Federal employers face new penalties

Non-compliant employers should prepare for monetary penalties, public naming in 2020

Federal employers face new penalties
Credit: Colin Woods (Shutterstock)

Federally regulated employers have had plenty to contend with of late, with new rules around pay equity, workplace harassment and the overall Canada Labour Code rolling out in 2019 and 2020.

The new year may not be much easier, with the federal government set to introduce new penalties for employers that don’t follow the rules. While not yet finalized, the administrative monetary penalties (AMPs) are intended to reduce the “widespread” non-compliance  with  the  code,  according  to  the  government.

From 2013 to 2016, for example, there were about 22,500 violations by about 1,700 employers, with 35 per cent being repeat offenders when it came to part II of the code (occupational health and safety).

For part III, the labour standards, there were roughly 7,400 violations regarding 2,270 employ-ers, with about 23 per cent being repeat offenders.

Overall, an average of 6.4 per cent of employers were found to be in violation from 2011 to 2015, said the government in its May 2019 report Evaluation of the Labour Standards Program, which recommended strengthening compliance and enforce-ment measures, including AMPs.

“Most employers want to do the right thing, they actually want to comply with the provisions in the Canada Labour Code....Our concern, and it’s been raised by stakeholders, is that they could have a competitive advantage over the law-abiding firms and therefore increase their profits at the expense of their employees. So that’s a very important consideration,” says Isabelle Maheu, spokesperson forEmployment and Social Development Canada.

The types of non-compliance can range from small, less serious incidences, such as an employer not filing its annual hazardous occurrence report or failing to provide a pay stub needed for an investigation, she says.

More serious violations could entail non-payment of wages to an employee, dismissing an em-ployee without cause, or not having a hazard prevention program in place.

“All of these provisions are in place to make sure that workplaces are healthy, safe, fair, that employees go home at the end of their work shift healthy and safe and they get paid the money that’s owed to them,” says Maheu.

While existing enforcement measures include notices of voluntary compliance (NoVs), directions and orders, they “may not always effectively encourage compliance or deter future non-compliance,” said the government.

“[AMPs] offer an alternative measure for promoting compliance in cases that do not warrant a prosecution.”

Under the new AMPs, violations would be classified from A to E, with A being less serious offences related to administrative and technical provisions, for example, while E would involve “immediate, life-threatening hazards or hazards known to cause latent occupational disease.”

The penalties from A to E would also vary depending on whether the violator was an individual, a small business or a large business or department. For example, an A offence would be $200, $500 and $2,000, respectively, while an E offence would be $4,000, $15,000 and $50,000, respectively.

As part of the proposed new rules, employers that have received an AMP would also see their name and violation published, once the review and appeal processes are exhausted.

“For many employers, a fine for non-compliance may just be part of doing their business. And, so, for some employers, it’s only when you actually name them that you’re actually going to change the culture in that workplace. And that’s why having the administrative monetary penalties, along with the ability to name employers, together, we expect will help to change the culture,” says Maheu.

Overall, the penalties address a gap in the enforcement tools that the labour program had at its disposal, says David Foster, an associate at Hicks Morley in London, Ont.

“For the majority of employers, this just ensures to level the playing field that everyone plays by the same rules.”

But with the new rules around harassment, labour standards, pay equity and now the new penalties, it’s hoped “that there is going to be some effort put into awareness and to ensure that everyone has the opportunity to bring themselves into compliance before being faced with a fine,” he says.

Employer awareness of Canada Labour Code

When it comes to violations, lack of awareness is most likely the cause, says Corinne Pohlmann, senior vice-president of national affairs at the Canadian Federation of Independent Business in Ottawa.

“Most of that non-compliance is not intentional. It’s just, unfor-tunately, there’s so many things [employers] have to know and they may not necessarily know that they’re filling out the right form or abiding by the rules succinctly,” she says.

“Probably nine times out of 10, the reason they’re not compliant is because they just didn’t know. And so let’s start with education before we start hitting them with penalties. And if they continue to be non-compliant, once you’ve told them how to do it or what to do, that’s a different thing... because [the government] really do not do a very good job of pushing that out there, especially at the federal level, I would say. We had a whole slew of new changes come in in September that were basically rammed through the system in June and I can tell you most [employers] have no clue that these new rules are in effect.”

Communication around the rules is a big issue, says Pohlmann. The government may cite the Canada Gazette process, for example, but employers have to proactively look for it, she says.

“It’s almost impossible to find anything on the federal government website these days. So, I would say that it’s a lot to do with communication. That’s probably 50, 60, 70 per cent of it is how they’re getting that information out there.”

Employers have said the government hasn’t been as effective in its communications, says Foster, and “the reason for the lack of awareness is they’re just not able to find the information or be alerted to it.”

That’s a key consideration for non-compliance, especially with all the changes that are being implemented right now, he says.

“There was certainly a large rush with getting some of these changes in place. And there was not a great deal of lead time to allow employers to prepare for that,” he says. “It’ll be important for employers to ensure that their policies and practices are consistent with both these existing obligations and new ones as they come into place.”

With any changes to the code, the government boosts information to build awareness, says Maheu.

“[There are] a variety of tools we use to convey information with regard to the code provisions and the expectations of our stakeholders to comply.”

The tools include working groups and advisory committees, online information, proactive investigations, information sessions, counselling sessions, a 1-800 number and social media, she says.

The May 2019 report found about 88 per cent of employers and 82 per cent of employees were aware of the Labour Standards website, although only three per cent of employers had used the program’s education outreach in the past two years.

AMP amounts

As for the new AMPs, one concern is the amounts to be levied, says Pohlmann.

“They want to impose a $500 AMP for a very first infraction on something that’s low risk and administrative. And to us that seems excessive, considering that other agencies like the CRA [Canada Revenue Agency] and the Canada Border Services Agency, they start at a much lower amount for small companies for administrative, low-risk infractions.”

The timeline for paying the fines is also an issue, with an employer found to be in violation of the code having just 15 days to pay early, says Erin Ludwig, partner at McLennan Ross in Calgary.

“For large federally regulated employers, that’s a very short window to determine what is the best course of action, ‘Should we pay the fine early?’ — which is effectively an admission of the viola-tion — ‘Or should we look at challenging this?’” she says.

“A lot of federally regulated employers — banks, airlines, railroads — are not small operations. And, sometimes, where the viola-tion may occur is not where their head office is where the decision-making is... There’s certain areas of the law where I can understand that urgency is of the essence, but when it comes to just when they should pay a fine, the differ-ence between 15 days versus 30, I struggle with that... Hopefully those limits will be extended.”

The government is at midterm stage with regard to the regulations and it continues to have consultations with stakeholders around issues such as the calculation of the fines, says Maheu.

“We do know that the amounts are going to differ depending on who the penalty is levied against whether it’s an employer or an employee... We’ll also consider the history of compliance of the violator, the number of employees that are affected by the violation and situations where our inspectors or officers who go in to investigate the workplace is obstructing their ability to do their investigation to do their job.”

The officers are very well trained, says Maheu, and the government will ensure that they are properly trained on these new provisions.

“As well, there will be an ability [for employers] to ask for a review of the amount of the penalty that’s been levied.”

The challenge for employers is that many complaints are contextual and very fact-dependent, says Ludwig.

“There can be two sides to every story, particularly when you go into the realm of medical and disability. And it’s quite the high penalty for these claims that are very fact-based... The system doesn’t give a lot of time for employers to do that kind of fact-finding analysis, where you might have concurrent jurisdiction issues related to WCB [workers’ compensation board] and human rights. And the penalties are quite severe if a labour program officer makes a de facto decision based on possibly only some information, given the tight timelines. And then they’re subject to both the penalty and the transparency, the shaming.”

Public naming

Another concern for employers is the public naming. If it’s an administrative, non-high-risk violation, “it seems a little excessive to be naming and shaming, especially for a first-time offender,” says Pohlmann.

But if the case involves repeated offences, and the employer has been educated and told otherwise and there’s a higher risk, “that’s a whole different ballgame,” she says.

“We’re really concerned with this naming and shaming of something which is minor and a first time, where it’s really just not knowing what they were supposed to do. [We consider that] a little excessive."

While it’s common practice for the Ontario Ministry of Labour to publish news releases with respect to occupational health and safety convictions, for instance, and that does serve a deterrent effect, says Foster, “the purpose and the benefit of publishing the names of those involved in minor administrative oversights, I think, is questionable.”

But the idea around the naming is for more serious situations, says Maheu.

“It’s at the end of the actual process. So, after all reviews and appeals have been exhausted... the circumstances under which those names will be taken off the list are also going to be noted. And it will actually be specific around the timing and whether the employer or employee has come into compliance and elements like that.”

Those elements will be explained in the operational policy that the government is working on with stakeholders, she says.

In developing the regime, the government looked at what exists elsewhere, says Maheu. The naming of violators is used extensively by governments both in Canada and internationally, such as the Radiocommunication Act, the Telecommunications Act and the Federal Accountability Act.

“Provinces and territories also publicly name violators in relation to employment standards and occupational health and safety,” she says, as does the Occupational Safety and Health Administration in the United States.

“They’re all the fines that they have levied against non-compliant employers, and they find that that is a really effective tool.”

Who exactly is federally regulated?

The labour rights and responsibilities of about 18,000 employers and 900,000 of their employees are defined by the Canada Labour Code. These employees account for six percent of all Canadian workers.

Employees in the following businesses and industries are more than likely working in a federally regulated sector:

  • banks
  • marine shipping, ferry and port service
  • air transportation, including airports, aerodromes and airline
  • railway and road transportation that involves crossing provincial or international borders
  • canals, pipelines, tunnels and bridges (crossing provincial borders)
  • telephone, telegraph and cable systems
  • radio and television broadcasting
  • grain elevators, feed and seed mills
  • uranium mining and processing
  • businesses dealing with the protection of fisheries as a natural resource
  • many First Nation activities
  • most federal Crown corporations
  • private businesses necessary to the operation of a federal act.

Source: Government of Canada

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