Part IX - Minimum wage
The minimum wage establishes a wage floor to prevent employers from taking unfair advantage of employers with little or no bargaining power.
Historically, the minimum wage was adjusted periodically on an ad hoc basis to reflect declining purchasing power of low wage earners, loss of their position relative to wage gains of workers generally, and changing minimum wage rates in other jurisdictions. In considering adjustments to the minimum wage, a number of other factors were considered to be relevant, including the relationship between minimum wage income and income from social assistance, and an industry's ability to compete internationally and to create employment.
The Stronger Workplaces for a Stronger Economy Act, 2014, SO 2014, c10 amended the ESA 2000 to directly tie changes in the minimum wage rates to increases in inflation through a formula based on changes in the Consumer Price Index. The Fair Workplaces Better Jobs Act, 2017, SO 2017, c 22 subsequently amended the minimum wage provisions and increased minimum wage rates to set amounts on January 1, 2018 and again on January 1, 2019. Effective October 1, 2019, the minimum wage rates in effect immediately before October 1 resumed being adjusted annually by the formula based on changes in the Consumer Price Index. The Build Ontario Act (Budget Measures), 2021, SO 2021, c. 40 (BOABM) further amended the minimum wage provisions by increasing the minimum wage rates for classes of employees described in paragraph 1 of ss. 23.1(1) to set amounts on January 1, 2022. Effective October 1, 2022, the minimum wage rates in effect immediately before October 1 are to resume being adjusted annually by the formula based on changes in the Consumer Price Index.
O. Reg. 285/01 was also amended effective January 1, 2022 to increase the minimum wage rate applying to the “wilderness guides” class of employees. Effective October 1, 2022, the rate in effect immediately before October 1 will resume being adjusted annually by the formula based on changes in the Consumer Price Index.
The BOABM also eliminated a class of employees to whom a special minimum wage rate previously applied: employees who, as a regular part of their employment, serve liquor directly to customers, guests, members or patrons in premises for which a licence or permit has been issued under the Liquor Licence Act and who regularly receive tips or other gratuities as a part of their work. As of January 1, 2022, employees who previously fell into this “liquor server” category are entitled to receive the “general” minimum wage instead of a rate specific to the “liquor server” class of employees.
Section 23 – Minimum wage
Minimum wage – s. 23(1)
This provision requires that an employer pay employees at least the minimum wage. See the discussion under s. 23.1 "Determination of minimum wage for information about the minimum wage rates.
Room or board - s. 23(2)
This provision deems prescribed amounts with respect to room or board to be wages paid to the employee. The prescribed amounts are set out in the following regulations:
- General O Reg 285/01, s 5(1);
- Domestic workers O Reg 285/01, s. 19(2);
- Fruit, vegetable and tobacco harvesters O Reg 285/01, s. 25(5).
Note that the prescribed amounts cannot be deemed to be wages unless the room/accommodation satisfies criteria set out in the regulation and the employee has received the meals or occupied the room. For a detailed discussion of these requirements, see O Reg 285/01.
Determining compliance – s. 23(3)
This provision simply states that the assessment as to whether the minimum wage requirements have been met shall be conducted on a pay period basis. Contrast this to the overtime provisions, where the threshold to determine whether overtime pay is owing is determined with reference to the work week - see ESA Part VIII, s. 22(1). Section 23(4) elaborates on this by providing a formula to be used in the case of employees whose minimum wage rate is expressed as an hourly rate.
Hourly rate – s. 23(4)
This section sets out two calculations to be used for determining whether the minimum wage requirements have been met for employees whose minimum wage is expressed as an hourly rate. The provision is not, therefore, relevant for hunting and fishing guides.
First calculation – s. 23(4)(a)
Divide the "regular wages" paid for the pay period by the number of hours worked in the pay period (other than those hours that attract overtime or premium pay). The resulting number ("the quotient") must meet or exceed the minimum wage.
- Regular wages excludes overtime pay, public holiday pay, premium pay, vacation pay, domestic or sexual violence leave pay, termination pay, severance pay and termination of assignment pay - see the definition of regular wages in ESA Part I, s. 1;
- Overtime hours and premium pay - see definitions in ESA Part I, s. 1.
Second calculation – s. 23(4)(b)
Divide the amount of overtime pay plus premium pay paid to the employee in the pay period by the number of hours worked during the pay period for which the employee is entitled to receive overtime pay or premium pay. The resulting number must meet or exceed one and one-half times the minimum wage.
Note that this second calculation is necessary only if there are overtime hours or hours that attract premium pay in the pay period.
An employer may pay an employee on a basis other than time (e.g., piece rate); however, the amount paid must at least be equal to the minimum wage.
Note that ESA Part IX, s. 23.0.1 states that where the employee's pay period crosses over the effective date for a minimum wage rate increase, the calculations required by s. 23(4) are to be performed as if the pay period were in fact two separate pay periods.
Section 23.0.1 – Change to minimum wage during pay period
The Fair Workplaces, Better Jobs Act, 2017, SO 2017, c 22 added s. 23.0.1 to the ESA, effective January 1, 2018. The same provision previously existed in O Reg 285/01, s. 5.1.
This provision states that where the employee's pay period crosses over the effective date for a minimum wage rate increase, the calculations required by ESA Part IX, s. 23(4) are to be performed as if the pay period were in fact two separate pay periods.
The following example, based on the increase in the minimum wage on January 1, 2018 demonstrates how compliance with the minimum wage entitlement is determined when an employee's pay period straddled the date of a rate change:
The employee's pay period runs from Wednesday, December 27, 2017 to Tuesday, January 9, 2018 inclusive.
The employee's work week runs from Wednesday - Tuesday and the employee works eight hours per day Wednesday, Thursday and Monday of each work week except for the public holiday on Monday January 1, 2018.
Because the minimum wage rate applicable to the employee changed as of January 1, the pay period of December 27, 2017 to January 9, 2018 must be treated as consisting of two separate pay periods for purposes of the calculations required by ESA Part IX, s. 23(4).
The first period would be the period from December 27 to December 31 and the second period would be the period from January 1 to January 9. As there are no overtime pay or premium pay in this example, the calculations would be made as per s. 23(4)(a).
As a result, in order for the employer to show compliance with the minimum wage entitlements:
- The pay for the hours worked in the first period when divided by the hours worked in that period would have to equal at least $11.60; and
- The pay for the hours worked in the second period, when divided by the hours worked in that period would have to equal at least $14.00.
- Hours worked –December 27 – December 31 = 16 hours @ $11.60/hour
- Hours worked January 1 – January 9 = 24 hours @ $14.00/hour
Refer to ESA Part IX, s. 23(4) for further explanation.
Section 23.1 - Determination of minimum wage
Determination of minimum wage - s. 23.1(1)
Subsection 23.1(1) was amended by the Build Ontario Act (Budget Measures), 2021 effective January 1, 2022. The rates for employees in classes (i) to (iv) were increased. The special minimum wage class that applied to employees who serve liquor directly to customers, guests, members or patrons in premises for which a licence or permit had been issued under the Liquor Licence Act and who regularly received tips or other gratuities from their work was eliminated. As such, employees who previously fell within that class of employees are entitled to the “general” minimum wage rate as set out in subparagraph (iv) effective January 1, 2022. The rates described in section 23.1 are in effect between January 1, 2022 and September 30, 2022. Beginning on October 1, 2022, the rates will be determined in accordance with the formula based on the Consumer Price Index set out in subsection (4).
Student minimum wage
The special student minimum wage in s. 23.1(1)(i) applies to a student under the age of 18 years who does not work more than 28 hours per week while attending school, or who is employed while on a school holiday. A school holiday includes summer holidays and breaks during the academic year, e.g., Christmas holidays, March break, etc.
This special rate was introduced to facilitate the employment of younger persons, recognizing their competitive disadvantage in the job market relative to older students who generally have more work experience and may be perceived by employers as more productive.
The term student is not defined in the ESA 2000. The Program considers a student to be a person who is in attendance at an elementary, secondary or post-secondary institution. In order to be paid the student minimum wage, the student must be under the age of 18 years.
Under s. 21 of the Education Act, RSO 1990, c E.2, generally speaking, every child is required to attend an elementary or secondary school from the age of six until attaining the age of 18 years. There are some exceptions.
If an employee is neither attending an educational institution nor on a school holiday, the employer will be liable for the general minimum wage even if the employee is under the age of eighteen.
The onus is on the employer seeking to pay the student minimum wage rate to confirm that the youth is either in attendance at an educational institution or on a school holiday.
Note that students who are employed as homeworkers are entitled to the higher homeworkers' minimum wage in accordance with s. 23.1(1.1).
Hunting or fishing guide minimum wage
The hunting or fishing guide minimum wage rate in s. 23.1(1)(ii) must be paid by employers who employ guides for their guests (such as camp or lodge proprietors) or who carry on a guide service. This rate is unique in that it is not expressed as an hourly rate.
Homeworkers' minimum wage
The minimum wage for employees who are homeworkers in s. 23.1(1)(iii) has historically been set at 110 per cent of the general minimum wage. The rationale for a higher rate is that the homeworker has certain overhead costs (e.g., heat, electricity, taxes) in connection with their employment that other employees do not have. Effective October 1, 2015 and annually thereafter, it is expressed as a dollar amount rather than a percentage of the general minimum wage rate, although at the time of writing, the dollar amount was in fact 110% of the general minimum wage rate.
General minimum wage
The general minimum wage rate in s. 23.1(1)(iv) applies to any other employee not falling within one of the classes described in subparagraphs i-iii of paragraph 1 of s. 23.1(1) or section 6 of O. Reg. 285/01 (the minimum wage for wilderness guides) and who is not otherwise exempted from coverage of ESA Part IX, Minimum Wage.
Minimum wage for commission salespersons and flat rate mechanics
Commission salespersons who normally make their sales away from the employer's premises (other than route salespersons) are exempt from the minimum wage provisions pursuant to O Reg 285/01, s. 2(1)(h). However, commission salespersons who normally make their sales at the employer's premises (“inside salespersons”) or who are route salespersons are covered by the minimum wage provisions. Car, furniture and appliance salespersons would typically be inside salespersons. Although note that there are special rules regarding commission earnings for car salespersons – see O Reg 285/01, s. 28 for a further discussion.
Some inside salespersons may receive a draw against commissions. In such a case, if the draw equals or exceeds the minimum wage for the pay period in question, the minimum wage requirement in the ESA 2000 is met.
In some cases, salespersons may be employed under arrangements, whereby, if the draws exceed the commissions actually earned, the employer may carry forward the negative balance and make an adjustment when calculating future commissions owing. In other words, the draw (or some portion thereof) is a negative balance carried forward for the purposes of calculating the employee's earnings in subsequent pay periods. A negative balance may continue to be carried forward over any number of pay periods but the employee must be paid the equivalent of at least minimum wage in respect of all hours worked in each and every pay period, whether through draw or a combination of draw and commission earnings. Applying a negative balance with the result that the employee's gross wages amount to something less than minimum wage for all hours actually worked in any pay period would contravene the minimum wage provisions. Note however that statutory or other authorized deductions (for example) that then reduce the net pay to something less than minimum wage does not result in a contravention of the minimum wage provisions. See the discussion in ESA Part V, ss. 13(1) and (3). If the employer pays straight commission with no advance or draw, then the commission must equal at least the minimum wage for the pay period over which the commissions are calculated; if it does not, the employer must top up the employee's earnings so that they receive at least the minimum wage.
Flat rate mechanics
Enquiries arise occasionally on the application of the minimum wage provisions to motor vehicle mechanics and body repair persons who are paid on a flat rate or incentive system. In a flat rate shop, every job is rated as taking a certain number of hours to perform and the mechanic is paid a "book" rate, i.e., the employee's hourly rate is multiplied by the hours rated for the job rather than their actual hours. As an example, a brake reline is rated as a four-hour job, and the mechanic's book rate is $16 per hour. The mechanic will be paid $64, even if the job takes the employee less than four or more than four hours to complete. This is acceptable so long as minimum wage is paid on the basis of actual time worked and all overtime hours (hours worked in excess of 44) are compensated at a minimum of 1.5 times the mechanic's actual regular rate, which is not the same as the flat rate. For a discussion on how to calculate overtime entitlements, see ESA Part VIII, s. 22.
Generally, in a flat-rate remuneration system, it is a condition of employment that the employee rectify their own faulty work without further pay. This is not a violation of the ESA 2000, so long as the minimum wage and overtime provisions are not violated based on actual time worked. If for some reason, another mechanic makes the required changes, the payment for the entire job is credited to the second mechanic. Where this occurs as part of the employment contract, the transfer of credits is considered as part of the reconciliation of wages due and not a prohibited set-off or deduction. However, the minimum wage and overtime provisions still apply with respect to the actual hours of work the first mechanic spent on the vehicle.
It is essential in a flat rate system that the employer's records reflect both the flat rate paid and the actual hours worked: it is the actual hours worked that must be used to calculate the employee's regular rate and overtime entitlements including any time the employee spends rectifying their own faulty work.
Liquor servers’ minimum wage - Repealed
Effective January 1, 2022, the Build Ontario Act (Budget Measures), 2021 eliminated a class of employees to whom a special minimum wage rate previously applied: employees who, as a regular part of their employment, serve liquor directly to customers, guests, members or patrons in premises for which a licence or permit has been issued under the Liquor Licence Act and who regularly receive tips or other gratuities from their work. As such, there is no longer a special minimum wage rate that applies to “liquor servers”. However, employees may still have a minimum wage complaint that arose when the “liquor servers” minimum wage rate was in effect. For this reason, the Program has retained the following discussion as part of this publication.
Until January 1, 2022, a special liquor servers' minimum wage rate applied to employees who directly serve liquor to a customer, guest, member or patron in premises where a licence or permit had been issued under the Liquor Licence Act, RSO 1990, c L-19, and who regularly receive tips or other gratuities from their work. The minimum wage rate for this class of employees over the last few years is as follows:
- From January 1, 2018 to September 30, 2020: $12.20 per hour.
- From October 1, 2020 to September 30, 2021: $12.45 per hour.
- From October 1, 2021 to December 31, 2021: $12.55 per hour.
- Beginning on January 1, 2022, this special minimum wage rate no longer applies.
The Fair Workplaces, Better Jobs Act, 2017 amended the subparagraph describing this class of employees to add the condition that liquor servers regularly receive tips or other gratuities in order for this rate to apply effective January 1, 2018.
Liquor service must also be a regular part of the employee's duties; an employee who only occasionally serves liquor is entitled to the general minimum wage. An earlier regulation did not include the regular service requirement, which led the Ontario Divisional Court in Re Fisherman's Wharf Ltd. and Wehrenberg to hold that an employer did not violate the Act by paying the liquor server minimum wage to a busperson who was not employed to serve liquor but who occasionally took liquor to tables to assist a waiter. However, under the wording of the current provision, a busperson in those circumstances would be entitled to be paid the general minimum wage.
Employees who serve liquor as a regular part of their employment are entitled only to the liquor servers' minimum wage for all hours worked within that employment relationship. The ESA 2000 does not require that employees be paid the general minimum wage rate when liquor is not being served and the liquor server rate when liquor is being served. Rather, the question to ask is whether an employee serves liquor directly to customers as a regular part of their employment and regularly receives tips or gratuities from their work. If so, that employee is entitled only to the liquor servers' minimum wage for all hours worked.
Note that tips or other gratuities, as defined in ESA Part I, s. 1, are not wages, as they are specifically excluded from that definition in ESA Part I, s. 1. As a consequence, they are not considered in determining whether or not an employee has been paid minimum wage. However, as noted above, whether the employee regularly receives tips or other gratuities from their work must be taken into consideration in determining whether the liquor server minimum wage rate applies to the employee. If the employee does not regularly receive tips or other gratuities from their work, the employee would be entitled to the general minimum wage rate for all hours worked.
Student homeworker – s. 23.1 (1.1)
Subsection 23.1(1.1) was amended by the Build Ontario Act (Budget Measures), 2021 effective January 1, 2022 to reflect the renumbering of the subparagraphs in subsection (1) due to the elimination of the liquor servers’ minimum wage rate.
Section 23.1(1.1) provides that where an employee is both a homeworker and a student under 18 years of age of age whose weekly hours do not exceed 28 hours or if the student is employed during a school holiday, the homeworkers' minimum wage rate applies to that employee.
Exception - s. 23.1(2)
Subsection 23.1(2) was amended by the Build Ontario Act (Budget Measures), 2021 effective January 1, 2022 to reflect the renumbering of the subparagraphs in subsection (1) due to the elimination of the liquor servers’ minimum wage rate.
This provision is an exception to s. 23.1(1). It permits a minimum wage to be prescribed by regulation for any new class of prescribed employees who would otherwise fall within the class described in subparagraph 1 v. In other words, a new class of employees may be prescribed out of the class otherwise entitled to receive the general minimum wage and a minimum wage may be prescribed for that new class.
O. Reg. 285/01 s. 6(1) has prescribed wilderness guides as a class of employees for the purposes of s. 23.1(2). See the discussion of that provision for additional information.
Same - s. 23.1(3)
Section 23.1(3) provides that if a new class of employees is prescribed under s. 23.1(2) and a minimum wage is prescribed for that class, the minimum wage for that class will be adjusted annually in accordance with ss. 23.1(4) to (6). In other words, once a minimum wage is prescribed for any new class of employees, it will thereafter be subject to adjustments using the same formula that applies to the classes of employees set out in s. 23.1(1).
Since wilderness guides have been prescribed as a class under s. 23.1(2), this provision establishes that the wilderness guide minimum wage will be adjusted annually in accordance with ss. 23.1(4) to (6).
Annual adjustment - s. 23.1(4)
Subsection 23.1(4) was amended by the Build Ontario Act (Budget Measures), 2021 effective January 1, 2022 to establish that the minimum wage rates in effect immediately before October 1 in each year are to be adjusted on October 1 of that year starting in 2022.
The provision sets out a formula based on changes in the Consumer Price Index, which reflects inflation. Consumer Price Index is defined in s. 23.1(12) – see below.
The way in which the minimum wage rates are adjusted under s. 23.1(4) can be illustrated with the following example using the general minimum wage rate of $15 per hour that came into effect on January 1, 2022.
Note that the changes in the CPI shown in the example are not the actual figures and are used merely for purposes of illustration.
- The formula is: Previous Wage x (Index A / Index B) = Adjusted Wage.
- Previous Wage: the general minimum wage that applied immediately before October 1, 2022, was $15 an hour
- Index A: the CPI for the previous calendar year, which will be the CPI for 2021.
- In this example, assume the CPI for 2021 is 105
- Index B: the CPI for the calendar year preceding the year referred to in Index A, will be the CPI for 2020.
- In this example, assume the CPI is 100
- Therefore, the formula that would be applied in this example would be:
- $15 x (105 divided by 100), which is
- $15 x 1.05, which equals
Thus, using the fictional CPI numbers the general minimum wage rate that would come into effect on October 1, 2022 would be $15.75 an hour.
Subsection 23.1(4) is subject to s. 23.1(5) and (6). If the adjusted wage is an amount that is not a multiple of five cents, the amount will be rounded up or down to the nearest amount that is a multiple of five cents. In addition, if the applying the formula in s. 23.1(4) would result in a decrease, no adjustment will be made. See ss. 23.1(5) and (6) below.
Rounding – s. 23.1(5)
If applying the formula in s. 23.1(4) results in an amount that is not a multiple of five cents, the amount will be rounded up or down to the nearest amount that is a multiple of five cents.
For example, if the calculation resulted in an amount of $16.04, the new minimum wage rate will be $16.05.
Exception where decrease – s. 23.1(6)
This subsection provides that if applying the formula in s. 23.1(4) would result in a decrease in the minimum wage, no adjustment is to be made. Thus, if the provincial economy went through a deflationary period, such that the change in the Consumer Price Index was negative, the minimum wage would remain unchanged.
Publication of minimum wage – s. 23.1(7)
This provision requires the Minister to publish on a government website the minimum wage rates that will be in effect on October 1 of each year by April 1 of that year, beginning in 2021.
Subsection 23.1(7) was amended by the Build Ontario Act (Budget Measures), 2021 effective January 1, 2022 to establish that the Minister shall publish the rates that are to apply starting on October 1 no later than April 1 of every year after 2021.
Same – s. 23.1(8) - repealed
Same - s. 23.1(9)
Paragraph 2.0.1 of ESA Part XXVII, s. 141(1) provides that a regulation may be made that in effect carves out a class of employees who would otherwise fall within the general class in subparagraph 1v of s. 23.1(1), and to prescribe a minimum wage for that class that is different from the minimum wage that applies to the general class. This leaves open the possibility that such a regulation might be made in the interval between the date that the Minister publishes the minimum wage rates that are to come into effect on October 1 (which must be no later than April 1) and October 1. In that event, the rate that was published for the general class will not apply to the new class that was carved out of the general class. To address this possibility, s. 23.1(9) requires the Minister to promptly publish the rate that will apply to the new class as of October 1.
Review - s. 23.1(10) – Repealed
Same - s. 23.1(11) – Repealed
Definition - s. 23.1(12)
23.1(12) In this section,
This provision defines Consumer Price Index, a term that appears in the formula for making annual adjustments in the minimum wage rates in s. 23.1(4). Note that Statistics Canada publishes a number of indices for measuring inflation; the one used for purposes of s. 23.1(4) is the index for Ontario (not the national index) that considers all items (i.e., without excluding any goods or services in the basket of goods and services that Statistics Canada uses for measurement purposes).