The Good, the Bad and the Ugly: Penalties for Violating Ontario’s Employment Standards Act

Aug 21, 2014

Many employers regularly – knowingly and unknowingly – contravene sections of the Employment Standards Act (ESA).

Common ESA Violations

Two of the most common violations are:

1. The failure to pay overtime pay

2. The failure to give an employee a day off work with public holiday pay if he or she works on a public holiday.

How an ESA Violation Can Be Discovered

ESA violations are usually discovered in one of two ways:

1. The Ministry of Labour periodically conducts enforcement blitzes and a contravention can be discovered during one of these blitzes. The Ministry’s last blitz focused on the retail sector because this sector, according to the Ministry of Labour “ often employs young, entry-level and part-time workers who may be at greater risk of having their rights violated, and who may lack the ability or resources to understand their rights and have them respected.”

2. An employee files a complaint under the ESA.

The Penalties for Violating the ESA

An ESA officer can impose one or more of the following penalties:

1. Compliance Order.An ESA officer can order an employer or other person to stop contravening a provision and to take certain steps in order to comply with a provision. The order may also specify a date by which the employer or other person must comply with the order. These orders do not require payment of wages or compensation.

2. Order to pay. An ESA officer can order an employer to pay an employee up to $ 10 000 for a violation of the ESA (and more in some cases)

3. Ticket, Notice of Contravention, or Prosecution. An ESA officer can issue a ticket for less serious ESA violations. A ticket carries a set fine of $295, with a victim fine surcharge added to each set fine, plus court costs. Alternatively, the fine for a notice of contravention is up to $ 1000. For some violations the fine is $ 250, $500, $ 1000 for the first, second, and third violation, respectively, in a three year period for each employee. Finally, an employer can be prosecuted and ordered to pay a fine, and/or imprisoned for contravening the ESA. An employer can be fined up to $100,000 for a first conviction. If an employer has already been convicted of an offence under the ESA, it can be fined up to $250,000 for a second conviction. For a third or subsequent conviction, an employer can be fined up to $500,000.

Since the implementation of its revised prosecution policy in 2004, the Ministry of Labour has initiated over 1,825 ESA prosecutions.

Lessons to be Learned

1. You should know which industries the Ministry of Labour is currently targeting for inspection.

2. You should make yourself aware of your obligations under the ESA. For more information on the ESA, click here.

3. You should always co-operate with an ESA inspector because failure to do so is a contravention of the ESA and because he or she has the discretion to decide whether or not to issue you a ticket, notice of contravention or prosecute your organization in addition to issuing an order to pay. In January 2014 a corporation was fined $ 37 500, and two directors of that corporation were fined $ 22 500 each for failing to comply with an ESA officer’s order to pay.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on issues that arise under Ontario’s Employment Standards Act. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

There are many ways to attack the termination clause in an employment contract. 

I am now surprised if employee counsel does not claim that their client’s  termination clause is not legally enforceable - usually because the termination clause does not allegedly comply with the Employment Standards Act.

This blog considers a case, McKercher v Stantec Architecture Ltd., 2019 SKQB 100, where an employee successfully attacked the termination clause in his contract because he did not explicitly agree to it after being promoted. 

The Facts

In 2006, Mr. McKercher commenced employment as a staff architect. The termination clause in his employment contract stated: 

Termination other than for cause will be with notice or pay in lieu of notice, based on your length of service. If the Employer terminates your employment for other than just cause you will receive the greater of:

  1. a)   Two weeks notice or pay in lieu of notice during the first two years of employment increasing by one week for each additional completed year of employment to a maximum of three months notice or pay in lieu of notice.

      or

  1. b)   The minimum notice of termination (or pay in lieu of notice) required by applicable statutes.

Eleven years later, when Mr. McKercher was employed as a Business Centre Sector Leader, his employment was terminated. The employer paid him the three months termination pay he was owed under his employment contract.

 

Another way to attack a termination clause: What is the changed substratum doctrine?

An Ontario judge in a 2012 case, MacGregor v National Home Services, 2012 ONSC 2042 (CanLII), described this legal doctrine as follows: "The changed substratum doctrine … provides that if an employee enters into an employment contract that specifies the notice period for a dismissal, the contractual notice period is not enforceable if over the course of employment, the important terms of the agreement concerning the employee’s responsibilities and status has significantly changed."

 

The rationale for this doctrine has been described by one judge, Schmidt v AMEC Earth & Environmental Ltd., 2004 BSCS 2012 (CanLII), as follows: "In my view, it was incumbent on the defendants to advise Mr. Schmidt that they intended to continue to rely upon the termination provision set out in the Agreement when substantial changes in his employment occurred. This would have allowed him to consider the matter and to negotiate for other terms. If the defendants wished to continue to rely on the termination provisions there ought to have been a ratification of the provisions as the nature of Mr. Schmidt’s employment changed."

 

Decision

The judge hearing this case relied on the following factors when deciding not to enforce the termination clause in the employment contract: ”...there is no evidence that (the employer) made it clear to the (employee) that the notice of termination provisions were intended to apply to the positions to which he was promoted. The employment agreement contains no express wording to this effect, nor does it contain any wording to support the inference of such an intent. Further, and in keeping with the analysis in Schmidt, the Court received no evidence that, as it promoted the plaintiff, SAL reasserted its understanding and expectation that the notice of termination limit would remain in effect.”

 

Lesson to be learned:

An employer should make it clear that the termination clause in an employment contract applies when an employee is promoted. This expression of this intent should be in writing and should be clear and unambiguous. I recommend that an organization’s employment be reviewed by an employment lawyer every year or two. If your employment contract does not address this issue then think about doing so the next time it is reviewed.

 

For 30 years, Doug MacLeod of   the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

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