New rules in place for Ontario employees making claims for unpaid wage
With new rules now in effect in Ontario for employees making claims for unpaid wages, now is a good time for payroll departments to review practises and record-keeping policies to make sure they are solid, advises an employment law lawyer.
On Feb. 20, the provincial government implemented amendments to the Employment Standards Act, 2000, that remove a previous cap of $10,000 on the amount of unpaid wages an employee could recover through Employment Standards. They also increase the time limit for employees to recover wages from six months to two years. The changes apply to unpaid wages that become due on or after Feb. 20, 2015.
Carl Cunningham, a management-side employment lawyer at the law firm Bennett Jones in Toronto, says the changes, combined with other amendments such as those requiring employer self-audits, mean employers and payroll departments are going to have to pay even more attention to employment standards rules.
"It’s a good time to conduct an audit or review of your practices and make sure that everything is up to best practices."
He says the removal of the $10,000 cap is significant because it makes the Employment Standards claim option for unpaid wages more attractive to employees. With the cap, employees could not recover any more than $10,000 from their employer through Employment Standards. Employees owed more than that had to choose between going to court and limiting their claim to $10,000.
"Prior to these amendments, if you had someone who claimed they were owed $20,000 in overtime pay, they probably would have gone the route of a small claims court proceeding because they would claim for the entire amount whereas under the Employment Standards Act, the most that the (Employment Standards) officer could order was $10,000."
Some employees have been reluctant to go through the courts to recover money because of the time and costs involved, Labour Minister Kevin Flynn said in the Legislative Assembly during a debate on the amendment.
"Vulnerable employees often cannot afford to go to court for larger claims. Court proceedings can discourage employers from settling claims quickly."
Even in small claims court, which applies for claims up to $25,000, there are fees to file the claim, legal costs if the employee hires a lawyer and the risk of having to pay the employer’s legal costs if the case is not successful. With the cap gone, Cunningham says some employers have concerns that more employees will file larger claims with Employment Standards.
"I think that’s a fear that employers have because the Employment Standards Act process is very employee-friendly in the sense that without them having to spend the money on a lawyer, they can go to a website and download the (complaint) forms. They can contact someone at the ministry to get advice. There are a lot of factors that would help facilitate them making a claim and not having to spend a lot of time or money doing so."
Workers’ rights advocates and the provincial government see the removal of the cap as an important action to help employees who believe their employer owes them money.
"It is safe to assume that the removal of the $10,000 cap on liability in the MOL (Ministry of Labour) procedure will create a greater deterrent for employers considering whether to pay their workers in accordance with their basic statutory entitlements," Ryan Newell, a lawyer with Sack Goldblatt Mitchell, wrote in the company’s Labour Law Blog.
"There is no justification for a limit. If you’re owed the money, you’re owed the money," Flynn told the Legislative Assembly.
Increased time limit
In addition to eliminating the wage cap, Flynn said the government is making the claims process easier for employees by increasing the amount of time they have to file claims for unpaid wages to two years.
"We’ve been told repeatedly by advocates that many employees need the longer recovery period because they’re afraid to make a claim before they leave their jobs. They’re worried that if they do so, their employer may punish them in some way — and that is simply not right."
While the change is important, Cunningham says the increase in the time limit is not as significant for employers as the removal of the $10,000 cap because the two-year limitation period is comparable to the time period for individuals to launch a civil lawsuit.
"The fact that the ESA is now, whether you want to call it harmonizing or making the time period for commencing an administrative claim the same as that for a civil action, I don’t think that that has quite the same impact on employers because they already had that potential two-year claim period for employees for civil claims," he says.
However, the change highlights the need for employers to make sure payroll records are up to date, accurate and thorough.
"A lot of the claims under the ESA for wages, overtime pay, those are often record-driven — the timesheet, the timecard, the payroll statements. All of those documents, if you as the employer are trying to rebut or deny the employee’s claim that they are entitled to those wages or overtime, you’re going to need the documents and records to prove it.
"Employers already should have been keeping those records, but this change for extending the limitation period should just reinforce a reminder to check your records retention practises to make sure you’re keeping not just that that is required by the act, but what you would need from an evidentiary perspective to prove that the employee wasn’t authorized to work additional overtime hours," adds Cunningham.
Across Canada, other jurisdictions generally have a six- or 12-month time limit for filing employment standards complaints for unpaid wages. In many provinces, employees are required to go to their employer first to try to resolve the issue before filing a complaint with employment standards.
Cunningham says good record-keeping practices for employers in Ontario will also be important as they prepare for a new Employment Standards self-audit process that will come into effect on May 20.
In addition to employee-driven complaints and Labour Ministry inspections, the Employment Standards Board will be able to require employers to examine their own records and practices to ensure they are complying with Employment Standards rules. Employers will have to report the findings to Employment Standards.
"We still have a claims-based process which is initiated by the individual employee, but there is now this self-audit process where an (Employment Standards) officer could come in and instruct the employers to conduct a self-audit," Cunningham says.
"Even if there hasn’t been a claim, the Employment Standards officer may ask an employer to conduct a self-audit to verify that they are in compliance with the act."
Employment Standards officers will be required to give employers written notice if they are selected for a self-audit. The notice will set out the period to be covered, which sections of the Act to examine for compliance and the date on which the employer must report the results.
"Under the act, the Employment Standards officer has pretty broad discretion in the scope of the order for the employer to conduct the self-audit. They can specify the method and the form of the report the employer has to (make)," Cunningham says.
"Conceptually, the officer comes in and says, ‘I want you to do a self-audit with respect to hours of work’ and then the employer is going to be expected to be able to produce records and verify that they are in compliance with hours of work or if they discover that they are not, come back and say how are we going to correct this."
If a self-audit finds that an employer owes wages to one or more employees, the employer will be required to include in the report the name of every employee to whom it owes wages, the amount owing, how it calculated the amount and proof that it paid the outstanding amount. Employment Standards officers will have the authority to issue payment orders for any outstanding amounts.
To get out in front of this requirement, Cunningham comes back to the importance of keeping good records.
"This is a good time for every employer to do a self-audit of their payroll practices and their record-keeping practices."
Whether the issue is an employee complaint to Employment Standards for unpaid wages or a mandatory self-audit, he advises employers with questions or concerns to seek legal advice.
"If the employer is at all unsure, they should contact their counsel. Counsel can advise them with respect to their rights and a strategy for dealing with the situation."
