II. Employment Standards2017-03-03T18:35:39+00:00

A. Ontario Legislation —  The Employment Standards Act

ES are legislated standards that set minimum terms and conditions of employment in areas such as wages, working time, vacations and leaves, termination and severance. ES generally apply to most workers in a labour market but are often the only source of workplace protection for workers in non-unionized jobs. The majority of Ontario’s over 6 million workers in over 370,000 workplaces rely on ES. This section of the paper provides both a chronological overview of the development of ES legislation in Ontario, and a summary of recent reforms to Ontario’s Employment Standards Act (ESA).

 

1. 1969-1995

Ontario’s ESA was enacted in 1969. The ESA provided a minimum wage for both men and women and established maximum hours of work at 8 per day and 48 per week. An overtime rate of time and a half was set for anything over 48 hours a week and the Act established the right to refuse overtime work. It also provided for time and a half on 7 statutory holidays and guaranteed 2 weeks of paid vacation per year. The principles behind the development of the Act were consistent with normative framework outlined above. Specifically, the legislation was designed to set minimum standards for Ontario’s labour market and provide legislative protection for those most vulnerable to employer exploitation.[29]

The core standards of the ESA were altered through minor reforms in the 1970s, 1980s, and early 1990s, most of which added to the scope of legislative protections for workers in the province. Termination notice requirements were added in 1971.  In 1972, a pregnancy leave provision was added that gave employees with at least 1 year of seniority in workplaces of 25 or more up to 12 weeks (6 and 6) of pre- and post-natal leave, and entitlement to their former or a comparable position.  In 1975, the overtime pay (time-and-one-half) threshold was reduced from 48 hours to 44, and pregnancy leave provisions were expanded to cover up to 17 weeks of leave.  In 1976, the province introduced a differential (lower) minimum wage rate for servers in the hospitality industry. 

Severance pay provisions were introduced in 1981.[30] These provisions provided employees with a minimum of 5 years of service with 1 week’s pay for each year worked up to a maximum of 26 weeks in cases of mass termination. Under amendments made in 1987, employers were required to provide termination notices 1 week in advance for any employee employed longer than 3 months, with an additional week’s notice for each year of employment, up to a maximum of 8 weeks.[31] Workers with 5 years of employment at a business with an annual payroll of at least $2.5 million became eligible for severance pay.  In addition, the new severance provisions were extended to workers whose temporary lay-off extended beyond 35 weeks in a 52-week period. Further, in the case of mass layoffs, the legislation required that employers provide the Ministry of Labour (MOL) with an explanation of the economic circumstances surrounding the termination, a summary of consultations with employees and the affected community, any proposed measures to help those laid off, and a statistical profile of affected workers.

Bankruptcy protection legislation was introduced in the Spring of 1991.[32] The Employee Wage Protection Program was designed to provide employees with compensation for unpaid wages, commissions, overtime wages, vacation pay, holiday pay, and termination and severance pay, up to a maximum of $5000 per employee.  The program was administered through the Employment Standards Branch of the MOL and Employment Standards Officers (ESOs) were given the ability to order payments under the program.  The program was funded out of general provincial revenues.  Upon payment of a claim, the government would attempt to recover funds from employers and businesses. 

 

2. 1995-2001

Beginning in 1995, Ontario’s ES underwent a three-stage reform process. The reforms pursued constituted a break from the normative framework of ES outlined above. Specifically, they were designed primarily to promote ‘flexibility’ for employers, in particular through changes to working time standards introduced in 2001.

First, in 1995 the Employee Wage Protection Program was terminated and the minimum wage was frozen at $6.85, a wage freeze that would last for 9 years. Second, in 1996, the Employment Standards Improvement Act reduced the time limit for workers to register formal complaints from 2 years to 6 months, and placed a $10,000 limit on monetary awards for ESA violations, regardless of the value of lost wages. The Act also introduced a provision preventing unionized employees from filing ES complaints with the MOL, requiring employees with union representation to resolve ES complaints through the grievance arbitration process, placing the cost of administering ESA complaints in the hands of unions, rather than the Ministry.[33]

Finally, major legislative changes were implemented in the ESA, 2000. These amendments increased weekly maximum hours of work from 48 to 60 and allowed for the calculation of overtime pay to be based on an averaging of overtime hours across a 4-week period: employers could schedule overtime hours without compensation at time and a half provided the total for the 4-week period was less than 176 hours. They also revoked the system of government permits required for excess hours (more than 48 per week), introducing instead a requirement for employee ”consent” to the new excess hours and overtime averaging provisions. The ESA 2000 also introduced anti-reprisal protections and family crisis leave. In addition, the government expanded the parental leave provisions of the Act, to bring them in line with federal amendments to the Employment Insurance program, allowing for up to 52 weeks of unpaid, job protected leave for birth mothers and up to 37 weeks for new parents (generally fathers or adoptive parents).

 

3.  2004-10

Between 2004 and 2010, ES reforms displayed a partial return to decent work principles, with the introduction of ES legislation targeted at particular groups of ‘vulnerable workers’: specifically, workers employed through temporary help agencies and live-in caregivers.[34]  In developing this legislation, the government assumed that most employers will comply with minimum standards legislation and aimed to target legislative reforms at employers in sectors where violations are high.

The Employment Standards Amendment Act (Temporary Help Agencies) 2009 developed new standards for workers in temporary help agencies. It introduced requirements that temporary agencies must provide information about the agency (name and contact information) and working conditions (incl. pay, hours, nature of work) to workers. It extended ESA coverage for public holiday pay and termination and severance to these workers. Finally, it introduced some prohibitions on charging fees to clients for entering into employment agreements with assignment employees. Specifically, agencies are permitted to charge clients a fee if an employee is offered a permanent position in first six months of an assignment with that client.

In 2010, the Employment Protection for Foreign Nationals Act (Live-in Caregivers and Others), introduced a series of legislative protections for those employed as live-in caregivers. Specifically, it banned fees charged by recruiters and employers, allowed live-in-caregivers up to 3½ years to make a complaint to recover prohibited fees, prohibited reprisals against live-in caregivers for exercising their rights under the legislation, and prohibited an employer or recruiter from taking possession of a live-in caregiver’s property (incl. documents such as passports). The Act also authorized ESOs to proactively enforce the legislation.

 

4. 2010 to present

Finally, the most recent reforms to the ESA were introduced through the Open for Business Act, 2010 (OBA). This Act focused on enforcement, modifying enforcement practices with the stated aim of making these practices more ‘efficient’. Specifically, the OBA alters ES enforcement procedures fundamentally by, among other things, requiring workers facing ES violations to first approach their employers for a resolution, mandating that workers and employers provide information on their claims before they will be accepted by the MOL, and giving new powers to ESOs to facilitate settlements between workers and employers, including unprecedented discretion over monetary compensation for workers.[35]  Like the ESA reforms of 2001, the OBA was a clear departure from the norms of decent work outlined above, prioritizing the efficient resolution of claims over the aim of protecting vulnerable workers.

First, employees are required to notify their employer before the MOL will initiate an ES claim.[36] The assumption behind this requirement is that “[m]ost employers want to do the right thing and they will often remedy the situation promptly and voluntarily, if they agree there is a valid claim.”[37] Second, the amendments place responsibility on individual workers to collect the information for their complaints, reducing the requirements on the investigative procedure itself. If an ESO determines that there is insufficient evidence provided by an employee, then the officer may determine there is no violation. Finally, the amendments promote a voluntary approach to ES regulation, specifically through amendments that give ESOs a role in bringing employers and employees to a mediated settlement, with the Act stating that “[n]either party would have to participate in such a settlement unless they agree to it.”[38]

In addition to the OBA, the MOL struck an Employment Standards Task Force to address the backlog of 14,000 ES complaints that have accumulated in recent years. The Task Force has a two-year mandate to clear this backlog and will operate under the aegis of the reformed ESA. The Task Force will not engage in a process of proactive investigation into ESA violations, but will investigate these existing claims “based on an officer’s review of written materials and through telephone discussions with parties.”[39] The Task Force will also utilize the new emphasis on voluntary, mediated settlements as a means to resolve claims and to create efficiencies in the enforcement process.

 

B. Mapping Employment Standards Enforcement

Workers’ access to minimum ES depends on the government’s ability to promote and enforce such standards. The legislation provides the Director of Employment Standards and ESOs with broad powers of investigation (e.g., entering business premises and requiring production of records for inspection). Officers have extensive authority to resolve complaints of violations including settlements, orders to pay, fines, compliance orders and prosecutions. There is no statutory provision specifying how investigations and enforcement are to be done. In practice, it is the policies and procedures established by the Branch that determine the choices Officers can make in investigation and enforcement techniques.

The MOL has three main strategies of ES enforcement: self-regulation and compliance by employers; self-enforcement by employees when employers are non-compliant; and proactive enforcement and education to improve employer compliance, largely by targeting employers most likely to be in violation of the ESA. It does this by:

  • Providing information to employers and employees, encouraging employers to comply voluntarily;
  • Investigating and resolving employees’ complaints of employer violations;
  • Conducting inspections of employers that are likely to be in violation; and,
  • Deterring violations through appropriate penalties.[40]

With almost 6 million employees in over 370,000 workplaces the MOL relies on employers to voluntarily comply with the ESA. When employers do not comply, individual workers are responsible for seeking their unpaid wages or ES entitlements from their employer and, through this process, may file a complaint for ES violations at the MOL. The MOL also undertakes proactive enforcement of employers that are at risk of ES violations. The reality is, however, that the majority of resources on ES enforcement go to investigating individual complaints of employer violations – that is, to reactive enforcement measures. The ensuing discussion examines these compliance and enforcement activities.

 

1. Employer Self-Regulation / Voluntary Compliance

The self-regulation strategy hinges on employers acting as good corporate citizens. The MOL seeks to assist employers’ compliance by providing the following types of information:[41]

Phone: The Employment Standards Information Centre, administered by Service Ontario, provides information about ES. It assisted almost 350,000 in 2009-2010. Legal advice is not provided. The toll-free call centre provides interpreters for its multi-lingual phone service.

Email: The MOL responds to emails from employers and employees – it prepared 9,000 such responses in 2010.

Website: The MOL has a variety of information tools explaining provisions of the ESA, how they may apply, and how to file an ESA claim. Videos showing employers what to expect in an inspection are provided as are videos on what workers can expect once they file a claim. The Ministry also communicates by social media (e.g., facebook and twitter). General information has been translated into 23 languages.[42]                  

 

2. Self-enforcement

When employers do not comply with ES, it is up to the individual worker to seek remedy from their employer and, failing that, by filing a claim with the MOL for unpaid wages and other ES entitlements. Historically, the MOL has encouraged employees to try and recover unpaid wages and ES prior to filing a claim. For example, when the MOL introduced on-line claims process in 2006-07, it posted a Self-Help kit for employees. This kit was intended to assist workers in learning about their ESA entitlements, determining which ES had been violated, and calculating the amount of unpaid wages owing. Employees were then asked to contact their employer to obtain wages owing. With the passage of the OBA in 2010, workers are now required (with some exceptions)[43] to first contact their employer to seek their ES entitlements. If a worker is unsuccessful in enforcing their ES entitlements, s/he is then allowed to file a complaint at the MOL for investigation.

 (i) Individual Claims Investigation

In general, after a claim was filed by a worker, an ESO investigated the claim to determine whether or not, and if so which, ES violations had occurred. The ESO evaluated evidence provided by the employer and the employee and made a determination on the claim. The institutional practice during investigations was to seek information from both the claimant and employer through telephone calls, letters and fact-finding meetings in which both parties were given the opportunity to present their case. To varying degrees, ESOs could gather evidence in ways that accounted for some of the barriers faced by people in low-wage and precarious employment (e.g., not understanding ES and claims process, language and literacy barriers). However, factors such as increasing numbers of claims, on-line filing of claims with information missing, and difficulties encountered in reaching the parties during ESO working hours contributed to a growing back-log in complaints and pressure to change the investigation process.  The OBA introduced a new requirement that certain information be provided in writing on the claim form before a worker’s claim would be allowed to proceed. Further, the OBA introduced a section (s. 102.1) that allows ESOs to deal with undue delays by making a decision on the best information available. The OBA places a greater burden on workers to provide evidence of employer violations, rather than a reverse onus on employers to refute allegations.

During the 1970’s the MOL used individual claims as “levers to pry open and expose to scrutiny” a company’s entire range of operations. ESOs were required to conduct full audits to disclose all violations for current employees. The number of employees receiving payments because of investigations and inspections in 1971 was 52,263. Full audits were generally done as a follow-up to every individual complaint. But rising caseload of complaints in the early 1970s saw the branch shift to ‘complainant only’ and away from expanded investigations protecting all workers.[44] The number of expanded investigations has declined since the 1970s. As noted by Ontario’s Auditor General in 2004, while violations were found to exist in about 70 percent of complaints filed, few investigations were expanded to protect the employer’s current employees who may also be facing violations.[45]  In 2009-10, the Ministry conducted 99 expanded investigations where a workplace was identified for an inspection based on the results found during an individual claim investigation. In that same year, 20,762 claims were investigated and violations assessed totalled almost $64.4 million ($42.9 million of which was subject to bankruptcy or insolvency).[46] There is no follow-up to inform current employees of what their entitlements may be under the ESA to create incentives for future employer compliance.

(ii) Individual Claims Resolution

Over 80 percent of claims are resolved during the investigation process. Claims are either withdrawn by the claimant, a settlement is reached between the employer and employee, the employer complies with an ESO determination of wages owing, or a claim is denied. In less than 20 percent of cases, the ESO issues an Order to Pay to the employer or Director. Claimants and employers have the right to appeal an ESO order to the Ontario Labour Relations Board (OLRB). But few do. Less than 5 percent of such claims proceed to appeal at the OLRB.

Institutional practices for arriving at settlements have allowed claimants and employers to enter into settlements during the claims process.  Indeed, the complaint is deemed to have been ‘settled’ as long as the ESO receives the terms of settlement in writing. In such cases, any orders respecting the employers’ contraventions are void [47]. Historically, ESOs were not supposed to “negotiate, promote, or ‘broker’ settlement agreements.”[48] However, over time, growing pressures were placed on workers to settle during the claims process.[49]  There are no data available on the number of claims settled below statutory minimums.

In response to a substantial backlog in claims in 2009-10, the OBA introduced new powers for ESOs to “attempt to effect a settlement.” Employers and employees are given the option of discussing settlement, with the ESO playing a mediating role.  Should a settlement not be reached, the ESO resumes the investigation and decision-making. An initial pilot project of facilitated settlements found that 21 percent of cases that went to a decision-making meeting were resolved through settlements and that these cases resulted in settlements of, on average, 17 percent lower than was assessed to be owed by the ESO.[50]

When an employer voluntarily complies with an ESO decision that an ES entitlement must be paid to a claimant, the employer either pays what they should have in the first place, or less if a lower settlement is accepted. There are no penalties or other costs to the employer. Further, when an ES complaint is settled without an order to pay being issued, there can be no fines levied through contravention notices.

(iii)  Penalties

The ESA sets out a variety of sanctions that can be used against employers that are found in violation of the Act. However, the MOL does not provide guidelines or criteria for the use of the sanctions and penalties listed below:

Order to Pay Wages (s. 103) is issued when an ESO finds that wages are owing and the employer has not volunteered to pay the wages. This order is subject to a $10,000 cap on unpaid wages (s. 103(2)) and will include an additional administrative fee of 10 percent of wages owing.

Directors’ Order to Pay Wages (s. 106 and 2. 107) is issued to a director of a corporation where the employer has not paid the wages required under an Order to Pay.

Order for Compensation (s. 104, 74.16, 74.17) deals with those matters under the Act in which damages are awarded when an ESO determines that an employee has suffered a loss. These orders relate to the reprisals, leaves of absence, retail business establishments and lie detector provisions of the Act.

Order to Reinstate (s. 104 and 74.17) may be issued in the matters outlined under compensation orders.

Compliance Order (s. 108) may be issued when an officer finds that an employer contravened any part of the Act or regulations. Compliance orders may be issued if there has been voluntary compliance to ensure that there is a record of the employer’s violation and enforcement activity. Such orders require employers to cease violating ES provisions specified by a certain time.

Notice of Contravention (s. 113) are monetary penalties for violations set out in regulation (O. Reg. 289/01) and generally increase from $250 to $1,000 per contravention per person violated.

Prosecution (s. 132) of employers that contravene the Act or its regulations may take place and if so, on conviction, individual employers may be liable to fines up to a maximum of $50,000 or imprisonment of not more than 12 months, or both, and corporations are liable for fines up to a maximum of  $100,000 and increased fines for subsequent convictions. .

ESOs have the discretion to use or not use the above orders and Part 1 Tickets in inspections and investigations. As Graph 1 demonstrates, the MOL’s preferred sanction is to issue Compliance Orders.  In 2009-2010, 20,762 claims were investigated finding that employers owed $64.4 million to workers yet only 86 fines (notice of contravention) and 298 tickets ($360) were issued. Prosecutions are determined by the Employment Standards Branch and Legal Services Branch of the MOL the latter of which conducts the prosecutions.  Prosecutions are for non-compliance with Orders issued from the MOL and do not directly remedy unpaid wages for workers. The Ministry initiated 13 prosecutions of employers in violation in 2009-2010.[51]

(iv) Collections

A key component of ES enforcement is recovering wages and other monies that have been found owing to workers. As Table 1 demonstrates, a substantial amount of the monies owed to workers are from employers who are insolvent or bankrupt. Recovery of unpaid wages in cases of bankruptcy or insolvency is difficult because workers become one of several creditors’ owed money and are paid subject to priority ranking as determined by federal bankruptcy and insolvency legislation. The MOL assists employees by filing Proofs of Claim with the Trustee in Bankruptcy or the Monitor. The recession of 2008-9 saw a dramatic rise in bankruptcies.

Table 1 illustrates that an average of 50 to 54 percent of wages assessed to be owed during investigation (excluding bankruptcies) were recovered between 2006 and 2010 through the MOL claims process. A further 6 to 9 percent are recovered by workers during the Labour Board appeal process. Collection agencies recovered between 12 to 16 percent of wages owing in cases sent to collections. [52]

By far, the most successful recovery of wages owing is through proactive inspections. Between 92 to 99 percent of wages assessed during inspections from 2006/07 to 2009/10 were recovered for workers.

 

3. Proactive Inspections

According to the MOL, proactive inspections aim to: ensure compliance with standards; communicate the requirements of the ESA; raise awareness and understanding by employees and employers of their rights and responsibilities; and promote self-reliance in the workplace.[54] Consistent with a largely reactive approach, the MOL does not use inspections to address individual employee’s complaints of ES violations.

The MOL currently focuses efforts and resources largely on investigating claims of ES violations from individuals against former employers. However, this has not always been the focus. Prior to changes to the Act in the late 1960’s, the bulk of the Branch’s enforcement activity in hours of work and minimum wage protections involved conducting surprise spot checks or planned visits to investigate companies’ compliance with the law. With new powers to collect wages beyond the minimum standards in 1969, a shift from proactive enforcement through inspections to individual complaints began to take place.[55]

Much of the focus during the 1980’s and 1990s was to avoid large backlogs of unresolved claims. As Graph 2 illustrates, ES inspections of workplaces were almost non-existent during that same period. 

In April 2004, then Minister of Labour Chris Bentley announced that the government was ‘putting enforcement back on the agenda.’[56] Alongside legislative changes to the hours of work provisions, the government claimed it would focus on improving education and awareness around both workers’ rights and employers’ obligations, shorten the time to process claims, dedicate resources to conduct 2,000 proactive inspections, improve collections, and increase the number of prosecutions.

In 2004, the MOL allocated 20 ESOs to conduct a target of 2,000 inspections per year. The overall strategy is thus to inspect non-complying companies, or those at highest risk for non-compliance, in order to bring these companies into compliance. The Dedicated Enforcement Team conducts inspections in sectors that historically have the highest rates of non-compliance such as retail, restaurant and business management services. Such criteria for targeted inspections are based on violations confirmed through individual claims brought forward.  In addition, where sectors of people in precarious jobs have been successful in bringing attention to substandard working conditions, the MOL has responded with targeted sectoral inspections (e.g., garment workers during the 1990s, temporary help agency workers and live-in caregivers in the early 2000s).[57] There does not appear to be any benchmarking or evaluation program to assess changes in compliance rates in the sectors targeted.

The Administration Manual for Employment Standards (AMES) outlines how officers are required to conduct inspections. The ESO generally gives the employer 10 days notice of the proactive inspection. The employer is asked to prepare payroll records for the inspection. The ESO interviews the employer, as well as a selection of employees, to identify any violations, and performs a test audit on payroll records (for example, in a workplace with 60 or fewer employees, the officer will review 5 employees’ records). If the ESO identifies ES violations, action is taken to remedy the contravention. This action is achieved by the employer doing a self audit to determine how much is owed, for example, in unpaid wages, unpaid overtime or public holiday pay. If an employer does not make a voluntary payment, the ESO may issue an order to pay.

Inspection results suggest that the purpose of inspections is to encourage employers to comply. For example, in 2008-09, of 2,135 inspections covering 60,000 employees, over $1.9 million in unpaid wages was uncovered through the inspections. Besides paying wages that should have been paid in the first place, enforcement activity focused on encouraging compliance rather than mandating penalties for violations of wage standards.  This activity included issuing:

  • 487 tickets (of about $360 each)
  • 2,883 Compliance orders (request compliance by specified time)
  • 68 Notices of Contravention (escalating fines per violation per occurrence); and,
  • 2 orders to pay[58]

As Table 2 demonstrates, proactive inspections reveal violations of core standards such as minimum wage, unpaid wages and overtime. They also offer greater chances of recovering those wages. Moreover, proactive inspections uncover violations of standards experienced by currently employed workers, whereas individual claims, more typical of reactive approaches, tend to uncover violations reported by workers after the employment relationship is severed. This is a key distinction. 

 

While roughly half of unpaid wages owed are recovered through the individual claims process (barring bankruptcy), 92 to 99 percent of unpaid wages confirmed during proactive inspections are recovered through this process. This finding, depicted in the table above, suggests that proactive inspections are more effective than the investigation of individual claims in recovering workers unpaid wages.

 

C.  Assessing Employment Standards Enforcement

The re-regulation of ES in the late 20th century through inadequate funding, economic restructuring, and the shift from proactive measures to individual claims resolution, has increasingly placed the onus for enforcement on workers, on the one hand, and voluntary compliance by employers, on the other hand. 

The focus of this report is on people in precarious jobs and enforcement practices. Precarious jobs are taken to mean work for remuneration, characterized by high levels of job and income insecurity, low wages and limited access to regulatory protections and employment benefits. Moreover, precarious jobs are often associated with temporary employment and self-employment (especially the own account variety, where the self-employed person does not employ others), rather than permanent paid employment.  Workers in precarious jobs also tend to lack meaningful access to employment rights. As precarious employment has developed over recent decades, it has become marked increasingly by processes of racialization and gendering, in other words the ways in which women, immigrant, migrant and racialized workers are incorporated into the labour market, the association of specific forms of employment with these groups of workers, and the over-representation of women and racialized workers in forms of employment characterized by high levels of insecurity. Furthermore, non-racialized and/or Canadian-born workers who work in  particular sectors, and/or alongside women, immigrants, migrants and racialized workers, are compelled to labour under similar conditions in work that is marked by feminization and racialization.[59]

Precarious employment is not new; in fact, many of these conditions are longstanding. They are reminiscent of the “sweating system” of outsourcing in the garment industry, of employment practices in employment agencies, and of immigration practices during the nation-building periods of the late 1800s.[60]  It is not the case that all employers are violating the ESA or attempting to evade core labour standards. However, precarious employment is growing and ES violations, evasion and erosion are therefore having a much larger impact on the broader labour market than during previous eras. Responsible employers are placed under growing pressure when undercut by employers who violate the ESA. As practices linked to precarious employment spread across industries, strategies to lower labour costs and liabilities also spread. The Ontario government is thus facing increasing numbers of individual complaints of employer violation at the same time that employers are shifting forms of violation and evasion through ‘new’ employment practices.  As U.S. researchers studying precarious employment reflect, “[w]hen the floor of labor standards is driven down or dismantled altogether, all of us are affected, not just those at the very bottom.”[61]   

Erosion of employment standards have, as a Law Commission of Canada report observes, developed both actively and passively.[62]  Active erosion of standards has occurred through explicit exemptions in the scope of the ESA being adopted through regulatory changes. For example, workers in agriculture, information technology, and construction do not have the same protections for hours of work and overtime that other workers have. Changes to the ESA in 2000 actively reduced government regulation of workplace standards, promoted greater employer control over work time, normalized non-standard employment relationships and increased the vulnerability of workers in non-unionized workplaces.[63]  More passive erosion of standards also undermined the ESA’s capacity to protect workers in low-wage and precarious jobs. From the late 1970’s until the early 2000s, Ontario’s minimum wage was substantially below the poverty level.[64]  This degradation has contributed to an expanding low-wage labour market in Canada. Data from the OECD show that Canada is second only to the U.S. as a low-wage country. The proportion of Canadian workers who are low paid (less than two-thirds of the median wage) is about double the level in continental Europe (on the magnitude of low wage work in contemporary Ontario, see also Noack and Vosko in this LCO series).[65]    

Active or passive, employers have adopted strategies for work organization over the past 3 decades that evade core labour laws and create legal distance between themselves and their workers.[66] Even harder to quantify than violations of ES are practices of evasion, as they often involve workers found in forms of employment outside the scope of the ESA or differentiated within the ESA – for example, the growing number of workers in forms of employment that fall outside of standard full-time, permanent employment with a single employer.[67] Over a third of total employment is part-time, temporary or own-account self-employment. Yet labour laws, regulatory regimes and employment benefits are still based almost exclusively on an employment model (a standard employment relationship) developed after World War II, which linked decent wages, benefits, working conditions and job security to a full-time continuous employment relationship between an employer and worker where the worker works on the employer’s premises under direct supervision, a form of employment in which non-racialized men were over-represented.[68]

Historic exclusions of certain types of work organization from ES protections, such as own-account self-employment, have created incentives for employers to move workers into “new” forms of employment. Contracting out work that can be done in-house is yet another practice that is re-emerging and it has surfaced in sectors from the newspaper industry to home care provision. Contracting out was a common practice in garment production and manufacturing more generally in the beginning of the 20th century. Externalizing employment costs to temporary help agencies is yet another growing strategy for just-in-time labour sourcing. Such practices shift the legal liability that employers have for their employees, working conditions and employment benefits onto intermediaries and, in the case of misclassified independent contractors (i.e., self-employed workers), onto workers themselves. While employers may argue that these strategies are necessary in an increasingly global market with intense international competition, this rationale does not justify these practices in Ontario. Many employers and industries that are engaged in outsourcing, indirect hiring, and misclassifying workers are part of distinctly local markets, such as restaurants, business services including janitorial and courier services, construction, trucking, home health care, warehousing and manufacturing of locally consumed goods.[69]

Few studies document the scope of violations of ES; but the ones that are available confirm substantial formal violations. In the late 1990’s, a federal government Labour Standards Evaluation surveyed employers and found that 25 percent of employers were in widespread violation of the Canada Labour Code and 50 percent were in partial violation.[70] These findings were confirmed a decade later by Statistics Canada[71] and the Workers’ Action Centre.[72] 

A survey of people in low-wage and precarious work in the Greater Toronto Area conducted in 2011 provides yet another window into the violations that some of these workers face. This non-randomized survey of 520 casual, temporary, non-standard and low-wage workers conducted in 2011 sought to document the types of violations people in precarious work face.  The findings included the following: 

  • 20 percent earned less than minimum wage
  • 39 percent failed to receive earned overtime pay
  • 36 percent were fired or laid off without termination pay or notice
  • 34 percent struggled to get vacation pay
  • 33 percent were owed wages and of those only 23 per cent were ever paid[73]

These findings do not indicate that all or most employers violate ES. Many employers do comply with the ESA. However, the prevalence of violations undermines employers who do comply with minimum labour standards and contributes to a downward pressure on wages and working conditions. 

Over the past 30 years, resources and staffing for ES regulation has not kept pace with increases in workers’ covered, number of workplaces and complexity of working relationships. While the number of workers covered by the ESA has increased by fully 24 percent between 1997 and 2007, the funding for the ES Program has decreased by fully 33 percent. Even recent increases to the Program in the 2009/10 budget leave it with funding levels of over 10 percent below 1997 levels.[74] With over 370,000 Ontario workplaces, ES regulation is made more difficult by the growth in smaller companies. Companies employing fewer than 50 employees make up more than 92 percent of Ontario’s businesses and 66 percent of ESA claims in 2009/10.[75] 

 

1. Effectiveness of ESA regulation

The growing trend towards individualized and privatized systems of workplace regulation is increasing workers’ exposure to market forces. Ontario ES regulation uses a mix of “hard” law and “soft” law approaches. Soft law approaches include the government’s reliance on voluntary employer compliance or self-regulatory behaviour from firms. Detection of violations is largely individualized through workers’ self enforcement and individual claims. Hard law approaches are reserved for employers that do not voluntarily comply with assessed violations. These include orders to pay, compliance orders, and fines or prosecution for particularly egregious employers.

(i) Self enforcement / Individualization of claims

The majority of resources for enforcing ES still go towards investigating individual complaints of employer violations. This despite the fact that, as Saunders and Dutil note, the “practice of dealing with compliance one case at a time is expensive and risks overloading the available capacity.”[76]  There has been an increase in claims over the last 5 years from an average of 15,000 claims per year to over 20,000 claims per year. By 2010, a backlog in workers’ complaints against employers for unpaid wages had grown to over 17,000.[77] 

 (ii)  Barriers to self-enforcement while on the job.

On an annual basis, less than 1 percent of workplaces are at risk of being inspected for ES violations. Enforcement of ES and MOL detection of violations largely relies on individual workers. Yet workers, particularly those in low-wage and precarious work, face significant challenges to enforcing their employment standards while still on the job. The ESA is supposed to remedy the unequal power relationship between workers and employers. There are no institutionalized mechanisms that enable employee voice in ES enforcement. Unlike Ontario’s regulation of the Occupational Health and Safety Act, workers cannot make anonymous complaints that will initiate MOL Health and Safety inspections of the workplace. Nor is there interim reinstatement pending investigation that is afforded to fired workers in specific situations under the Ontario Labour Relations Act (OLRA) 

There are many factors shaping how workers respond to ES violations. Workers must consider factors such as: wages needed to support themselves and their families; savings; eligibility for and capacity to survive on Employment Insurance benefits while searching for new employment; the realities of getting another job at the same or similar wages; the impacts on immigration status and family sponsorship; and whether they will be successful in securing the minimum ES they should have received in the first place. Workers under the Live-in Caregiver and Temporary Foreign Worker Programs face even greater challenges. Caregivers must complete the equivalent of 24 months of employment within 4 years before being able to apply for permanent residency and are required to live in their employer’s home.  People who work under the Seasonal Agricultural Program and low-skill Temporary Foreign Worker Program (TFWP) are tied to one employer for a specific term.  Federal immigration program requirements create conditions ripe for abuse and that limit what workers can do to address violations.[78] 

Workers without regularized immigration status have the same ESA rights as other workers. But non-status workers face substantial barriers to enforcing their rights; many in this group face substandard conditions of employment but do not complain due to implicit or explicit threats of reporting their status to immigration officials and the potential of deportation. 

Workers’ ability and willingness to confront employers over ES violations is also shaped by labour market conditions. Worker’s decisions may be shaped by their ability to get a new job at the same or better pay and job security. For workers facing substandard employment conditions, the fraying social safety net reduces workers’ options even more. While Ontario had the third highest unemployment rate in 2009, it had the lowest level of EI coverage with only 41.3 percent of unemployed workers receiving EI benefits.[79] Workers that do qualify are only eligible for 55 percent of their previous wages. For people in low-wage work, EI does not buttress workers displaced from their jobs for trying to enforce their rights. Besides benefit levels well below the poverty line, social assistance is not an option for many people who are trying to regularize their immigration status or sponsor family members. Barriers to filing claims while workers are on the job result in some workers being owed substantial amounts of unpaid wages and entitlements. However the $10,000 cap on monies recoverable under the ESA leaves these workers without remedy through the ES claim process.

Together these factors result in substantial barriers to workers in pursuing their ES rights. Power imbalances leave workers with little protection against reprisal or job loss. It is little surprise that 9 out of 10 workers who file claims for unpaid wages and entitlements do so after they have left the job.[80]  It is hard to know how many workers move from one substandard job to the next, without seeking to recover unpaid wages, overtime, vacation, termination and public holiday pay.  A MOL Inspection of a textile company in 2004 found that 99 workers were owed more than $136,000 in wages. Yet only 22 workers had come forward to file ES claims in the months prior to the company closing down, despite considerable media attention about the case in question.  Almost 80 percent of the workers never came forward to make claims for their unpaid wages. This case suggests that the 15,000 to 20,000 claims filed each year may only be the tip of the iceberg.

 (iii)  Barriers in individual claims

Workers are now required to first seek compliance from employers before being allowed to file an ES claim for unpaid wages. This effectively means that workers must have access to the internet to learn about rights, knowledge about how to apply abstract legal rights to their specific conditions, the ability to gather evidence to prove their case, and, the time and facilities to assemble, package, and deliver it to (former) employers. Most significantly, mandatory self-enforcement requires that workers have the skill set and confidence to confront their (former) employer about violations.   

There are substantial structural power imbalances between workers and employers that the ESA seeks to address. Such imbalances in power can create significant fears in workers.  A mandatory requirement for workers to contact their employer about wages contravenes the purposes of the ESA, both its four fundamental underlying normative principles (i.e., fairness, social minima, decent work, and universality) and its role of providing workers with an administrative process through which to seek redress for contraventions of the Act.

The MOL’s ES complaints system relies heavily on individuals being able to access the website. Reliance on internet access creates significant barriers for many people in precarious employment. Statistics Canada reports that there is a digital divide in the rate of internet use on the basis of income, education and age. If someone is poor, older, lives in a rural community, was born outside of Canada, and/or has relatively low levels of education, s/he is less likely to use or have use of the internet.[81] Recent immigrants often have low incomes and hold highly precarious temporary and part-time jobs. It is workers in such situations, who also often face language barriers, who are most in need of ES protection and assistance in accessing these rights.

ES stand alone in the regulation of employment rights in having no government or quasi-government funded assistance for workers who believe their rights have been violated. The government provides direct and indirect funding for information, education and legal support in areas of Health and Safety, Workplace Safety and Insurance and Human Rights, (e.g., Occupational Health Clinics for Ontario Workers, Office of the Workers Advisor, Human Rights Legal Support Centre). Few legal supports exist for workers requiring assistance with ESA matters. Ontario’s Community Legal Clinic system provided ESA representation in 86 cases, 90 brief services and advice for just over 850 workers in 2008.[82] There are no legal aid certificates for ESA matters. Furthermore, the $10,000 cap on ESA claims means that few private bar lawyers would represent workers on ESA matters. Workers are left to learn how to make a complaint on their own. Workers have to go back and forth between the ESA guide (over 100 pages), the guide to the claim form, and the claim form itself, often going through the three documents on the MOL website.  Workers may not only need legal information about ES, but also knowledge about how to connect that information to their particular situations. They may also need assistance in determining entitlements, in preparing the narrative of what happened, and in identifying supporting documentation.   The MOL does not provide this assistance. The ESA has a time limit of 6 months to file a claim. Job dislocation and difficulties learning how to pursue ES rights means some workers only find out about the ES claims process after the 6 month limitation period has passed. The claims process is difficult for workers who are not proficient in written English. A 2008 study on linguistic access to legal services provides a rough estimate that as many as half a million people in Ontario might need an interpreter in pursuing legal matters.[83] There are no language interpretation services to assist in the filing of claims or investigation of claims. Workers are left to rely on support from friends, family or community members to assist them in filing a claim. 

Literacy is also a factor in enforcing ES through the claims process as workers are required to submit a claim form to initiate investigation. Low levels of literacy affects labour market outcomes in a way that establishes a strong link between employability, income and literacy proficiency. People with lower literacy are more likely to be pulled into low-wage and precarious work where higher rates of violations occur. Furthermore, linking literacy and social position, the International Survey of Reading Skills found that “individuals with low literacy skills were older, less educated, immigrants or had a mother tongue other than English or French.”[84] Even though the ESA is a rights-conferring piece of legislation, the process for addressing violations of those rights has shifted to dispute resolution.  Workers are expected not only to make a complaint about the violation but also to make their own case that the employer has violated their rights. When the employer holds all of the employment records, this process can be time consuming, with ESOs going back and forth between employer and employee. If there are fact-finding meetings, workers, who are often in another job, must take time off from employment, generally without pay.  There is no remedy under the ESA to provide workers with compensation for the substantial time and resources spent trying to obtain the wages and entitlements they have earned, much less any interest on wages that may go unpaid for well over a year. 

 

2. Minimum Wage

The Canadian economy has grown in the past 30 years. However, an increasingly unequal distribution of the rewards of employment is leaving more workers struggling to get by. In Ontario, provincially-regulated minimum wages have institutionalized low wages that fail to keep up with the cost of living. Indeed, Ontario’s minimum wage has fallen 21 percent below the peak levels of the mid-1970s. A person working in Toronto full-time at minimum wage ($10.25 an hour) has earnings that leave her below Statistics Canada’s Low Income Cut-Off (LICO).[85]  Anyone working at minimum wage and supporting a family would earn well below the LICO. Recent immigrants are particularly hard hit by low wages. Racialized women workers earn 47 percent less than non-racialized men and 15 percent less than non-racialized women workers.[86] This is due, in part, to the lack of recognition of non-Canadian credentials, experience, and expertise.[87]

To return to the principle of decency outlined at the beginning of this report, as Arthurs concludes in his review of the federal labour code, “no worker should be paid so little, that, after working full-time at a regular job for a full year they still find themselves with less money than they need to live at or just above the poverty line.”[88]  At present there is no policy formula under the ESA to determine the level of minimum wages. Rather, they are increased in an ad hoc manner. 

 

3.  Compliance, Self-regulation and Enforcement

The MOL announced recently that the backlog of claims will be eliminated by March 2012, at which point it will partner and consult with employer and employee groups as it shifts resources to inspections: “through our enhanced compliance strategy, we will continue reaching out to employers through a mix of education, outreach and enforcement to help ensure we stem any problems before they arise and enforce the legislation”.[89]

The compliance model of ES regulation assumes that virtue will trump employer self-interest.[90] One report prepared by the MOL states:

…[e]mployers want to comply with the law because it is the right thing to do. The ministry is helping them to do just that. Employers also want to comply with the Employment Standards Act because they know it benefits them – compliance can reduce legal costs, improve staff retention and increase productivity. The vast majority of employers know that a fair workplace is a productive and efficient workplace – making for a better bottom line.[91]

This view eclipses employers that face conflicts between ES compliance and profits, particularly when competing with employers operating below minimum standards.  Further, this view of employer behaviour does not recognize the power imbalances between employers and employees that the ESA is intended to address. While the MOL establishes targeted inspections for those at high risk of violation, it leaves a core model of employer self-regulation and reliance on employer voluntary compliance.[92]

 

4.  ESA Gaps and Loopholes

The way work is organized has changed drastically over the past 30 years  The ESA does not address these new forms of work organization creating institutional incentives to reduce employer liabilities.

As noted above, unions are prevented from filing ESA complaints. As the discussion of OHS later in this paper demonstrates, the participation of unions in the regulation of OHS has strengthened both health and safety standards and their enforcement. Arguably, the separation of the collectivized voice of unions from non-unionized workers has weakened ES regulation, particularly in terms of testing new forms of work at appeals of ESO decisions at the Ontario Labour Relations Board and pressure for improved minimum standards from which to bargain from.

History demonstrates that employers create new, unforeseen and unprotected work arrangements. That is why an essential step to improving enforcement must be to expand the scope of the ESA to include all who work and all work arrangements. In this way we remove the incentives and statutory mechanisms allowing employers to move some forms of work beyond the reach of employment standards. By requiring all work to meet basic minimum employment standards, we can finally establish a level playing field for employers and a minimum floor of rights and standards for workers and society.

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