See also: The Changing Workplaces Review
There are two issues that have been raised consistently:
Workers who are employees under the ESA definition are sometimes “misclassified” by their employers – intentionally or unintentionally – as independent contractors not covered by the ESA.
Currently, 12% of the total Ontario workforce of 5.25 million is reported as “own account self-employed” (i.e., self-employed individuals without paid employees). The experience of the Ministry of Labour in enforcement and significant anecdotal evidence suggests that a portion of these “own account self-employed” workers are misclassified as they are actually employees within the meaning of the ESA but are treated by their employers as independent contractors. The US Department of Labor (DOL) has said that “the misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers and the entire economy.”
Businesses that misclassify employees as independent contractors avoid the direct financial costs of compliance with the ESA and other legislation. These costs include:
Additionally, employees who are misclassified as independent contractors are denied benefit coverage where such coverage is available to employees. In sum, misclassification has significant adverse impact on those Ontario workers who are labelled independent contractors and not treated as employees.
The Law Commission of Ontario (LCO) recognized the problem of misclassification and has expressed the opinion that part of the solution is greater use of proactive enforcement:
Misclassification is said by the US DOL to be a broad and significant problem, presenting:
Underscoring the importance of the misclassification issue, the DOL has allocated significant resources to the issue by prosecuted cases in federal court, and by signing partnership agreements with numerous states to encourage detection and prosecution of misclassification cases. In 2015 the DOL’s investigations resulted in more than $74 million in back wages for more than 102,000 workers in industries such as the janitorial, temporary help, food service, day care, hospitality and garment industries. It has also been reported that misclassification cases, which are described by the DOL as cases of workplace fraud, are the subject of numerous profitable class action cases.
The ESA applies to “employees” – workers who are in an employment relationship with an employer. Independent contractors are not employees.
The ESA currently defines “employee” as including:
Similar definitions have appeared in previous versions of the ESA. The current definition has been in place since 2001. In conjunction with the statutory definition, various common law tests are used when determining whether a worker is an employee. These tests have evolved and become more expansive of workers as employees over the years.
Over time, the Ontario economy has grown more sophisticated, workplaces have fissured and a spectrum of relationships and arrangements has evolved between workers and employers ranging from standard employment relationships at one end of the spectrum to independent contractors at the other (see Chapter 3). The result of these changing relationships is that the old definitions are not well suited to the modern workplace. Not every worker fits neatly into the category of employee or independent contractor. Within this spectrum, there are those whose relationship is more like a traditional employment relationship than that of an independent contractor and who are deprived of the protection of the ESA.
The common law has long recognized that there is a category of worker who is not a traditional employee and is not an independent contractor but who is entitled to some of the common law protections of an employee such as reasonable notice of termination of employment. The Ontario Court of Appeal has concluded that an intermediate category between employee and independent contractor exists, “which consists, at least, of those non-employment work relationships that exhibit a certain minimum economic dependency, which may be demonstrated by complete or near-complete exclusivity. Workers in this category are known as ‘dependent contractors’ and they are owed reasonable notice upon termination.” The Court noted that the recognition of an intermediate category based on economic dependency accords with the statutorily provided category of “dependent contractor” in the Labour Relations Act, 1995 (LRA).
The LRA provides that an “employee” includes a “dependent contractor” defined as:
There is no provision in the ESA equivalent to the dependent contractor provision of the LRA that specifically defines “employee” for purposes of the Act as including a dependent contractor.
A further issue that has been raised by some is that independent contractors should also be included in the Act. A 2002 study for the Law Commission of Canada argued that although there were good reasons to include independent contractors under the ESA, because of the complexity of applying all standards to independent contractors, further study was required. In 2012, the LCO, however, essentially rejected including independent contractors under the ESA.
Under the US Fair Labor Standards Act (FLSA), to determine if a worker qualifies as an employee, the law focuses on whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for her/himself. Detailed interpretations of the tests to be applied in determining economic dependency have been issued by the Administrator.
Both issues discussed above were the subject of submissions by unions and employee advocates.
Employee advocates asserted that too many employees are misclassified by employers as independent contractors. Such misclassification results in employees being required to work in substandard working conditions and in their being denied their statutory rights and protections. Their concern about misclassification was not limited to one business or sector, but was expressed as likely more prevalent in certain segments of the economy including: the “gig” or “sharing” economy, cleaning, trucking, food delivery and information technology – to name but a few.
Employee advocates suggest that misclassification occurs because of ignorance of the law by both employers and employees, because of the perceived benefit to employees of the ability to deduct business expenses from income (which may increase the willingness of employees to be treated as independent contractors) and because of intentional avoidance by employers of their legal obligations and the savings that result from non-compliance.
With respect to the second issue, unions and employee advocates submitted that the ESA should specifically be made applicable to dependent contractors. A few employee advocates suggested that the ESA coverage should be extended to independent contractors, but in the main, submissions focussed on the merits of amending the ESA to provide that dependent contractors have the protection of the Act. These advocates suggested that the current ESA operates as an incentive to fissuring and encourages business to structure their workplaces so that work is performed without employees, thus avoiding the obligations of an employer under the ESA and effectively negating the workplace rights of vulnerable workers.
Finally, employee advocates asserted that in cases where there is a dispute as to whether a person is an employee, the burden of proof to establish on a balance of probabilities that the person is not an employee should be on the employer.
Harry Arthurs, in Fairness at Work recommended an “autonomous worker” provision that was conceptually similar to a dependent contractor provision in the Canada Labour Code (CLC). While the LCO rejected the inclusion of independent contractors under the ESA, it did recognize that legislative provision for extending protection to dependent contractors should be explored, recommending that the Ontario government consider extending some ESA protections to self-employed persons in dependent working relationships with one client, focussing on low wage earners, and/or identifying other options for responding to their need for employment standards protection.
The 1994 Thompson Commission Report on the British Columbia Employment Standards Act recommended that dependent contractors as the term is used in the Labour Relations Code be included in the definition of ‘‘employee’’ in the ESA. The government did not adopt that recommendation.
Some employers commented on both of the two main issues canvassed above. Employers often have the need to use independent contractors whose unique expertise, cost, efficiency and availability cannot be duplicated by their own employees and would oppose challenges that these are dependent contractors. Employers would also point out that there may be sections of the ESA such as hours of work and overtime pay that are difficult to apply to particular workers, even if they are dependent, where the workers themselves tend to set their own hours of work.
Determining the appropriate employer(s), as well as other parties who ought to be liable for providing minimum terms and conditions of employment for employees in a business, is fundamental to maintaining a viable system for ensuring compliance with employment standards. The issue is which entities ought to share liability and responsibility for compliance with employment standards.
Currently, entities and persons who are liable in addition to the direct employer are:
The issue is whether any of these categories require change and whether other categories should be added.
When establishing liability for compliance with employment standards legislation, statutory definitions and enforcement mechanisms have traditionally focussed on the entity that directly employs the employee. However, in what has been called the “fissuring” of employment relationships, many companies have shifted away from direct employment through a wide variety of organizational methods such as subcontracting, outsourcing, franchising, and the use of THA workers (see Chapter 3 for a description of “fissuring.”) Some of these activities are for organizational business reasons and some are for the express purpose of insulating and shielding the higher level business – which benefits from the labour – from responsibility and liability for employment standards. Some of these activities are undertaken for a complex mix of reasons.
Non-compliance in many industries may be driven by the practices of organizations at higher levels of an industry structure. The higher level company may, for example, control the economic model that dictates whether the entity with responsibility for running the business or providing the goods or services can even afford to conform to minimum standards. An example is a franchisor whose economic model makes it problematic for the franchisee to comply with minimum standards. Also a business needing a particular service may create fierce competition among subordinate businesses with whom it contracts by constantly retendering. Or, it may set pricing policies that make ESA compliance by the subordinate businesses difficult. Sometimes there is a contracting chain with multiple levels of subcontractors, with the actual work being performed at the lowest level.
Assigning liability to the higher level entities could well cause them to change their strategies with the effect of improving the compliance rates by subordinate employers further down the supply chain or change the economic model so that compliance with minimum terms and conditions of employment is attainable by the business performing the service or providing the goods.
Also, businesses may be structured into more than one corporate vehicle with one corporation primarily having assets – while the other corporate vehicle primarily has liabilities – thereby attempting to insulate one from the other. Measures to pierce the corporate veil are common to make corporate directors liable for the employer’s failure to pay or to make related companies liable for flouting minimum standards of all related companies.
Across Canada, “related employer” provisions are common. Of the eight Canadian jurisdictions whose employment standards legislation contains a related employer provision, only Ontario requires a finding that the intent or effect of the corporate structure be to defeat the purpose of the Act.
The employment standards legislation in 3 provinces – Quebec, British Columbia and Saskatchewan – contain provisions that extend liability for unpaid wages beyond the direct and related employers in certain circumstances where employers contract out work.
Quebec’s An Act Respecting Labour Standards provides that an employer who enters into a contract with a subcontractor, directly or through an intermediary, is responsible jointly and severally with that subcontractor and that intermediary for their pecuniary obligations under the Act. This provision has been in place for decades but is seldom used. It can only be enforced through the courts, and only at the instance of the Labour Standards Commission.
Saskatchewan’s Employment Act (section 2-69) has a similar provision that states that if an employer or contractor contracts with any other person for the performance of all or part of the employer’s or contractor’s work, the employer or contractor must provide by the contract that the employees of that other person must be paid the wages they are entitled to receive. If the person fails to pay, the employer or contractor is liable. Like Quebec, this provision has been in place for many years and is used as a last resort.
British Columbia’s Employment Standards Act (section 30) holds farm producers who use farm labour contractors liable for the wages of the contractor’s employees if the contractor was not licensed or if the producer did not pay the contractor for the work performed.
California has what is referred to as a “brother’s keeper” law, aimed at deterring firms from entering into arrangements that are likely to lead to wage violations. It holds contracting firms liable for subcontractor’s wage and hours violations in the construction, farm labour, garment, janitorial and security guard industry if the contracting firm knew, or should have known, that the contract does not contain sufficient funds for the subcontractor to comply with employment laws.
In January 2016, the US DOL issued a new interpretation of what it described as the increasing frequency of joint employment in the economy. The concept of joint liability in the US is based upon an expansive definition of employer which is designed to define the employment relationship as broadly as possible. When joint employment exists, all of the joint employers are jointly and severally liable for compliance with the Act. The interpretation described two forms of joint employment:
In examining the “economic realities”, the Department looks at:
The DOL interpretation has been strongly criticized by some US employers.
It is argued that it is fair that lead companies or employers who contract out, or in some cases individual directors of companies, should have some liability and responsibility for employment standards of the employees in the business from which they benefit. It is said that entities that benefit or derive profits from the particular labour should share responsibility to ensure that minimum statutory standards are being met in the production of goods and services used in that business. It is argued it is fair and appropriate for lead companies who direct and dictate the terms of the supply of goods and services to bear responsibility for compliance with employment standards in the production and provision of those goods and services.
In the case of franchisors, it is said that their overall control of the brand, the business model, and all the details of how the business must operate, make it appropriate for it to have responsibility for compliance with employment standards legislation, together with the franchisee. This argument would apply regardless of the amount of control over the terms and conditions of employment of the franchisee’s employees is exercised by the franchisor. Alternatively, franchisors could be held liable only when they exercised a sufficient degree of control that they should be considered to be a joint employer.
Accordingly, employee advocates and some academics have suggested that additional provisions are required to create obligations on businesses higher up the chain of contracting, or the supply chain, to address non-compliance by employers lower down the chain or by subcontractors. Specifically, some or all of the following have been recommended:
In addition, employee and labour groups suggested that the existing “related employer” provisions are too narrowly confined. In particular, submissions focus on the narrow interpretation that has been given to the second criterion of section 4 – the “intent or effect” requirement – establishing a test that is extremely difficult to meet and rendering section 4 ineffective for assigning liability to other entities that, in fact – by satisfying the first criterion – are associated with, or related to, the direct employer. These groups cited examples of employers with unpaid orders who continue to operate other related businesses that are never pursued to satisfy those debts. One union submitted that this narrow interpretation has cost its members millions of dollars in lost wages, including termination and severance pay, and called for the repeal of the “intent or effect” criterion.
Employers argue that wide-ranging legislative provisions like those in Quebec and Saskatchewan – which make all businesses liable for the employment standards violations of their contractors – are too great an interference with the market where contracting is a legitimate business tool for organizing the production of goods and services. A strategy of lowering costs by creating competition for the provision of goods and services by contracting out work may be a necessary strategy to compete for business and maintaining viability. In any event it is argued that there is a difference between contracts where the business really closely controls the conditions under which the work is performed and deliberately fosters competition for the work and other situations where the entire point of hiring a contractor is to use the expertise of that entity to perform the work that is required. It is a perfectly normal business strategy to have the most efficient entity do the work. It is said to be impossible to distinguish between the two situations and that it is unfair to make companies responsible for the ESA violations of some of their contractors.
Representatives from the franchising industry strongly argue that making franchisors liable for franchisees’ ESA obligations is unnecessary, would be costly and burdensome, and could threaten the entire franchise model that contributes to employment and the Ontario economy. Their view is that the Act, through the related employer provision, already captures the atypical situation where a franchisor exerts a significant measure of control over, or direct involvement in, decisions concerning a franchisee’s employees. Franchisors also argue that the franchise model most commonly used makes employment the responsibility of franchisees who determine terms and conditions of employment of their employees.
The ESA is generally thought of as legislation designed to provide basic minimum terms and conditions of employment applicable to all employers and employees, providing basic floors and a fair competitive playing field where the rules are the same for everyone. Prima facie, exemptions are inconsistent with the principle of universality – which is that minimum terms and conditions set out in the Act should be applicable to all employees. We agree that the ESA should be applied to as many employees as possible and that departures from, or modifications to, the norm should be limited and justifiable.
As noted elsewhere in this Interim Report and in our mandate, work has changed for many people in recent years. Unwarranted or out-dated exemptions may have unintended adverse impact on employees in today’s workplaces. The concern is that many employees may be denied the protections under the ESA that are essential for them to be treated with minimum fairness and decency.
Business also has undergone fundamental change. Not only have many businesses faced significant technological change but also many have streamlined operations and made significant changes in the way they do business in order to meet the challenges of competitive markets. Many of these changes affect the work and the working conditions of employees. Unwarranted or out-dated exemptions could create unfairness if some employers gain competitive advantage over others because of such exemptions.
We know from our own experience that one size of regulation cannot fit every industry and every group of employees. Ontario’s evolving economy is very diverse and some degree of flexibility is important in furthering the particular needs and circumstances of particular industries, or occupational groups, and the employees whose jobs depend on the success of those industries. We cannot simply discount the potential negative impact of the wholesale elimination of exemptions without further careful review. While exemptions should be subject to scrutiny, we accept that a standard in the Act could be modified or amended in particular sectors without sacrificing fairness or the legitimate interests of employees where there are compelling reasons for differential treatment.
The ESA contains more than 85 complex exemptions and special rules. Also, provisions requiring Personal Emergency Leave (PEL) and severance pay apply only to larger employers (see sections 5.3.4 and 5.3.8 respectively). Exemptions operate to permit some employers not to pay minimum wage and from other provisions including not paying vacation and statutory holiday pay, and/or overtime pay. As a result, a significant number of employees are denied the protection of important provisions of the Act – typically limitations on hours of work and the payment of overtime. Many of those exemptions are in industries where there are vulnerable workers in precarious jobs. For example, it is estimated that only 29% of low income employees are fully covered by overtime provisions as opposed to approximately 70% of middle and higher income employees and so on in respect of many of the exemptions.
Some exemptions are decades old and have been present in some form since 1944. Many were introduced ad hoc over the years, largely as a result of lobbying by stakeholders in opaque processes and with no or little significant employee involvement.
The Ministry of Labour now has an internal policy framework for considering new exemptions and special rules. Since 2005 the Ministry has approved six of what it refers to as “Special Industry Rules” or (SIRs). SIRs were granted using principles and criteria developed by the Ministry for any new requests for exemptions. SIRs allow for modified standard for certain occupations in certain industries and have been granted in situations where an ESA standard arguably could not be met because of unique production issues, but where a modified version of the standard could reasonably apply. In developing these regulations, the Ministry consulted extensively with affected stakeholders. The ministry facilitated discussions between the affected parties including representatives of employees – generally the relevant unions – and developed modified rules that worked for the affected parties and met a set of consistent policy principles. These Ministry principles are set out below.
Most of the existing exemptions predate the development of that policy framework and have not been reviewed to see if they comply with it. Accordingly, these exemptions may not have a solid policy rationale or may be out-dated. The reasons for many existing exemptions are unclear. Some industries and occupations have modified standards. In other industries and occupations, there are broad exemptions where terms and conditions of employment such as hours of work are essentially unregulated. Overall, the existing exemptions do not fit into a consistent policy framework and constitute a disjointed patchwork of rules.
Accordingly, we are considering not only a process to review current exemptions but also a process that may be applied in the future for developing rules for unique situations and circumstances that may warrant special treatment. In short, a sectoral process may be appropriate in a variety of situations.
Below are the principles and criteria used by the Ministry for any new requests for exemptions:
Core Condition A:
The nature of work in an industry is such that it is impractical for a minimum standard to apply. Applying the standard would preclude a particular type of work from being done at all or would significantly alter its output; the work could not continue to exist in anything close to its present form. “Nature” of the work relates to the characteristics of the work itself. It does not relate to the quantity of work produced by a given number of employees.
Core Condition B:
Employers in an industry do not control working conditions that are relevant to the standard.
If one or both of the Core Conditions is met, a further Supplementary Condition must be met:
In addition to the above conditions, two other considerations are relevant to this issue:
During consultations, we heard from various organizations and individuals raising concerns with the number of exemptions in the Act or with specific exemptions for an occupation. There has been sustained criticism from many sources about the number and scope of the exemptions and that they are not only contrary to the implicit goal of universality but also that they are:
and that they undermine the purpose of the Act to provide minimum terms and conditions of employment, denying basic employment standards to many workers.
It is argued that the cost of exemptions is borne not only by employees not covered by the Act who suffer lost income and insufficient time off, but also that there is a social cost to health and safety resulting from excessive overtime and long hours of work. It is argued that these costs are disproportionately borne by vulnerable and precarious workers.
Some organizations asked for existing exemptions to be maintained or broadened, explaining that they continue to be needed to maintain viability and competitiveness. These organizations argued that there are circumstances where a departure from a general rule is warranted and cautioned against a “one-size-fits-all” policy. For example, uncertainties in some industries may be caused by seasonal factors or unpredictable climate conditions necessitating more flexibility in hours of work.
We have not been asked directly by affected stakeholders to review the SIRs formulated after 2005 and, indeed, we have been asked by an affected employee group not to interfere with them.
Partial or full exemptions for a large part of the working population have been embedded in Ontario legislation and regulation for decades. Some may have been justified but are now out-dated and unwarranted. Some may never have been justified or subject to the careful scrutiny that any departure from employment standards should receive.
Although we have been reluctant at this stage of our Review to draw any firm conclusions on any of the issues because further consultations are still ahead of us, in order to make the remainder of the consultation process on this issue more helpful, we have decided that it would not be in the public interest to recommend a wholesale elimination of all the exemptions without further review. While some immediate changes may be warranted, the remainder of the current exemptions should not be eliminated, modified or amended without further careful assessment and consultation with those affected. Limitations on time and available resources, however, mean that the implementation of a consultative process for a detailed review of exemptions is not practical as part of this Review. Thus we are likely to recommend that Ontario establish a new process of review to assess the merits of many of the exemptions to determine whether the exemptions are warranted or whether they should be modified or eliminated. The implementation of such a review process may lead to many further changes but only after a spotlight is put on each of the issues. The review process we will likely recommend would use fixed criteria for evaluation of exemptions and one that will invite the participation of workers and worker representatives as well as employers and other interested stakeholders. In any review of exemptions, a consistent policy framework informing such review is essential. So, too, is the recognition of the importance of equal protection and responsibility for employees and employers unless other treatment is clearly warranted.
Exemptions and special rules have the potential to recognize that the unique characteristics of some occupations and industries require a different approach from the norm. However, it must also be recognized that an exemption normally reduces employment rights. In our view, therefore, the burden of persuasion to maintain, extend or modify an exemption is high and ought to lie with those seeking to maintain the exemption. The proponents of an exemption should also try to balance the needs and interests of workers with the needs of the particular industry. Moreover, any reduction or modification of employee rights must involve consultation with those affected. To be clear, we view it as essential that worker representatives participate fully in this process so that employee interests can be heard and taken into account.
We outline below an approach to current exemptions by creating 3 categories:
As noted above, existing exemptions are divided into 3 categories.
For category 1 exemptions, we ask for submissions on whether there are reasons to maintain, modify or eliminate such exclusions. Our preliminary view is that these exemptions need not be subject to a subsequent review. If there are reasons why these exemptions should be referred to a subsequent review process and not be dealt with as part of the Changing Workplace Review, we invite stakeholders to make submissions on this issue as well. These exemptions are:
Category 2 exemptions are recent modifications (i.e., SIRs) created since 2005 in accordance with a policy framework and after a thorough consultative process involving stakeholder representation. Our preliminary view is that a current or subsequent review to consider the modification or elimination of these exemptions is not warranted. We ask for submissions from stakeholders on whether there are reasons to review these recent special rules at this time. These exemptions are:
Category 3 contains the remaining exemptions (see the end of section 5.2.3 for list of remaining exemptions) that we think should be reviewed using a transparent and consistent review process to determine whether an exemption is justifiable. For these exemptions, we seek submissions as to the proper process to be implemented for the review and assessment of the current exemptions as well as for the review of proposed new exemptions that may be proposed in the future. We have set out some options for such a review process below.
Option 1: Use the policy framework developed by the Ministry for the SIRs process described above and use the criteria developed by the Ministry in the SIRs process to evaluate the exemptions.
Option 2: Create a new statutory process to review exemptions with a view to making recommendations to the Minister for maintaining, amending or eliminating exemptions/special rules as follows:
Option 3: Create a new statutory process where the OLRB would have the authority to extend terms and conditions in a collective agreement to a sector.
Essentially this option is one where the Cabinet’s power to enact terms and conditions of employment for an industry would be given to the OLRB:
Existing exemptions that we might recommend for elimination or variation without a further review beyond the Changing Workplaces Review:
“Information technology professional” is defined under ESA Regulation 285/01 as “an employee who is primarily engaged in the investigation, analysis, design, development, implementation, operation or management of information systems based on computer and related technologies through the objective application of specialized knowledge and professional judgment.”
Information technology professionals are exempt from all the hours of work rules (daily and weekly limits on hours of work, mandatory rest periods and eating periods) and overtime pay provisions. These exemptions have been in place since 2001 and were created in response to requests by industry stakeholders. It appears that the request for an exemption may have been made in conjunction with fears over the possible instability of computer systems in conjunction with the “Y2K” issue. It is not clear to us that people who were employed in the industry were consulted.
Industry stakeholders argued that timely support from information technology professionals is often needed to preserve the integrity of information technology systems and to prevent problems or deficiencies in their operation from becoming worse.
The definition of information technology professionals was meant to be narrow and have limited application. The exemptions were intended to apply only to those employees who work with “information systems” and “use specialized knowledge and professional judgment in their work.” The exemptions are not intended to apply to employees who perform routine tasks that do not require specialized knowledge and professional judgment.
Alberta, British Columbia and Nova Scotia allow for exemptions for information technology related work. In Alberta, “information systems professionals” are exempt from maximum hours of work, rest periods, eating periods and overtime pay. In British Columbia, “high technology professionals” are exempt from rest periods, eating periods, overtime pay and public holiday pay. In Nova Scotia, information technology professionals are exempt from overtime pay.
We heard from some individuals about this issue. The Ministry has also told us that concerns are often expressed to it.
The argument is made that it is not clear why this one industry is exempt from all of the ESA provisions dealing with hours of work and overtime. There are many other industries where urgent action or response is critical, and longer hours are required to fix equipment, ensure timely production, meet deadlines, etc. In most of these other industries the ordinary rules of the Act apply, so many critical areas, such as the provision and repair of power facilities, the operation and repair of power lines, emergency health care, stock exchanges, and many others are covered by the ESA. It is unclear what special factors justify this particular exclusion.
Assuming there is a justification for the exemption, information technology employees have repeatedly stated that the exemptions are being misused, either inadvertently or intentionally. Employees who appear to do routine computer support, maintenance and upgrading functions, or have jobs such as designing software for computer games, are complaining that they have been told they have no hours of work or overtime pay rights. It does not appear to us that the exemptions cover these types of work.
While a modified exemption may be justifiable, it is unclear to us why there is a wholesale exemption of all the hours of work rules including daily and weekly limits on hours of work, mandatory rest periods and eating periods, and overtime pay and why at least some limits are not appropriate.
It is argued that the definition of information technology professional is open to significant interpretation and is unclear, and thereby creates the risk of being applied in circumstances that were not intended.
The exemptions for “pharmacists” are in ESA Regulation 285/01 and apply to “persons employed as duly registered practitioners of pharmacy and students in training to become practitioners.”
Pharmacists are exempt from all the hours of work rules (daily and weekly limits on hours of work, mandatory rest periods and eating periods), overtime pay, PEL, public holidays, vacation with pay and minimum wage. It is assumed that, as professionals, pharmacists have an obligation to respond to patients’ needs, and interruptions in their work for rest may not be possible at times and that exemptions were granted. Also, at the time this exemption was granted many more pharmacists were likely self-employed drugstore owners and it may not have appeared to have been a significant issue.
Pharmacists have the same exemptions as many other professions under the Act, such as physicians and surgeons, chiropractors, dentists and physiotherapists. Many of these exemptions for professions are longstanding and were granted as a result of requests from professional governing bodies. Each of the exempted professions is governed by a different professional body. Pharmacists are governed by the Ontario College of Pharmacists.
Manitoba and New Brunswick are the only other jurisdictions that allow for exemptions for pharmacists. In Manitoba, pharmacists are exempt from rest periods, eating periods, overtime pay, public holiday pay and minimum wage. In New Brunswick, pharmacists are exempt from public holiday pay.
|Jurisdiction||Exemptions for Pharmacists|
All hours of work rules (daily and weekly limits on hours of work, mandatory rest periods and eating periods), overtime pay, public holidays, vacation with pay and minimum wage
Newfoundland and Labrador
Prince Edward Island
Public holiday pay
Rest periods, eating periods, overtime pay, public holiday pay and minimum wage
During consultations we heard from several individual pharmacists regarding requirements to work excessive hours with no breaks and concerns about the safety and quality of pharmaceutical care because of these poor working conditions. The Ministry has also told us that they regularly receive correspondence on this issue.
We also heard during consultations that the nature of work and the work environment for pharmacists has changed drastically over the last decades. Many pharmacists are employees who have no control over their work environment and that it is not uncommon for pharmacists to have non-pharmacist employers. Corporately owned stores that commonly require shifts of 12 hours or more with no guaranteed breaks have replaced many independent pharmacies. The health consequences to individual pharmacists and the increased risk of medication dispensing errors are factors to be considered.
Employees who are classified as managerial or supervisory are exempt from overtime pay and from the rules which govern maximum daily and weekly hours of work, daily and weekly/bi-weekly rest periods, and time off between shifts.
Managerial and supervisory employees are defined as those whose work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an “irregular or exceptional basis.” This means that the supervisor/manager exemption can apply even if the employee is not exclusively performing supervisory or managerial work.
“Exceptional” suggests that non-supervisory or non-managerial duties may be performed as long as they are outside the ordinary course of the employee’s duties. “Irregular” implies that although the performance of non-supervisory or non-managerial duties is not unusual or unexpected, their performance is unscheduled or sporadic; “irregular” may also depend on the frequency with which such duties are performed and the amount of time spent performing them.
The fact that an employer calls an employee a “supervisor” or “manager” does not mean that the exemption will automatically apply. The employee’s actual job duties would need to be assessed.
The number of workers in the labour force who report working in management occupations has remained relatively constant, and even declined over time, ranging from a high of 10.7% in the mid-1990s to a low of 8.5% in 2014.
Many provinces exempt managers from overtime pay (exceptions are New Brunswick, Newfoundland and Labrador, and Prince Edward Island). Most provinces also exempt managers from at least some hours-of-work rules. Alberta and British Columbia, for instance, exempt managers from rest period and eating period rules.
The American federal FLSA exempts certain executives and administrative employees from minimum wage and overtime requirements. The exemptions for executives and administrative employees are based on a “salary-plus-duties” test. The employee must perform certain specified duties and be paid a certain salary in order to be captured by the exemptions.
Exempt if the following conditions are met:
Exempt if the following conditions are met:
Highly Compensated Employees
Employees who perform office or non-manual work and are paid total annual compensation of $100,000 or more are exempt if they customarily and regularly perform at least one of the duties of an exempt executive or administrative employee identified above.
The DOL is updating the salary threshold for the exemptions. Under the new rule, which will come into effect on December 1, 2016, the standard salary level will be set at the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage census region (currently the south); this will be $913 per week ($47,476 annually for a full-year worker). The high income exemption will be set at the 90th percentile of earnings for full-time salaried workers nationally, which will be $134,004. Both salary figures will be automatically updated every three years, beginning on January 1, 2020.
The DOL estimates that, in the first year, 4.2 million currently exempt workers could be entitled to overtime. Similarly, it estimates that 65,000 workers currently exempt under the “highly compensated employees” category may become covered.
It is argued that this exemption has a broad cost to workers amounting to $196 million per year in Ontario. It is said that the permission to work unlimited hours and unlimited amounts of overtime is a heavy burden to put on some supervisors and managers, especially those whose remuneration is not high. It is also argued that the interpretation of the term “exceptional” allows prolonged unpaid overtime, for example, the working of unpaid overtime by managers where workers are constantly away owing to a labour dispute.
While the exemption does not distinguish between supervisory and managerial employees, it is questioned whether there is a bona fide rationale for exempting supervisory personnel who generally are not part of a core management team. The question is not whether there is a conflict of interest between the supervisor and the employees they supervise, but whether supervisors controls their own hours of work, have any real bargaining power, or are paid enough to justify the exemption.
There is also a concern expressed about the growing misclassification of managers and supervisors, who often have a title that is used to exclude them unjustifiably because they are often lower-age staff who find themselves performing significant non-managerial functions without protection from working excessive hours of work and not being paid overtime. It could be argued many such employees also do not set or control their own hours and are exploited by the exemption.
Rationales in favour of the exemptions include the ostensibly strong bargaining position of such employees, the ability of such employees to control their own hours of work and cost to the employer. Some employers have argued that the exemption should be broadened to look at the primary function of such persons by looking at their compensation levels and training and not take into account whether part of their work includes doing the work of non-managerial or non-supervisory employees. In retail, for example, it is argued that managers’ and supervisors’ serving customers as part of the team should not convert them into regular employees entitled to overtime. We also heard that the definition of manager/supervisor is too vague, can be difficult to apply properly, and that a minimum salary threshold for overtime eligibility should be considered.
Exemptions and special rules for “residential care workers” in ESA Regulation 285/01 have been in place since 1982.
A residential care worker is defined as “a person who is employed to supervise and care for children or developmentally handicapped persons in a family-type residential dwelling or cottage and who resides in the dwelling or cottage during work periods, but does not include a foster parent.”
According to the definition:
Residential care workers are exempt from the hours of work and eating periods (daily and weekly limits on hours of work, mandatory rest periods and eating periods) and overtime pay provisions. However, they are entitled to 36 hours free time each work week. They have special rules regarding minimum wage entitlement, records of hours and rules defining when work is deemed to be performed.
At the time of the creation of this exemption, the government was implementing a de-institutionalization policy. This involved moving children and developmentally disabled adults out of large institutions and, in as many cases as possible, placing them in the community in home-like settings, preferably in a family-type group home.
The definition of residential care workers was meant to be narrow and apply only to those homes where the parent-model, with its continuity of supervision by the same persons, was of significance in the rehabilitation and well-being of the person being cared for. The “live-in” aspect of the position is also an important element in defining this model of care and in defining this category of worker.
The exemptions and special rules for residential care workers were intended to cover workers responsible for supervision and care of children or adults with developmental disabilities during the patients’/residents’ sleeping and eating periods as well as during entertainment and/or recreational periods inside or outside the home.
The residential care workers exemption has been identified as potentially out-dated and perhaps irrelevant. The strict definition of this type of worker reflects the intent in the 1980s – that the exemptions and special rules be narrowly applied to a specifically defined worker, serving a specifically defined client. The specific scenario that this regulation once applied to may no longer exist.
The exemptions for “residential superintendents, janitors and caretakers” are in ESA Regulation 285/01 and apply to superintendents, janitors and caretakers of residential buildings who reside in the building. The individual must actually live in the building for which he or she is responsible or in another building in the same complex.
These occupations are exempt from some hours of work rules (daily and weekly limits on hours of work and mandatory rest periods), overtime pay, public holidays, and minimum wage. These exemptions have been in place at least since 1969. The exemption reflects the requirement to deal with frequent and unpredictable events or demands that arise from tenant concerns or emergencies. The result can be sometimes long and unpredictable hours of work.
The Residential Tenancies Act, 2006 (RTA) requires owners/landlords to maintain the property in a good state of repair. It is typical practice to answer maintenance requests in the order of their urgency, but all legitimate requests must be answered within a reasonable time. It does not require 24-hour site service.
British Columbia and Nova Scotia are the only other provinces that have exemptions for superintendents. However, their exemptions are narrower than those in Ontario. In British Columbia, superintendents are exempt from eating periods and overtime pay. They are also subject to a special minimum wage rule, under which they are entitled to a monthly base wage and a certain amount per unit supervised. In Nova Scotia, they are only exempt from overtime pay.
We heard only a little during the consultations, but in addition the Ministry has told us that concerns on this issue are often expressed to it.
Letters received raise concern about the lack of employment rights. Generally, individuals have raised concerns about the long hours and the little, if any, free time available for individuals in these jobs. Employees suggest that they are expected to be available 24 hours a day, 7 days a week.
While the rationale for the exemptions is in part the difficulty in monitoring employees engaged in this type of work that is off-site from the employer, technology has changed dramatically and there may well be ways in which work hours can be monitored. The fact that most Canadian jurisdictions do not restrict the rights of such employees could suggest that the Ontario law needs to be reconsidered.
There is a separate minimum wage for students under 18 who work no more than 28 hours per week when school is in session, or work during a school break or summer holidays. For such employees the minimum wage is $10.55 instead of $11.25. Among students who are affected by the special rules for a student minimum wage, 52,000 (59%) report earning less than the general minimum wage, suggesting that employers are using this provision. It has been estimated that the individual cost of this special rule is a median of $8 per week per employee, and the weekly cost to all student employees in Ontario is approximately $482,000.
Ontario is the only province with a lower minimum wage for students.
The Ministry states that the rationale for the student minimum wage is “to facilitate the employment of younger persons, recognizing their competitive disadvantage in the job market relative to older students who generally have more work experience and may be perceived by employers as more productive”. Proponents of the lower rate believe it is necessary to give employers an incentive to hire younger workers and that youth employment would decline if the special rate was not there.
Student groups strongly sought the end of the special rate as it is considered purely discriminatory and the students need the higher income. Similarly, employee advocacy groups have recommended that the student minimum wage be eliminated.
Liquor servers are covered by a minimum wage of $9.80 instead of the general minimum wage of $11.25. This is intended to recognize that such servers earn additional income from tips and gratuities. It is said that among the approximately 45,900 liquor servers in Ontario, about 9,000 (20%) report earning less than the general minimum wage, even after reported tips and commissions. For these employees, the median cost of this lower minimum wage – the difference between their reported wage and the general minimum wage – is approximately $21 a week, based on their usual hours of work. Across all liquor servers, the cost of this special rule was calculated at approximately $258,900 per week.
We note that the Ontario Legislature recently passed the Protecting Employees’ Tips Act, 2015, which prohibits employers from taking any portion of an employee’s tips or other gratuities, except in limited circumstances. The Act came into force on June 10, 2016. The impact this Act may have on liquor servers’ incomes remains to be seen.
Alberta and British Columbia are the only other provinces with a lower minimum wage for liquor servers. Quebec has a lower minimum wage for tipped employees.
Employee advocacy groups recommended that the liquor servers’ minimum wage be eliminated.
(Note: Issues regarding reporting pay are dealt with in section 5.3.2 on Scheduling).
Students of any age and with any hours of work are exempt from what is known as the “three-hour rule” or “reporting pay.” Under this rule, when an employee who regularly works more than 3 hours a day is required to report to work but works less than 3 hours, he or she must be paid the higher of:
Almost all Canadian jurisdictions have requirements concerning reporting pay; two have different rules that apply to certain students.
In Saskatchewan, there is a minimum call-out pay of 3 hours if an employee reports to work and there is no work or the employee works fewer than 3 hours. This rule does not apply to students in Grade 12 or lower during the school term; if these employees work, they are paid only for the time worked with a minimum of 1 hour.
In Alberta, there is a general “three-hour rule” when employees are required to report to work. However, certain employees only have to be paid for two hours; this includes adolescents (12-14 years of age) who work on a school day, but these employees are prohibited from working more than two hours a day on a school day in any event.
It is said that this provision is unfair to all students who need the protection as much as anyone. The criticism is that the exemption subjects them to discriminatory and harsh scheduling practices by allowing employers to send students home without any payment beyond what was already worked. This provision incentivized employers to schedule students irresponsibly and adversely affected students compared to other workers. We did not receive submissions from the employer community on the student exemption specifically, although we did hear about the rule in the context of scheduling issues more broadly.
In the past few years, there has been widespread reporting of the growth in unpaid internships.
The ESA provides an exclusion for “interns/trainees” (referred to as “person receiving training” under the Act). The conditions that must all be met for the exclusion to apply are as follows:
In April 2014, and again in September 2015, the Ministry conducted proactive enforcement blitzes, focusing on interns at workplaces across the province. Ministry officers checked for contraventions of the ESA and whether those individuals are employees under the ESA and, therefore, entitled to be paid.
In the 2014 blitz, out of 31 employers who had internship positions, 13 employers were found to be in contravention of the Act.
In the 2015 blitz, out of the 77 workplaces that had internships, 18 employers were found to be in contravention of the Act.
The Act provides exclusions for secondary students who are participating in a board-approved work experience program and for approved programs provided by universities and colleges of applied arts and technology. We are not commenting on these exclusions.
In the expectation of receiving training and valuable work experience, some individuals may be attracted to unpaid “intern/trainee” opportunities that will help them secure decent paid employment in the future. During consultations, it was asserted that some employers abuse the intern/trainee exclusion by using “interns/trainees” to perform unpaid work that would otherwise be performed by paid employees and where no training similar to that provided in a vocational school is provided. It is suggested that many intern/trainee positions do not comply with the ESA requirements and that some employers misuse the exception to benefit from free labour, with the result that many employees are misclassified as interns or trainees and are denied the minimum standards and the protections mandated by the Act.
Only certain parts of the Act apply to employees of the Crown or a Crown agency, and to their employer. The term “Crown” refers to the government of Ontario. This exception dates back to 1968.
The following provisions of the ESA apply to Crown (i.e., Ontario government) employees and their employer:
The provisions of the ESA that do not apply to Crown employees include:
Not all public sector employers fall within this exception, e.g., hospitals, municipalities, etc.
Ontario remains the outlier among its provincial counterparts owing to the breadth the exclusion of Crown employees.
In Nova Scotia, only deputy ministers or other deputy heads of the civil service are exempt from the overtime provisions. Manitoba uses a salary-based overtime exclusion for Crown employees, which applies to those making above $34,497 per year. Several provinces – including Alberta, Manitoba, New Brunswick, Nova Scotia and Saskatchewan – explicitly provide that Crown employees are covered by employment standards legislation.
In the federal jurisdiction, most federal Crown corporations are covered by Part 111 of the CLC but the public service is not.
Several provinces stress inclusion – including Alberta, Manitoba, New Brunswick, Nova Scotia, and Saskatchewan – noting explicitly that Crown employees are covered by employment standards legislation.
The exclusion of Crown employees in Ontario has been raised as an issue during consultations by labour groups who contend that there is no rational basis to exempt Crown employees from ESA protections. They assert that notwithstanding high union density in the public sector, these exclusions affect Crown employees – particularly non-unionized and contract employees who may experience inequitable working conditions as a result.