employer complied with ESA Part X in all respects. However, if the appropriate benchmark figure is exceeded on the basis of the principles discussed in the preceding paragraphs even without consideration of the amount paid for public holiday work, it is not necessary to take this additional step.

Vacation with pay

It must be clear from the contract of employment exactly what the greater entitlement is before it is enforced. For example, although a contract may provide a greater benefit of four weeks' vacation time, this does not necessarily mean that a corresponding increase (e.g., to eight per cent) in the percentage of vacation pay can be enforced. However, if a contract of employment does provide a greater percentage for vacation pay, that greater percentage will be enforced even if the employee does not complete the vacation entitlement year, unless the entitlement to the greater percentage is clearly dependent upon that completion.

Leaves of absence

Pregnancy and parental leave

Questions regarding the application of s. 5(2) may arise in the context of pregnancy and/or parental leave when an employee, who has taken time off that exceeds the leave periods under the ESA 2000, seeks the assistance of the Program in returning to work.

In many cases, employers are prepared to allow employees to take additional time off following the statutory leave. In fact, such arrangements are often individually tailored to suit a specific employee's needs rather than appearing as a standard contract entitlement. Nothing in the ESA 2000 prohibits employers from agreeing to allow an employee to take additional time off or otherwise negotiating a discrete, non-statutory leave entitlement as a term of the contract of employment. But, in either case, the terms of that extended period of time off or discrete, non-statutory leave would not be subject to scrutiny or enforcement under the ESA 2000. Most importantly, the rights of reinstatement afforded under the ESA 2000 are not enforceable at the end of the extended period of leave or following a discrete, non-statutory leave.

However, if the leave as provided under the terms of the contract is determined to be a greater right or benefit than the statutory leave entitlement, the terms of the leave under the contract of employment will apply and can be enforced.

In determining whether a contract provides a greater right or benefit with respect to leave, one must examine and compare the entire package of contractual provisions that relate to the package of leave provisions under the ESA 2000. However, one essential element of the package will be reinstatement in some form, as the concept of a leave from work necessarily implies a right to return to work.

It may not be necessary for the rights of reinstatement afforded under the contract provisions to be precisely the same as those afforded under the ESA 2000. For example, the contract provision may allow an employee to take reinstatement at the end of the statutory leave period in accordance with ESA Part XIV, s. 53, but limit the employee's rights to reinstatement following a period of leave that is longer than the statutory requirements, to reinstatement to a comparable job only. An officer would need to review all of the terms and conditions of the contractual provisions before concluding that there was a greater right or benefit but it would be open to an officer to conclude that a contract provides a greater right or benefit, despite the fact the employee seeking reinstatement at the end of the longer period of leave would be entitled only to a comparable job as per the contract.

Further, where an employer provides a greater right or benefit with respect to statutory leave in that the employment contract offers a period of pregnancy or parental leave that is greater than the statutory minimum, it will not necessarily mean that rights collateral to the statutory leave period such as participation in benefit plans and accrual of length of service, employment and seniority will automatically apply to that greater period of leave.

As an example, an employee had a right under her contract to extend her leave for an additional 26 weeks following the 78 week period of combined pregnancy and parental leave under the ESA 2000. However, if she does so, she will not accrue credit for seniority for that 26 week period. All other rights afforded under the statutory leave provisions continue to apply for the additional 26 week period. In that case, an officer may find that the leave provisions in the contract provide a greater right or benefit because the employee has all the rights afforded under the ESA 2000 for the period equivalent to the statutory leave as well as a right to a longer leave, despite the fact the contract provisions do not extend the right to accrue credit for seniority for that period of leave exceeding the statutory entitlement.

[Note: the discussion of the application of the greater right or benefit principle to the now-repealed Personal Emergency Leave standard appears below, following the Bereavement Leave discussion.]

Sick leave

Determining whether the provisions of an employment contract provide a greater right or benefit than ESA Part XIV, s. 50 in relation to time off work because of personal illness, injury or medical emergency can be a difficult matter. The principle that applies in making the determination is the same principle that governs in any greater right or benefit determination, i.e., do the relevant contractual provisions, taken in their entirety, give the employee a better deal than the corresponding employment standard taken in its entirety.

In order to provide assistance in determining whether the employment contract is providing a greater right or benefit than sick leave under the ESA 2000, the following list of criteria has been developed. In any given case, some criteria might point one way, while some might point the other; bearing in mind, however, that the question to be answered is whether the contractual leave provisions, taken in their entirety, give the employee a better deal than ESA 2000’s sick leave provisions, taken in their entirety. The contractual scheme should be examined in light of all of the criteria and then considered whether, on balance, it is the contract or the ESA 2000 that provides the better deal for the employee. Note, however, that the various criteria are not all of equal significance; while no single criterion is likely to be conclusive in itself, some are much more important than others. The criteria set out below have been listed in the order of their importance.

Note that if an employee who takes what is purported to be leave under the contract has no actual entitlement to return to work, the leave under the contract will NOT be considered to be a greater right or benefit. This is because it is inherent in the concept of a leave that there is an entitlement to return; a supposed leave without such an entitlement is meaningless.

Criteria

Number of Days of Leave

How many days of leave does the contract provide for? If the contract provides for fewer than three days’ leave per calendar year, the leave under the contract will NOT be considered to be a greater right, since even only one day less leave under the contract constitutes such a significant reduction in the entitlement. For example, if a contract provides for only two days of sick leave, an employee’s entitlement to sick leave would be reduced by a full one-third if that contract were to be considered to be a greater right or benefit. On the other hand, an unlimited leave entitlement, or an entitlement to more than the three days per calendar year that the ESA 2000 provides for, weighs in on the side of concluding that there is a greater right or benefit.

Qualifying events

Does the contract cover all the different types of events that would entitle an employee to sick leave under ESA Part XIV, s. 50? For example, does the contract allow the employee days for a medical emergency but not for personal injury? If so, it would be a very strong indication that the contract does not provide a greater right or benefit.

Paid or unpaid

Is the leave under the contract paid leave? None of the days of sick leave are paid under the ESA 2000, so if the leave under the contract is paid leave, this tends to point to the contract providing a greater right or benefit. But as with the other criteria, this criterion is not conclusive in itself; other criteria might tip the balance the other way.

Reinstatement right

As stated above, if an employee who takes what is purported to be leave under the contract has no actual entitlement to return to work, the leave under the contract will NOT be considered to be a greater right or benefit. This is because it is inherent in the concept of a leave that there is an entitlement to return; a supposed leave without such an entitlement is meaningless.

If the employee takes leave under the contract, are they entitled to return to their original position (assuming it still exists), as they would be if they took sick leave under the ESA 2000? While it is unlikely, as a practical matter, that a short-term absence would result in the employee being moved to another position, it is quite conceivable that an employer might make such a move if there were repeated absences, and the new position might not even be comparable. If the employee does not have a right to return to their original position if it still exists, or to be placed in a comparable position if it does not, this would be a factor tending to suggest that a greater right or benefit is not being provided.

Negative consequences

Even if the employee has a right to their original job, can the employee be adversely affected in any other way because they take leave under the contract? For example, the employee might have an entitlement under the contract to take leave and keep the original job, but they might lose out in other ways, e.g., the absence from work may cause them to be ineligible for a perfect attendance bonus, or the absence from work may be included when determining whether the employee has triggered an absence threshold that results in termination. This points in the direction of the contract not providing a greater right or benefit. See the discussion of the impact of statutory leaves on attendance management programs and perfect attendance bonuses at ESA Part XIV, s. 52(1).

Other examples of negative consequences that would point in the same direction include interruption in certain kinds of benefit coverage, deduction of leave time from seniority, and forfeiture of contractual vacation entitlement because the leave results in the vacation being postponed beyond the last allowable date for taking vacation under the contract.

Other Criteria

A number of other criteria, although comparatively minor in importance, could conceivably have some impact on the greater right or benefit determination. These criteria include:

  • Whether there is a length of employment requirement that employees must meet in order to be eligible for the leave, and if so, how long it is.
    • The ESA 2000 provides that employees must be employed for two consecutive weeks in order to be eligible for the leave.
  • What sort of evidence the employer requires to support the entitlement under the contract
    • Does it go beyond "evidence reasonable in the circumstances", which is what the employer is entitled to ask for under ESA Part XIV, s. 50(6)?
  • Whether the contractual right is based on the calendar year or on the individual employee's year of employment
    • The right under the ESA 2000 is based on the former; the latter can impact unfavourably on employees who have only just started with the employer; and
  • Whether the employer can deduct a part day of leave from the employee's entitlement as if it were a whole day
    • The ESA 2000 allows the employer to do this, but the contract may be more favourable to the employee.

Although none of these criteria may be greatly important in themselves, they could tip the balance one way or the other in a close case. In some cases these criteria may be more important – for example, if the contract contained a six-month length of employment requirement in order to be eligible for the leave, that criteria would be a factor strongly tending to suggest that a greater right or benefit is not being provided to an employee who has not met the six-month requirement. If a contract does provide a greater right or benefit than ESA Part XIV, s. 50 provides, the terms of the contract will apply instead of ESA Part XIV, s. 50. That is, the terms of the contract, not ESA Part XIV, s. 50, will govern how absences are treated how many the employee is entitled to, what situations will trigger an entitlement, what evidence of eligibility may be required, whether or not they are paid, etc. On the other hand, if a contract does not have any period of employment requirement and provides everything the ESA provides (which means, for example, that all of the rights under the General Provisions Concerning Leaves and the anti-reprisal protection would apply to the absences) this would strongly tend to suggest that a greater right or benefit is being provided.

If a contract does not provide a greater right or benefit than ESA Part XIV, s. 50 provides, ESA Part XIV, s. 50 will apply.

Note that pursuant to ss. 50(7) – (9), where an employee opts to take a contractual leave that is not a greater right or benefit than s. 50, in circumstances that would also give rise to an entitlement under s. 50, the Act deems the contractual leave to be a s. 50 sick leave. See the discussion at subsections 50(7) – (9) for more information.

Family responsibility leave and bereavement leave

Determining whether the provisions of an employment contract provide a greater right or benefit than ESA Part XIV, s. 50.0.1 (family responsibility leave) and s. 50.0.2 (bereavement leave) in relation to time off work because of the death or illness, injury or medical emergency of a relative or an urgent matter concerning a relative can be a difficult exercise. The principle that applies in making the determination is the same principle that governs in any greater right or benefit determination, i.e., do the relevant contractual provisions, taken in their entirety, give the employee a better deal than the corresponding employment standard taken in its entirety.

In order to provide assistance in determining whether the employment contract is providing a greater right or benefit than family responsibility leave or bereavement leave under the ESA 2000, the following list of criteria has been developed. In any given case, some criteria might point one way, while some might point the other; bearing in mind, however, that the question to be answered is whether the contractual leave provisions, taken in their entirety, give the employee a better deal than the ESA 2000’s family responsibility leave or bereavement leave provisions, taken in their entirety. Note, however, that the various criteria are not all of equal significance; while no single criterion is necessarily conclusive in itself, some are much more important than others. Whether the employment contract covers all of the types of events referred to in ESA Part XIV, s. 50.0.1 or s. 50.0.2 should be given far more weight than, for example, whether the contract would allow the employee to take family responsibility leave because their spouse's step-grandparent was ill. The criteria set out below have been listed in the order of their importance.

Note that if an employee who takes what is purported to be leave under the contract has no actual entitlement to return to work, the leave under the contract will NOT be considered to be a greater right or benefit. This is because it is inherent in the concept of a leave that there is an entitlement to return; a supposed leave without such an entitlement is meaningless.

Criteria

Number of days of leave

How many days of leave does the contract provide for? If the contract provides for fewer than three days’ leave per calendar year for family responsibility purposes, or fewer than two days’ leave per calendar year for bereavement, the leave under the contract will NOT be considered to be a greater right, since even only one day less leave under the contract constitutes such a significant reduction in the entitlement. For example, if a contract provides for only two days of leave for family responsibility purposes, an employee’s entitlement to family responsibility leave would be reduced by a full one-third if that contract were to be considered to be a greater right or benefit. If the contract provides for only one day of leave for bereavement, an employee’s entitlement to bereavement leave would be reduced by one-half if that contract were to be considered a greater right or benefit. On the other hand, an unlimited leave entitlement, or an entitlement to more than the three or two days per calendar year that the ESA 2000 provides for, weighs in on the side of concluding that there is a greater right or benefit.

Qualifying events

Does the contract cover all the different types of events that would entitle an employee to family responsibility leave under ESA Part XIV, s. 50.0.1? For example, if the contract allows the employee family responsibility leave for the illness of a dependent relative, but not an urgent matter, this is a very strong (though not in itself conclusive) indication that the contract does not provide a greater right or benefit.

Paid or unpaid

Is the leave under the contract paid leave? Neither family responsibility nor bereavement leave are paid leaves under the ESA 2000. So, if the leave under the contract is a paid leave, this tends to point to the contract providing a greater right or benefit. But as with the other criteria, this criterion is not conclusive in itself; other criteria might tip the balance the other way.

Reinstatement right

As stated above, if an employee who takes what is purported to be leave under the contract has no actual entitlement to return to work, the leave under the contract will NOT be considered to be a greater right or benefit. This is because it is inherent in the concept of a leave that there is an entitlement to return; a supposed leave without such an entitlement is meaningless.

If the employee takes leave under the contract, are they entitled to return to their original position (assuming it still exists), as they would be if they took family responsibility or bereavement leave under the ESA 2000? While it is unlikely, as a practical matter, that a short-term absence would result in the employee being moved to another position, it is quite conceivable that an employer might make such a move if there were repeated absences, and the new position might not even be comparable. If the employee does not have a right to return to their original position if it still exists, or to be placed in a comparable position if it does not, this would be a factor tending to suggest that a greater right or benefit is not being provided.

Negative consequences

Even if the employee has a right to their original job, can the employee be adversely affected in any other way because they take leave under the contract? For example, the employee might have an entitlement under the contract to take leave and keep the original job, but they might lose out in other ways, e.g., the absence from work may cause them to be ineligible for a perfect attendance bonus, or the absence from work may be included when determining whether the employee has triggered an absence threshold that results in termination. This points in the direction of the contract not providing a greater right or benefit. See the discussion of the impact of statutory leaves on attendance management programs and perfect attendance bonuses at ESA Part XIV, s. 52(1).

Other examples of negative consequences that would point in the same direction include interruption in certain kinds of benefit coverage, deduction of leave time from seniority, and forfeiture of contractual vacation entitlement because the leave results in the vacation being postponed beyond the last allowable date for taking vacation under the contract.

Eligible relationships

With respect to entitlement to leave for death or illness, injury, medical emergency or urgent matters concerning certain relatives, how does the contractual right compare with family responsibility or bereavement leave under the ESA 2000, insofar as scope of coverage is concerned? ESA Part XIV, s. 50.0.1 and s. 50.0.2 provide an entitlement in relation to a fairly broad range of expressly designated relationships, including some that might be considered fairly remote (e.g., foster parent of the employee's spouse); moreover, the entitlement also extends to dependent relatives even if they do not fall into any of the named categories. If the contractual entitlement covers a narrower range of relationships (e.g., members of the employee's immediate family only), this weighs in on the side of concluding that it does not constitute a greater right or benefit. However, if, for example, a contractual entitlement for bereavement leave may be used in relation to any death - including that of a non-relative- it tends to suggest that this may be a greater right than ESA bereavement leave.

Other criteria

A number of other criteria, although comparatively minor in importance, could conceivably have some impact on the greater right or benefit determination. These criteria include:

  • Whether there is a length of employment requirement that employees must meet in order to be eligible for the leave, and if so, how long it is.
    • The ESA 2000 provides that employees must be employed for two consecutive weeks in order to be eligible for the leaves.
  • What sort of evidence the employer requires to support the entitlement under the contract
    • Does it go beyond "evidence reasonable in the circumstances", which is what the employer is entitled to ask for under ESA Part XIV, s. 50.0.1(7) and s. 50.0.2(7)?
  • Whether the contractual right is based on the calendar year or on the individual employee's year of employment
    • The right under the ESA is based on the former; the latter can impact unfavourably on employees who have only just started with the employer; and
  • Whether the employer can deduct a part day of leave from the employee's entitlement as if it were a whole day
    • The ESA allows the employer to do this, but the contract may be more favourable to the employee.

Although none of these criteria may be greatly important in themselves, they could tip the balance one way or the other in a close case. In some cases these criteria may be more important – for example, if the contract contained a six-month length of employment requirement in order to be eligible for the leave, that criteria would be a factor strongly tending to suggest that a greater right or benefit is not being provided to an employee who has not met the six-month requirement. On the other hand, if a contract does not have any period of employment requirement and provides everything the ESA provides (which means, for example, that all of the rights under the General Provisions Concerning Leaves and the anti-reprisal protection would apply to the absences) this would strongly tend to suggest that a greater right or benefit is being provided.

If a contract does provide a greater right or benefit than ESA Part XIV, s. 50.0.1 or s. 50.0.2 provides, the terms of the contract will apply instead of the ESA leave provision. That is, the terms of the contract, not ESA Part XIV, s. 50.0.1 or s. 50.0.2, will govern how absences are treated how many the employee is entitled to, what situations will trigger an entitlement, whether or not they are paid, etc.

Note that pursuant to ss. 50.0.1(8) – (10), where an employee opts to take a contractual leave that is not a greater right or benefit than s. 50.0.1, in circumstances that would also give rise to an entitlement under s. 50.0.1, the Act deems the contractual leave to be a s. 50.0.1 family responsibility leave. The same applies in the bereavement leave context. Pursuant to ss. 50.0.2(8) – (10) , where an employee opts to take a contractual leave that is not a greater right or benefit than s. 50.0.2, in circumstances that would also give rise to an entitlement under s. 50.0.2, the Act deems the contractual leave to be a s. 50.0.2 bereavement leave.

Personal emergency leave (in force prior to January 1, 2019)

Personal emergency leave was repealed pursuant to the Making Ontario Open for Business Act, 2018 effective January 1, 2019. As such, this leave is no longer applicable. However, since employees may still have a complaint relating to personal emergency leave that arose during the period of time when that leave was in force, the discussion about what to consider when assessing whether an employee had a greater right or benefit with respect to personal emergency leave remains as part of this publication. The text appears in red to highlight that s. 50 personal emergency leave has been repealed.

Determining whether the provisions of an employment contract provide a greater right or benefit than ESA Part XIV, s. 50 (personal emergency leave) in relation to time off work because of personal illness, the death or illness of a relative or an urgent matter concerning a relative can be a very difficult exercise. The principle that applies in making the determination is the same principle that governs in any greater right or benefit determination, i.e., do the relevant contractual provisions, taken in their entirety, give the employee a better deal than the corresponding employment standard taken in its entirety.

However, in the case of personal emergency leave, the determination is much more complicated than it is in the case of other employment standards because of the very wide range of events referred to in section 50, the large number of features of the statutory right (e.g., reinstatement right, prohibition against penalization) and the virtually limitless variation in contractual entitlement schemes.

In order to provide assistance in determining whether the employment contract is providing a greater right or benefit than personal emergency leave under the ESA 2000, the following list of criteria has been developed. In any given case, some criteria might point one way, while some might point the other; bearing in mind, however, that the question to be answered is whether the contractual leave provisions, taken in their entirety, give the employee a better deal than the ESA 2000’s personal emergency leave provisions, taken in their entirety. The contractual scheme should be examined in light of all of the criteria and then considered whether, on balance, it is the contract or the ESA that provides the better deal for the employee. Note, however, that the various criteria are not all of equal significance; while no single criterion is likely to be conclusive in itself, some are much more important than others. Whether the employment contract covers all of the types of events referred to in ESA Part XIV, s. 50 should be given far more weight than, for example, whether the contract would allow the employee to take leave because their spouse's step-grandparent was ill. The criteria set out below have been listed in the order of their importance.

Note that if an employee who takes what is purported to be leave under the contract has no actual entitlement to return to work, the leave under the contract will NOT be considered to be a greater right or benefit. This is because it is inherent in the concept of a leave that there is an entitlement to return; a supposed leave without such an entitlement is meaningless.

Criteria
Qualifying events

Does the contract cover all the different types of events that would entitle an employee to personal emergency leave under ESA Part XIV, s. 50? For example, if the contract allows the employee personal sick leave and bereavement leave but does not allow any leave for the illness of, or urgent matter concerning, a dependent relative, this is a very strong (though not in itself conclusive) indication that the contract does not provide a greater right or benefit.

Number of days of leave

How many days of leave does the contract provide for? Obviously, if the contract provides for something less than 10 days' leave per calendar year, this weighs in on the side of concluding that it does not constitute a greater right or benefit. On the other hand, an unlimited leave entitlement, or an entitlement to more than the ten days per calendar year that the ESA 2000 provides for, weighs in on the side of concluding that there is a greater right or benefit.

Paid or unpaid

Is the leave under the contract paid leave? Only the first two days of leave are paid under the ESA 2000 and the remaining eight days are unpaid, so if the leave under the contract is paid leave, this tends to point to the contract providing a greater right or benefit. But as with the other criteria, this criterion is not conclusive in itself; other criteria might tip the balance the other way.

Reinstatement right

If the employee takes leave under the contract, are they entitled to return to their original position (assuming it still exists), as they would be if they took personal emergency leave under the ESA 2000? While it is unlikely, as a practical matter, that a short-term absence would result in the employee being moved to another position, it is quite conceivable that an employer might make such a move if there were repeated absences, and the new position might not even be comparable. If the employee does not have a right to return to their original position if it still exists, or to be placed in a comparable position if it does not, this would be a factor tending to suggest that a greater right or benefit is not being provided.

Negative consequences

Even if the employee has a right to their original job, can the employee be adversely affected in any other way because they take leave under the contract? For example, the employee might have an entitlement under the contract to take leave and keep the original job, but they might lose out in other ways, e.g., the absence from work may cause them to be ineligible for a perfect attendance bonus, or the absence from work may be included when determining whether the employee has triggered an absence threshold that results in termination. This points in the direction of the contract not providing a greater right or benefit. See the discussion of the impact of statutory leaves on attendance management programs and perfect attendance bonuses at ESA Part XIV, s. 52(1).

Other examples of negative consequences that would point in the same direction include interruption in certain kinds of benefit coverage, deduction of leave time from seniority, and forfeiture of contractual vacation entitlement because the leave results in the vacation being postponed beyond the last allowable date for taking vacation under the contract.

Eligible relationships

With respect to entitlement to leave for death or illness of or urgent matters concerning certain relatives, how does the contractual right compare with personal emergency leave under the ESA 2000, insofar as scope of coverage is concerned? ESA Part XIV, s. 50 provides an entitlement in relation to a fairly broad range of expressly designated relationships, including some that might be considered fairly remote (e.g., foster parent of the employee's spouse); moreover, the entitlement also extends to dependent relatives even if they do not fall into any of the named categories. If the contractual entitlement covers a narrower range of relationships (e.g., members of the employee's immediate family only), this weighs in on the side of concluding that it does not constitute a greater right or benefit.

Other criteria

A number of other criteria, although comparatively minor in importance, could conceivably have some impact on the greater right or benefit determination. These criteria include:

  • What sort of evidence the employer requires to support the entitlement under the contract
    • Does it go beyond evidence reasonable in the circumstances, which is what the employer is entitled to ask for under ESA Part XIV, s. 50(10)?
  • Whether the contractual right is based on the calendar year or on the individual employee's year of employment
    • The right under the ESA 2000 is based on the former; the latter can impact unfavourably on employees who have only just started with the employer; and
  • Whether the employer can deduct a part day of leave from the employee's entitlement as if it were a whole day
    • The ESA 2000 allows the employer to do this, but the contract may be more favourable to the employee.

Although none of these criteria may be greatly important in themselves, they could tip the balance one way or the other in a close case.

If a contract does provide a greater right or benefit than ESA Part XIV, s. 50 provides, the terms of the contract will apply instead of ESA Part XIV, s. 50. That is, the terms of the contract, not ESA Part XIV, s. 50, will govern how absences are treated how many the employee is entitled to, what situations will trigger an entitlement, whether or not they are paid, etc.

If a contract does not provide a greater right or benefit than ESA Part XIV, s. 50 provides, ESA Part XIV, s. 50 will apply. Any issue as to the application of the contractual leave terms will not be an issue for the employment standards program.

For example, a contract provides for three paid personal sick leave days and three paid bereavement leave days per year. There is no provision for job-protected time off (paid or unpaid) for any other reason listed in s. 50 (e.g., to tend to a sick child or a spouse with an urgent matter). It is the Program's view that this contract does not provide a greater right or benefit than ESA Part XIV, s. 50 provides. Accordingly, s. 50 will apply. An employee will have the right to two days of paid leave and eight days' unpaid leave per calendar year for any of the reasons listed in ESA Part XIV, s. 50. Assume the employee takes 10 days of personal emergency leave for personal illness. The employee will have no further personal emergency leave entitlements under the ESA 2000. The question of whether the personal emergency leave absences will also draw down against the contractual right of three paid sick days is not a matter for the employment standards program.

Other leaves

Similar considerations as those listed above apply in the context of family medical leave, family caregiver leave, critical illness leave, domestic or sexual violence leave, crime-related child disappearance leave and child death leave when determining whether a contractual provision provides a greater right or benefit than the provisions of the ESA 2000 as they relate to these six leaves. As with the leaves described above, if an employee who takes what is purported to be leave under the contract has no actual entitlement to return to work, the leave under the contract will not be considered to be a greater right or benefit. This is because it is inherent in the concept of a leave that there is an entitlement to return; a supposed leave without such an entitlement is meaningless.

Termination notice / pay and severance pay

Where an employee is provided a greater benefit for notice of termination, termination pay or severance pay under an employment contract or collective agreement that directly relate to the employment standard, such greater benefit prevails over the minimum requirements in the ESA 2000.

For example, if an employee’s contract of employment provides the employee with two weeks of severance pay per year of employment rather than the minimum set out in the ESA 2000, the employee will be entitled to the higher amount under the contract of employment. However, where an employee’s contract grants the employee a lump sum of $5,000 as severance pay and the employee’s entitlement under the ESA 2000 is $7,500, the contract of employment will be considered to be void in this regard and the employment standard will prevail. Therefore, the employee would be entitled to severance pay in the amount of $7,500 despite the contract of employment.

In some cases, when terminating an employee, an employer will provide salary continuance for an extended period in order to bridge and/or maximize pension entitlements for the departing employee. Such arrangements may not refer explicitly to a termination date and in some cases, the employee is not expected (or even allowed) to attend at the workplace for the period that they are in receipt of the salary continuance payments. As a result, the Program may view the salary continuance as pay in lieu of notice rather than working notice.

In either case, such payments may exceed the statutory entitlement to notice or pay in lieu and would be a greater right or benefit. Where the employee is also entitled to severance under the ESA 2000, the employer may likewise claim that the salary continuance is a greater right or benefit with respect to severance pay, that is, where the total amount paid under the salary continuance arrangement exceeds both the notice or pay in lieu and severance obligations under the ESA 2000.

However, for this to be the case, the parties must have clearly turned their minds to the termination and severance obligations in the ESA 2000 in forging the deal. Even if the package is more generous than the combined entitlements under the ESA 2000, the package must reference severance pay explicitly or it will not be held to satisfy both notice and severance obligations. See McPherson v Xebec Imaging Services Inc. (January 25, 1996), ESC 96-17 (Randall). Note that although these arrangements may not comply with the requirements under ESA Part V, s. 11(5) with respect to the timing of the payment of termination pay in lieu of notice or severance pay, they may be considered to be a greater right or benefit in respect of those entitlements despite this technical breach.

In McDonnell Douglas Canada Ltd. v Topham (April 22, 1993), ES 93-74 (Randall) the employer argued that a provision in a collective agreement prohibiting termination except for just cause was a greater right or benefit than an individual employee’s right to notice of termination under s. 57 of the former Employment Standards Act and, therefore, that the employee was not entitled to notice of termination since the greater right or benefit prevailed over the employment standard. In that case, the employee was terminated for innocent absenteeism and an arbitrator had ruled that this was just cause for termination. The referee agreed with the employer, stating that the just cause provision afforded the employee greater job security than the notice provisions in the Act. This decision is contrary to Program policy.

It is the Program’s position that to compare a just cause clause with the statutory provision providing for notice of termination is to compare apples and oranges. While both a just cause clause and the statutory notice requirement relate to the termination of employment, they are different things. The focus of the just cause clause is job security. The statutory notice requirement has nothing to do with protecting an employee’s job. Its purpose is to provide an employee whose employment is being terminated with a reasonable period of time (or pay in lieu) to seek other employment without undue financial hardship. A just cause provision provides a valuable right to job security, but it does not give an employee any right to notice of termination or pay in lieu. The just cause clause and the notice requirements address two different concerns. It is therefore the Program’s view that the only thing that can be a greater right or benefit than notice of termination under ESA XV, ss. 57 or 58 is notice that is of greater length than that required under the ESA 2000.

The Divisional Court considered the issue of greater right or benefit in the termination notice context in the 1984 decision in Fanaken v Bell, Temple, 1984 CanLII 1856 (ON SCDC). The employee in that case was entitled under the former Employment Standards Act to four weeks' written notice of termination, but did not receive it. Rather, he was provided with six weeks' oral notice, key assistance in securing another job, together with the freedom not to report to work during the notice period. The court found that situation to be a greater right or benefit than the entitlement to four weeks' written notice. It must be emphasized that the oral notice was not just a casual reference to a likelihood of termination in the future but rather was found to be clear and unequivocal notice of a specified termination date. The Fanaken v. Bell, Temple decision does not stand for the proposition that oral notice of equal length to the required written notice under the ESA 2000 is either sufficient notice or a greater right.

Other issues

Referees have often denied an employer's claim that a greater benefit has been granted. In St. Peter's Hospital o/a St. Peter's Centre v Kee (November 20, 1980), ESC 917 (Egan), the referee held that a six-month pregnancy leave (when the employment standard was 17 weeks) was not to be a greater benefit, because the employer also required one month's notice and three months' compulsory absence prior to the date of delivery. In Michaud v Employee (November 23, 1973), ESC 165 (Bolan), the referee held that a higher rate of pay than the standard in the area and no overtime pay was not a greater benefit. In Oxford Warehousing Limited v Morin et al (October 17, 1980), ESC 891 (Bigelow) the referee held that rehiring terminated employees so the conditions and pay were the same as if they never left and therefore not a greater benefit than termination pay. The cases cited in this paragraph are all decisions under the former Employment Standards Act.

Once the employer has given greater benefits to an employee, they cannot subsequently recover them. In Fleet Facts (Canada) Ltd. v Woods (October 16, 1973), ESC 179 (McNish), a decision under the former Employment Standards Act, the referee held that an employer cannot give two weeks' termination pay and then, because the employee was entitled to only one week under the ESA 2000, try to deduct one week's pay from the vacation pay. Further, in David Kirsch Customs Limited v Fenney (March 22, 1983), ESC 1388 (Baum), the referee rejected the employer's argument that the amount of vacation pay paid to the employee in excess of the requirements of the former Employment Standards Act should be deducted from the pay in lieu of adequate notice of termination he had been ordered to pay to the employee. This was due to the fact that, among other things, the amount of vacation pay paid in excess of what was required by the former Employment Standards Act had been the subject of agreement between the employer and the employee. Since the Act indicated that a greater contractual or statutory right prevailed over a corresponding employment standard, the employer was obliged to pay it.

Section 5.1 – No treating as if not employee

No treating as if not employee – – 5.1(1)

This provision was added to the ESA 2000 by the Fair Workplaces, Better Jobs Act, 2017, SO 2017, c 22 effective November 27, 2017. It expressly prohibits an employer from treating an employee as if that person were not an employee under the Act. For example, this provision prohibits an employer from misclassifying or treating an employee as an independent contractor, volunteer or any other type of non-employee, and therefore denying that employee some or all of their ESA entitlements.

In applying this provision, it must be determined if the individual is in fact an employee. See ESA Part I, s. 1 for a detailed discussion on the definition of employee. See also the discussion of employer-employee relationships and independent contractors in ESA Part I, s. 1.

Note that before the Fair Workplaces, Better Jobs Act, 2017 added this provision to the ESA, if an employer misclassified an employee for the purposes of the ESA, an officer could only issue an order with respect to specific standards that were contravened. However, with the introduction of this new provision, if an employment standards officer finds that an employer violated s. 5.1(1)  as well as other ESA provisions in relation to that employee, the officer may issue a notice of contravention under ESA Part XXII, s. 113) for s. 5.1(1) and those violations as well. For example, if an employer misclassified an employee as an independent contractor and subsequently denied the individual overtime pay, the officer may issue a notice of contravention  for the violation of s. 5.1(1) as well as an order to pay wages under ESA Part XXII, s. 103 for the unpaid overtime pay.

An employer does not contravene this provision simply by contravening another provision of the ESA (e.g., failing to pay vacation pay). However, if that other contravention stemmed from the employer’s misclassification of the employee as a non-employee, that would constitute a contravention of s. 5.1(1).

Knowledge and intentions of parties

The key consideration in determining if an employer violated this provision is whether or not an individual is an employee as per the definition in ESA Part I, s. 1 and if an employer-employee relationship exists. It does not matter whether the misclassification and treatment of an employee as a non-employee arose from:

  • The parties’ honest belief that the employee is an independent contractor, volunteer or any other type of non-employee;
  • The parties’ lack of knowledge or uncertainty about the difference between an employee and independent contractor, volunteer or any other type of non-employee;
  • The parties agreeing that the employee would be classified as a non-employee; or
  • The employee requesting to be classified and treated as a non-employee.

Note that an employee’s request or agreement to be classified as an independent contractor or any other type of non-employee would be considered contracting out under ESA Part III, s. 5(1). Any such agreement is null and void.

From November 27, 2017 to December 31, 2018, s. 5.1 included a so-called “reverse onus” provision; itplaced the burden of proof on the employer or alleged employer if, during the course of an investigation into a complaint, inspection or proceeding, the employer or alleged employer took the position that an individual is not an employee for the purposes of the ESA.  The effect of that provision was to require the employer to establish, on a balance of probabilities, that the person was not an employee.  Although the onus was on the employer to demonstrate that the worker was not an employee pursuant to that subsection, it was Program practice that employment standards officers would not rely solely on the employer’s failure to demonstrate this when making a determination, as officers make their determination based on the best available evidence.  In the the investigatory context of the employment standards program, this meant, and continues to mean after the repeal of the “reverse onus” provision, that officers actively collect evidence from both parties and make the “employee status” determination on a balance of probabilities standard based on the best available evidence.   

Section 6 – Settlement by trade union binding

This provision was introduced by the Employment Standards Act, 2000. It codifies Program policy as it applied under the former Employment Standards Act. Section 6 confirms that a trade union can agree to a settlement on behalf of an employee that the trade union represents. For example, s. 6 could apply to allow a union to enter into a binding settlement regarding severance pay entitlements.

It is important to note that such settlement may be entered into only with respect to an entitlement that has crystallized or where its crystallization is imminent. As a consequence, this section could not, for example, be applied to bind employees to a contract provision that provided for future overtime hours to be paid at the employees' regular hourly rate. This would be considered to be an attempt to contract out of the Act and contrary to s. 5(1). However, where, for example, employees represented by a trade union had not been paid anything with respect to overtime hours contrary to the Act and the collective agreement, the union could enter into a settlement on behalf of the employees that required the employer to pay the employees at their regular rate (as opposed to the overtime rate) for those overtime hours.

Section 7 – Agents

This provision was introduced by the Employment Standards Act, 2000. Section 7 provides that, where the Act allows an employee to enter into an agreement with the employer (such as an agreement to work excess hours or to average overtime), an agent may make such an agreement. Where the agent makes such an agreement, it is binding on the employee. In Collins & Aikman Plastics Ltd. v. United Steelworkers, Local 9042 an arbitrator concluded that although the terms of the collective agreement allowed the employer to require an employee to work on a public holiday, those terms could not override the employee's individual statutory rights to choose not to work. This decision is inconsistent with the Program's interpretation of s. 7 of the Act and should not be followed.

The type of agreement that this section governs is limited to agreements made under the Act.

Where the Act requires that the agreement made or given by an employee be in writing, which is in most cases - see ESA Part I, s. 1(3) - the agreement made by the agent must also be in writing.

Section 8 – Civil proceeding not affected

Civil proceedings not affected – section 8(1)

Section 8(1) provides that nothing in the Employment Standards Act, 2000, subject to s. 97, suspends or affects the right of the employee to sue their employer in court. In particular, the ESA 2000's limitation period provisions do not apply when an employee pursues their ESA 2000 rights by suing in court.

Section 97 states:

For a detailed discussion of when civil proceedings are not permitted, refer to ESA Part XXII, s. 97.

Notice of civil proceedings – section 8(2)

Section 8(2) requires a litigant to give notice to the Director when the litigant relies on the ESA 2000 to support a claim against their employer.

Section 8(2) ensures that the Director and therefore the Ministry will be alerted so that it may seek standing in a proceeding if it is of the view that important issues are being raised or the integrity of the legislation is being challenged. The obtaining of standing will allow an opportunity to present the Ministry's view of the legislation if the lawsuit involves a legislative interpretation or policy issue, and further will ensure that the Director is informed of legal developments affecting the ESA 2000.

Another purpose for this section is to enable an employment standards officer to determine whether the employee is prohibited from filing a claim with the Ministry on the basis of previously having commenced a civil action for the same matter.

The Director need not be notified of the proceeding at its onset, rather, they must be notified when all the parties' pleadings are complete and on or before the date the matter is set down for trial. See ss. 8(3) to (5) for information on the service of the notice. For copies of the approved form please contact the Employment Practices Branch.

Note that the ESA 2000 does not require a client of a temporary help agency to notify the Director if it commences a civil action against a temporary help agency for charging a prohibited fee in contravention of paragraph 8 or 9 of ESA Part XVIII.1, s. 74.8(1).

Service of notice – section 8(3)

This provision must be read in conjunction with section 8(4) and 8(5), which establish when the service is deemed to be effected.

Section 8(2) requires that an employee give notice to the Director when they commence a civil proceeding against their employer under the ESA 2000. The notice must be served on a form approved by Director on or before the date the civil proceeding is set down for trial. Section 8(3) establishes the methods by which the notice may be served on the Director:

Delivered to the Director's office when it is open

This would include, for example, personal delivery by the employee or their representative or agent, or delivery by a private courier.

Generally, the Director's office is closed between 5 p.m. and 8:30 a.m. Monday through Friday, on Saturdays, Sundays, the nine public holidays under the ESA 2000 as well as Easter Monday, the August Civic Holiday, and Remembrance Day. See the definition of public holiday in ESA Part I, s. 1 for a list of the public holidays.

Mailed to the Director's office using verifiable mail

It is Program policy that three Canada Post services fall within the meaning of verifiable mail: these are Registered Mail, Xpresspost and Priority Courier. However, it is important to note that Xpresspost and Priority Courier are verifiable only if the signature upon delivery option is selected.

On the date of publication, the Director's office is located at the following address:

Ministry of Labour
Employment Practices Branch
400 University Avenue, 9th Floor
Toronto, ON M7A 1T7

Faxed or e-mailed to the Director's office

At the time of writing, the Director's fax number is 416-326-7061. The Director's email address is Director.EmploymentStandards@ontario.ca.

When service effective – section 8(4), (5)

This provision must be read in conjunction with s. 8(3) which sets out the methods by which a notice of a civil proceeding may be served on the Director. Section 8(4) establishes when the service of the notice of civil proceeding is deemed to have taken place.

If the notice was served by delivering it to the Director's office on a day and at a time when the office is open per s. 8(3)(a), service is deemed to have taken place on the day indicated on the receipt or acknowledgement provided by the Director or their representative.

If the notice was served by mailing it to the Director's office using a method of mail delivery that allows the delivery to be verified per s. 8(3)(b), service is deemed to be effective on the day shown in the verification.

If the notice was served by sending it to the Director's office either by email or fax per s. 8(3)(c), service is deemed to have taken place on the day the electronic transmission or fax transmission is sent, unless the transmission is sent on a day that the Director's office is closed or after 5:00 p.m. on any day. In those situations, s. 8(5) provides that the service is deemed to have been effected on the next day the office is open.

Generally, the Director's office is closed between 5 p.m. and 8:30 a.m. Monday through Friday, on Saturdays, Sundays, the nine public holidays under the ESA 2000 as well as Easter Monday, the August Civic Holiday, and Remembrance Day. See the definition of public holiday in ESA Part I, s. 1 for a list of the public holidays.

Same – section 8(5)

When an employee serves their notice of civil proceeding on the Director via email or by fax after 5:00 p.m. on a regular business day, or at any time on a day when the Director's office is closed, s. 8(5) deems the service to have occurred on the next day the Director's office is open.

Generally, the Director's office is closed between 5 p.m. and 8:30 a.m. Monday through Friday, on Saturdays, Sundays, the nine public holidays under the ESA 2000 as well as Easter Monday, the August Civic Holiday, and Remembrance Day. See the definition of public holiday in ESA Part I, s. 1 for a list of the public holidays.

Updated: June 15, 2022
Published: July 19, 2018