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On August 21, 2017, the Ministry of Labour (“MOL”) issued a $49,000.00 fine against an employer that failed to comply with Orders to Pay. The employer, Winli Apparel Manufacturing Inc. (“Winli”), was out of business and, likely, also out of money to pay its employees’ termination pay. Employees filed successful claims under the Employment Standards Act, 2000 (the “ESA”) resulting in the issuance of $26,000.00 in Orders to Pay. Winli did not comply with the Orders and the MOL charged it with 14 counts of failure to comply with the Orders under the Provincial Offences Act (the “POA”). Upon conviction, the court ordered Winli to pay a $46,000.00 fine plus a 25% victim fine surcharge. (Please see the full MOL bulletin here.)
The link between ESA infractions and POA Offences and Prosecutions
For most employers, the leap from an employment standards infraction to a provincial offences conviction may be unexpected. Part XXV of the ESA permits the MOL to pursue prosecutions via the POA. Any person who contravenes the ESA or fails to comply with an ESA order is guilty of an offence and, on conviction, is liable:
- (a) if the person is an individual, to a fine of not more than $50,000.00, or imprisonment for a term of not more than 12 months, or both;
- (b) if the person is a corporation, to a fine or not more than $100,000.00; and
- (c) if the person is a corporation that has previously been convicted of an offence under the [POA],
- (i) a fine of not more than $250,000 if the person has one previous conviction, and
- (ii) a fine of not more than $500,000.00 if the person has more than one previous conviction.
Although the Orders to Pay issued against Winli related to termination pay, such Orders may also be issued for other outstanding wages, tips, or gratuities that are owed and the employer has refused to pay. The Orders are also inclusive of a 10% administration surcharge, or $100 (whichever is greater).
The Takeaways for Employers After Winli
The Winli result provides an important reminder for employers to recognize the potential consequences of failing to comply with MOL Orders.
While in recent years, the MOL has received much criticism regarding its inability to successfully collect a significant portion of its Orders to Pay, the outcome in Winli demonstrates that the MOL has little reservation in proceeding with POA charges. Though the MOL will likely be unable to recover payment in this case because Winli is no longer in business, this is one of the reasons the MOL chose the POA route.
Historically, the MOL has had difficulty in collecting unpaid earnings because employers would simply ignore them. Previously, the MOL could issue decisions for any amount owing, but, only had the power to issue Orders to a maximum amount of $10,000.00. Employers who owed amounts upwards of $10,000.00 would simply not pay upon receiving the decision, wait until the $10,000.00 Order would be issued, and – if they chose to – pay the reduced amount instead.
Regardless, the MOL’s difficulty in collecting Orders should not be viewed as an opportunity to disregard them – doing so, as highlighted in Winli, may expose an employer to increased financial liability (in fines), the possibility of incarceration for its directors, officers, and owners, and infamy in the MOL’s conviction archive (or wall of shame).
Winli’s fine may sound like an extreme punitive measure for the charges laid, however this example is not the worst case scenario. In June of 2017, an employer who was ordered to pay $140,000.00 in wages was fined $20,000.00 and sentenced to 30 days in jail (see MOL bulletin here).
The MOL’s reach can hit much closer to home for owners. Specifically, the ESA allows the MOL to impose personal liability on directors for unpaid orders involving: a) regular wages; b) vacation pay; c) public holiday pay; and, d) overtime pay (but no personal liability for termination or severance pay). There is a maximum personal liability of directors for up to six months of wages, and, up to twelve months of vacation pay.
On top of all debts owing to employees, a director is also liable to pay interest on all outstanding wages. While such caps exist on the individual debts owing, in February of 2015, the MOL eliminated its $10,000.00 cap on MOL orders – the previous loophole employers would use to skirt around amounts owing. Since February 2015, the sky‘s the limit.
How the Fair Workplaces, Better Jobs Act, 2017 (Bill 148) might affect Penalties, Interest and Collections
With Bill 148 on the horizon, what possible changes should employers expect?
- Penalties for non-compliance with ESA provisions – The government intends to amend an ESA regulation (Reg. 315/17) to increase the maximum administrative monetary penalties from $250, $500, and $1000 to $350, $700, and $1500 respectively.
- Publicly posting more detailed information regarding specific infractions – Proposed changes would allow for the Director of Employment Standards to publish (including online) the names of individuals who have been issued a penalty, a description of the contravention, the date of the contravention, and the amount of the penalty.
- Charging Interest to employers – Changes would also enable Employment Standards Officers to award interest on employees’ unpaid wages and on fees that were unlawfully charged to employees.
- Collections – Changes would confer greater collection powers including:
- 1) Allowing a collector authorized by the Director of Employment Standards to issue warrants, place liens on real and personal property and to hold a security while a payment plan is underway; and,
- 2) Enabling government and the authorized collector to collect and share personal information.
If Bill 148 achieves Royal Assent, all mentioned changes would come into force on January 1, 2018. To read a rundown of all proposed Bill 148 changes to Ontario’s employment and labour laws, click here.
The Bottom Line
As we await the enactment of Bill 148, employers should take heed when issued Orders to Pay and consider the consequences of non-compliance. Financial hardship is not a factor the MOL will take into consideration, and non-compliance may ultimately result in jail time, an even greater hit to an employer’s pocket, and the pocket of its owners, directors and officers.
Maria Luisa Vitti
Maria Luisa Vitti is Rubin Thomlinson’s first ever articling student. Maria Luisa provides support to the firm’s employment law and workplace investigation practices.