ESA compliance still a challenge

Ontario’s Ministry of Labour finds many repeat violators
By Melissa Campeau
|Canadian HR Reporter|Last Updated: 04/17/2017

Last fall, Ontario’s Ministry of Labour sent inspectors to 103 workplaces — each of which had been found in violation of the Employment Standards Act (ESA) at least twice during the past three years. For the blitz, the ministry focused on sectors with “precarious employment,” such as gyms, nail salons and maintenance and security systems.

The results weren’t good: Most of the employers — 75 out of the 103 — were still in violation of the act. The most common money-related infractions involved public holiday pay, overtime pay and vacation pay. The top violations not related to money involved hours of work, record-keeping and written agreements on vacation pay.

In all, the ministry recovered $125,267 in unpaid entitlements for workers, and it reported that all of the employers willingly complied with orders to pay. The blitz also resulted in 42 fines for employers, ranging from $250 to $300 each.

Why the violations?

The high number of ESA violations comes despite each employer’s history of reprimands for rules violations, as well as advance notice of the blitz.

“Most of the time, I don’t think employers are consciously setting out to violate the Employment Standards Act,” said Daniel Chodos, partner at Whitten & Lubin Employment Lawyers.

Ignorance of the law can play a big role, however.

“Take overtime, for example,” he said. “There’s a misconception I hear over and over again, from both employers and employees, that salaried employees are not entitled to overtime… That couldn’t be more wrong but it’s a common belief.”

In such cases, employers may feel mistakenly confident about their actions and have no idea they’re breaking the law.

“So if I’m running a business and this is what I truly believe, I’m going to make a lot of mistakes and if I get caught, I’m going to be paying overtime to every single one of my salaried employees,” said Chodos.

“Some might very well be exempt, but there will certainly be many who aren’t.”

But employers “won’t get any sympathy for that — ignorance of the law is no excuse,” he said.

Employers can also find themselves struggling to fully understand the law.

“It can be immensely confusing, and that’s a big part of the problem,” said Chodos.

“The ESA section on vacations and vacation pay, for example, is written in a way that even perplexes lawyers.”

Sometimes, there are other moving pieces to take into consideration as well.

“It can be very difficult to understand how all of these rules dovetail with each other, plus there are occupational health and safety rules to consider as well as union rules,” said Chodos.

“If you’re in a small business, good luck to you. That’s a lot to keep track of.”

For some employers, it might be something of a calculated risk.

“Most of the time, you’re not going to get caught, so you might think to yourself ‘Let’s just do this until we get caught — if we get caught — and then we’ll deal with compliance,’” he said.

‘Tough’ penalties?

Typically, employers that are found to be in violation of the ESA receive orders to comply with rules and pay employees any money that’s owed. But the repercussions of getting caught are not, typically, enough to spur some employers into action, said Chodos.

“You wonder where the motivation is for an employer to follow the law, where the only result of not complying is being forced to comply.”

In many states south of the border, an employer has to pay three times the wages that are earned if it gets caught not having paid an employee, he said.

“That’s a really strong motivator.” 

But lately, the ministry has been enforcing tougher repercussions for ESA violators, said  Janet Deline, spokesperson for the Ministry of Labour.

“We know that some employers are not taking orders as seriously as they should,” she said. “So, we are holding repeat violators accountable by pursuing prosecutions.”

If convicted, penalties for employers can include up to six months of jail time. And in a 12-month span over 2015 and 2016, the ministry launched 950 prosecutions against employers that failed to comply with orders to pay, said Deline.

“That’s an increase of almost 450 over the year before, and is more than we pursued in any previous year.”

Staying on the right side

For an employer, the simplest solution is to comply with the law in the first place. And to sort through potential confusion, the ministry suggests employers use the government-published Guide to the ESA, plus videos and tools, on the ministry’s website.

It’s worthwhile to check in with any association and industry groups, too, said Deline, since the ministry partners with many groups to help put accurate information into employers’ hands.

The ministry has also set up an Employment Standards Information Centre, offering general information about the act by phone or email — and  anonymity.

“You could call up and say, ‘I’d like to get a sense of what it is we might be doing wrong. These are the areas of focus. What are my obligations and how can I comply?’” said Deline.

Outside counsel can also be helpful, particularly if an employer is dealing with an especially complicated situation or set of rules, she said.

“We do encourage employers to seek advice from a lawyer if they are having difficulty understanding what their responsibilities are.”

Understanding legal obligations tends to be simpler than untangling legal challenges, said Chodos. That means homework can pay off, whether spending the time consulting with someone at the ministry, or investing in a lawyer’s expertise.

“It’s an ounce of prevention, essentially,” he said. “You might make sure down the line you save an awful lot of money and an awful lot of headaches and attention from the wrong organizations just by making a few phone calls and going through some records.”

When an impending inspection is announced, employers might be motivated to ensure they’re in compliance, at least for the short term, said Chodos.

“I’m going to say to my clients ‘Guys, be really careful. From this date to this date, the Ministry of Labour is coming down hard and they’re probably coming to see you. So let’s get everything in order and let’s talk about what needs to be done.’”

After the blitz, however, Chodos questioned how well employers will maintain compliance.

“It’s not that difficult for employers to be good for two months,” he said. “It’s a lot more difficult to do it all the time.” 

Melissa Campeau is a freelance writer based in Toronto.

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