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An expensive roller coaster ride for employers –  and an action plan

By George Vassos

This has been a roller coaster ride like no other for HR professionals.

The ride started in May 2015 when the Ontario government appointed two special advisors to conduct the “Changing Workplaces Review.” The top of the ride came two years later on May 23, 2017, when the special advisors issued their extensive final report (and a summary report) with 173 recommendations

for amendments to the Employment Standards Act, 2000 (ESA) and Labour Relations Act, 1995 (LRA).

Since May 23, employers have been on the downside of the roller coaster ride. With lightning speed, the government announced on May 30 its intention to pass The Fair Workplaces, Better Jobs Act, 2017 and details of same. Only two days later on June 1, Bill 148 was introduced, and it passed First Reading unanimously. Bill 148 has been referred to the Standing Committee on Finance and Economic Affairs for review (and public input). Committee meetings were announced for June 22; July 10-14 and 17-21; and August 21-25.

The small piece of good news for employers is that Bill 148 amendments are not as extensive as originally feared in light of the 173 recommendations. Beyond that, most employers see nothing more than higher costs flowing from those amendments, including significant increases in minimum wage and equal pay for equal work (e.g., full-time vs. part-time). The proposed effective date for most ESA amendments is January 1, 2018, and six months after Royal Assent for LRA amendments.

The Ontario Legislative Assembly is now in recess until September 8. A “broad consultation process” has been promised with respect to Bill 148, but that process will likely be limited to the committee’s summer review (when many individuals are away on vacation).

There are many initiatives employers should consider undertaking.

1. Conduct an ESA self-audit now

A self-audit is an important tool to evaluate legal compliance, effectiveness of HR and recordkeeping systems and recommended practices; create proactive protection; and develop staff (usually HR).

Every employer should ask whether it is aware of all of its ESA obligations and whether it is currently compliant with all obligations (even before addressing Bill 148 amendments). In addressing these two questions, start with a focus on simple issues:

Is the required ESA poster posted in the workplace, has it been provided to all existing employees and is there a system in place to provide it to all new employees?

If the answer is “no” to any of these, then an employer will be off to a poor start when a Ministry of Labour (MOL) inspector shows up.

In proceeding with a self-audit, an employer has to decide how broad it will be. Certainly, if prior ESA issues have been raised, then any self-audit should address whether those issues have been appropriately resolved. A self-audit can focus on any number of substantive ESA obligations (including hours of work; overtime; averaging or maximum hours; vacation; public holidays) and/or recordkeeping and retention requirements for all such obligations.

Getting organized now on a self-audit can certainly prove to be a valuable precursor to any MOL audit. A proactive self-audit and correction of any noncompliant practices will likely provide a positive starting point for such audit.

Finally, in consultation with legal counsel, consideration should be given to whether lawyer-client privilege is desirable and whether a self-audit should be conducted as the basis for privileged legal advice.

2. Thoroughly review all “contractor” relationships now

Bill 148 amendments relating to misclassification of such relationships are scheduled to be effective on Royal Assent (likely prior to January 1, 2018). An employer needs to carefully identify and examine all relevant documents (including any written agreement) as well as all terms to which any contractor is subject. A comparison must also be drawn between a contractor’s responsibilities and terms and those of a “regular employee.”

If an employer determines that a contractor is not truly “independent,” then a strategy needs to be formulated as to whether to terminate the relationship or to somehow transform it into employment. An employer must assess both the legal and business “pros and cons” of every contractor relationship, and implement a strict approval process as a precondition for any contractor agreement. A risk analysis needs to be undertaken and the employer needs to identify its risk tolerance as it decides whether to maintain a particular contractor relationship.

3. Review potential costs of Bill 148 amendments now

The greater the costs and the more important the Bill 148 issues, the more an employer should be considering whether to assess and pursue advocacy alternatives. There may still be an opportunity to influence the final form of Bill 148. However, amendments governing certain “bread and butter” and “election-friendly” issues (e.g., increasing the minimum wage and increasing the minimum vacation entitlement to three weeks after five years) are less likely to change. Apart from the “broad consultation process,” there may also be an opportunity for direct advocacy with the MOL either through legal counsel or through various organizations (e.g., Coalition to Keep Ontario Working).

4. Thoroughly review all hiring letters, employment contracts, policies, handbooks, plans and collective agreements

Any terms in these documents inconsistent with Bill 148 (and current ESA requirements) must be identified, and appropriate changes need to be drafted. An implementation strategy needs to be developed for final Bill 148 amendments (particularly with a collective agreement where amendments will obviously require union consent).

An employer should also critically examine all termination clauses because of many recent cases that make it more difficult to limit entitlements on termination without cause.

5. In fall 2017, identify appropriate managers for training

This is especially important with respect to misclassification/independent contractor issues.

6. Ongoing monitoring of the MOL’s website announcing ESA inspection blitzes

It is always helpful to know in advance the particular industries targeted for MOL inspection.

In light of the pending Ontario election on June 7, 2018, it is perhaps not surprising that the current descent on the roller coaster ride will be dizzying and certainly much faster than desired by employers. Hold on tight! 

George Vassos counsels employers on a wide variety of labour and employment law issues, including ESA issues, out of the Toronto office of Littler LLP.

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