Taking Action Against Wage Theft

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1 Taking Action Against Wage Theft Recommendations for Change WAGE THEFT! May 2011

2 The Workers Action Centre s report, Unpaid Wages, Unprotected Workers, 1 exposes a reality of work where wages, overtime and vacation goes unpaid and people work at less than minimum wage. Based on a survey of 520 people in low-wage and precarious work, this study demonstrates that vital protection of core rights are failing people in precarious work. Of workers surveyed, 22% earned less than minimum wage An additional 22% worked at minimum wage that is 10% below the poverty line in % of those that worked overtime failed to receive overtime pay 36 % of workers were fired or laid off without termination pay or notice 34% had problems getting their vacation pay. 33% of workers reported being owed wages from their employer; and 77 % of these workers were unsuccessful in obtaining the wages owing to them. Sixty-four percent of workers surveyed made $12.50 or less. The average industrial wage is $ Workers want a fair day s pay for a fair day s work without the pressure of working excessive overtime or juggling more than one job. Unpaid wages threw many of these workers into financial hardship and emotional stress. Workers reported feeling like they worked hard, without rights, without protection. Action must be taken when an average of one in three people in low waged, precarious work face violations of core minimum standards. This fact points to the unravelling of fundamental rights and protections that should be at the core of our labour market. Work is leaving too many workers and their families struggling with job insecurity and poverty. More people are working part-time or on contract, often juggling two or three jobs. Workers face more difficulty planning their daily lives and supporting families. Hours and schedules are increasingly undependable. Many jobs today fail to provide supplemental health benefits, sick pay or pensions. In 2008, Statistics Canada found that recent immigrants were more likely than Canadian-born workers to be forced into temporary or part-time jobs, end up in jobs for which they were over-qualified, and be paid lower wages. 2 When employers shift work beyond the reach of regulation to avoid minimum standards, workers, families and our local communities and economy suffer. When the floor of labour standards is driven down or dismantled altogether, all of us -- not just those at the very bottom are affected. 3 The majority of Ontario s over six million workers in more than 370,000 workplaces 4 rely on employment standards to protect their rights at work. Workers in low-wage and precarious work are least able to negotiate fair wages and working conditions with their employer. These nonunionized workplaces are most in need of effective and inclusive employment standards. However, over the last three decades changes in the organization of work and deregulation of our labour market have eroded employment standards protections. 5 Employment standards set minimum terms and conditions of work such as wages, hours, vacations, leaves, termination and severance of employment. They reflect society s norms about what standards should be met in our jobs and labour market. Such norms include the ability to earn wages that are sufficient to live on and decent conditions of work that allow a person to balance work and family life. 6 Employment standards are supposed to establish a minimum floor for those who have the least ability to negotiate fair wages and working conditions. Not only is the Employment Standards Act (ESA) a central feature of labour market regulation, it is also an important social policy tool in fighting poverty. The Ontario government has stated that poverty reduction is a key goal of the Employment Standards program -- poverty reduction will be aided by improving the protection of vulnerable workers and to ensure fair workplaces by getting tough on employers who contravene employment standards legislation and regulations. 7 Workers expect the Ontario government to live up to this commitment and to make the changes necessary to make a real difference in their lives. Workers Action Centre, May 2011

3 1. Enforce Employment Standards in Ontario Workplaces Our current system of labour market regulation relies on workers who face unpaid wages to enforce employment standards through the individual complaint-driven system. That only works for the few workers who have overcome barriers to enforcement and file a claim with the Ministry of Labour. All too many workers don t contact the Ministry of Labour because they fear retaliation and employer reprisals. Other workers may not know or understand their employment rights or what to do about them. Individual claims do little to protect workers currently in the workplace or ensure employer compliance. Neither do individual claims expose vast areas of our labour market where employment standards are routinely violated (for example, unpaid hours of work and overtime). With limited resources, we need effective multipronged enforcement strategies that target high-violation industries and labour market practices. The government needs to consult with groups working with low-wage workers who have knowledge of violation practices. The Ministry of Labour must make preserving workers jobs, wages and minimum standards a priority. RECOMMENDATIONS 1. Develop strategic enforcement priorities and proactively target employers in high-violation industries and substandard practices Use the $10 million committed by the government in its 2009 Poverty Reduction Plan for a strategic proactive enforcement strategy. Map labour market practices (following up on previous cases of employer violations, new forms of work organization, sectors and industries comprised of concentrations of young workers, recent immigrants, women, racialized workers and other indicators of high rates of employer violations) to develop a strategic plan for inspections and year by year targets. Where an individual claim has confirmed violations, this should be used to trigger a broader investigation of other violations of the employer to protect current employees. 2. The Ministry of Labour should work with workers advocates and community stakeholders to target companies and industries where wages go unpaid. Partner with organizations working directly with precarious workers (e.g., workers centres, community legal clinics, unions, immigrant serving agencies) to identify where violations are occurring and identify what investigative strategies will best uncover employer tactics to evade or disguise violations. Various states in the U.S. have undertaken innovative programs to combat wage violations through collaborations with workers advocates. 8 Allow for anonymous complaints and third party complaints to assist the Ministry in uncovering workplaces for inspection and violations Target practices such as mis-classification of employees as independent contractors and subcontracting. A century ago, work was let through the sweating system (i.e., subcontracting). Today again, employers use this strategy of contracting out work to reduce labour costs and shift liabilities down the chain of production. Coordinate with government agencies and stakeholders to address enforcement of misclassification of employees and address liability for employment rights in subcontracting Increasingly, the employment function is being shared among corporate entities. Enforcement must hold related employers accountable for employment standards violations. Identify employers who misclassify workers as independent contractors and hold them accountable for employment standards violations. Shift the burden of proof: A worker should be presumed to be an employee absent employer proof to the contrary.

4 4. Employer retaliation stops many workers from enforcing their rights at work. Workers need real protection from employer reprisal. The Ministry of Labour must make preserving workers jobs, wages and minimum standards a priority. New rules are needed that: Protect workers who come forward to assert their rights by establishing stiff penalties to punish employers who retaliate against them. Provide interim reinstatement during claims investigation for workers that have been fired for seeking entitlements. Establish a fast-track process for reinstatement. In cases where reinstatement is not feasible, fast-track compensation of workers who have been penalized for attempting to enforce their rights (including all lost wages and costs of employer retaliation) Workers need protection against unjust dismissals to support their efforts to enforce their rights on the job. Establish protection against unjust dismissal that is available to all workers with an expedited investigation process with interim reinstatement. 5. There must be real deterrence to stop employers from violating employment standards The current use of Part I tickets ($350 or less) does not provide adequate incentives to comply with the law. Rather, fines doubling or tripling the amount owed such as provided for in the New York State Wage Theft Protection Act would provide a better incentive. Further, workers should receive interest on all unpaid wages owing. Monies collected as fines could be used to expand proactive inspections, extended investigations and collection activities. 10 Make prosecution policy simple and transparent. Each repeat violation or non-payment of orders must be prosecuted under Part III provincial offences. 6. Support workers to make Employment Standards claims The employment standards complaints process relies heavily on individuals being able to learn what their legal entitlements are, interpret how legal rights relate to their particular experience, gather evidence and write a submission arguing their case. Access to the claims process is largely by internet. Workers have to go back and forth between the ESA guide (over 100 pages), the guide to the claim form and the claim form itself, often going through the three documents on the Ministry of Labour website. Reliance on internet access creates significant barriers for many people in precarious work. Statistics Canada reports that there is a digital divide in the rate of internet use on the basis of income, education and age. If you are poor, older, have less formal education, live in a rural community and were born elsewhere, you are less likely to use or have use of the internet. 11 Recent immigrant communities face the lowest incomes and are more likely to be forced into temporary, part-time and precarious jobs. It is these workers, who often face language barriers, who are most in need of employment standards protection and assistance in accessing these rights. So workers are left to learn how to make a complaint on their own. Employment standards stand alone in the regulation of employment rights in having no government or quasi-government funded assistance for workers who believe their rights have been violated. 12 One of the most effective strategies to streamline the process and reduce the backlog would be to provide, as a first step in the claims process, assistance to workers to prepare their claim so that investigators can expeditiously adjudicate the matter.

5 2. Update Labour Laws to Protect All Workers Many workers are deprived of employment rights, benefits and protections because their work arrangements don t conform to the standard employment model underlying labour standards, policies and practices. For example, employers are passing business costs on to workers such as purchasing cleaning supplies for cleaners RECOMMENDATIONS or gas and car maintenance for couriers. Such practices push these workers into a grey area of employment status. The Ministry of Labour should close the gaps in employment standards that leave workers without protection against wage theft. 1. Expand scope of ESA to protect all workers The scope of the ESA should be expanded to include all precarious forms of employment. This is necessary to improve regulatory effectiveness in our changing labour markets. The starting point should be that all workers are entitled to minimum labour standards. The definition of employee must be broadened along the lines of Ontario s Health and Safety Act, which defines a worker as a person who is paid to perform work or supply services. Contracting and subcontracting employers must be made accountable for employment standard violations. Employers, who enter into contracts with subcontractors and other intermediaries, either directly or indirectly, must be liable both separately and together for money owed and statutory entitlements under the ESA and its regulations. This would bring Ontario in line with Québec s Act Respecting Labour Standards which makes companies that engage subcontractors jointly liable for monetary obligations. Identify employers who misclassify workers as independent contractors and hold them accountable for employment law violations. There should be a reverse onus in which a worker is presumed to be an employee unless the employer can provide proof to the contrary. 2. No exemptions Exemptions from provisions of the ESA create a patchwork of rights and entitlements from basic, minimum standards. For example, information technology workers are excluded from hours of work and overtime protections, resulting in excessive overtime with no right to refuse. This practice contravenes the purposes of the ESA which are to establish a floor of minimum standards for all workers. 3. Equal pay for equal work There should be no discrimination in pay and working conditions for workers doing the same work but classified differently, such as part-time, contract, temporary, self employed. The ESA has a role in establishing a framework for equality among workers doing comparable work. The government should not enable employers to impose inferior conditions on workers, primarily women, racialized workers, immigrant workers and young workers, simply because of the form of employment or employment status. This measure would help bring the ESA in line with the Ontario Human Rights code. 4. Update time limitations and monetary caps to reduce barriers to employment standards remedies. The increase in minimum wage and barriers to enforcing employment standards leaves many workers owed substantially more than the $10,000 cap on monies recoverable under the ESA. Bring the ESA limitation periods and amount of wages recoverable in line with Ontario s small claims court. Extend the monetary limit on monies that can be recovered to $25,000 and extend the time limit to 2 years to recover wages and entitlements. 5. Updating other Standards Many provisions of the ESA date back over 40 years. It is time that these basic standards on hours of work, vacations, leaves and termination are updated. For example, there are already six jurisdictions within Canada that provide a 40-hour work week, with overtime thereafter. It is time that Ontario catches up with the common practice of overtime pay after 40 hours a week. Ontario still only provides 2 weeks of paid vacations after one year of employment which pales in comparison to many European countries, that average more than five weeks annual paid leave to balance work and family life. The government should commit to consulting workers advocates and community groups on how basic standards of hours of work, vacations, sick days, leaves and terminations should be updated.

6 3. Increase the Minimum Wage to Bring Workers Out of Poverty No one should work full-time yet still live in poverty. RECOMMENDATIONS The minimum wage should be based on the principle that a person working full-time, all year, should at least earn enough to be at or above the poverty line. No one should work full-time yet still live in poverty. Further, a fair minimum wage policy should ensure protection against inflation. An annual cost-of-living increase would provide a basic level of financial stability for Ontario s lowest paid workers. Ensure the minimum wage brings workers out of poverty and increases annually with the cost of living. 4. Equal Status and Protection for All Workers Regardless of Immigration Status Remove barriers to employment rights and protections facing temporary foreign workers, workers without status and workers with precarious immigration status. RECOMMENDATIONS 1. Expand the Employment Protection for Foreign Nationals Act (Live-in Caregivers and Others), to include all workers, especially other classes of temporary foreign workers. Temporary foreign workers are currently facing agency fees of $5,000 to $10,000 for placement in employment under the temporary foreign worker program. The prohibition of fees for work or charging workers for recruitment costs should cover all workers not just live-in caregivers. 2. Many temporary foreign workers are repatriated by their employer or deported when they try and enforce their rights. The current anti-reprisals protections do little for temporary foreign workers or those without regularilized status. Ontario and the federal government should establish a program that would grant open work permits in cases where workers make complaints about labour law violations (ESA, OHRC and WH&SA, WSIB) to ensure equal recourse to labour laws. 3. Remove exemptions for farm workers, harvesters and associated farm work under the ESA which disenfranchise many workers from obtaining basic wage and hours of work entitlements. 4. Comprehensive immigration reform including permanent residency status for workers under the Temporary Foreign Workers Program and an inclusive regularization program for people without status.

7 Notes Workers Action Centre (2011) Unpaid Wages, Unprotected Workers: A Survey of Employment Standards Violations Statistics Canada (2009) Study: Quality of employment in the Canadian immigrant labour market The Daily Monday November 23, Bernhardt, Annette, Heather Boushey, Laura Dresser and Chris Till (eds) (2008) The Gloves Off Economy: Workplace Standards at the Bottom of America s Labor Market Labor and Employment Relations Association Series. In 2008 there were 371,533 firms. Source: Statistics Canada (2008) Canadian Business Patterns Database, December Number of Establishments by Type and Region: December 2008 Canadian Economy (NAICS 11-91) See Thomas, Mark (2009) Regulating Flexibility: The Political Economy of Employment Standards. Montreal and Kingston: McGill-Queen s University Press; Saunders, Ron and Patrice Dutil (2005) New Approaches in Achieving Compliance with Statutory Employment Standards. Canadian Policy Research Network. Online: and, Vosko, Leah F. (ed.) (2006) Precarious Employment: Understanding Labour Market Insecurity in Canada. Montreal and Kingston: McGill-Queens University Press. Arthurs, Harry (2006) Fairness at Work: Federal Labour Standards for the 21st Century, Ottawa: Federal Labour Standards Review. Ontario Ministry of Labour (2009) Ontario Helping Live-in Caregivers Press Release, October 21, s009/10/ontario-helping-live-in-caregivers.html For example in 2009, the New York State Department of Labor, under the Wage and Hour Watch program, has entered a formal partnership with six community organizations to conduct oversight in specific geographic areas with heavy concentrations of low-wage employers. In 2006, California s Division of Labor Standards Enforcement established its Janitorial Enforcement Team, which works closely with Maintenance Cooperation Trust Fund, a janitorial watchdog organization established in 1999 by Local #1877 of the Service Employees International Union following revelations of persistent violations in the janitorial Industry. See Janice Fine and Jennifer Gordon, (2010) Strengthening Labor Standards Enforcement through Partnerships with Workers Organizations Politics & Society, 38(4) The government has recognized the importance of anonymous complaints in uncovering violations as demonstrated in the introduction of Bill 210 to protect live-in caregivers whereby ESOs will be authorized to act on tips to conduct proactive investigations and audits. Similarly, Health and Safety officers regularly investigate workplaces on the basis of anonymous complaints. Monies from fines and prosecutions currently go in to the provinces general revenues fund. Although those immigrants arriving in the last 10 years that live in urban centres are slightly more likely to use the internet than Canadians as a whole. Statistics Canada (2008) The government provides direct and indirect funding for information, education and legal support in areas of Health and Safety, Workplace Safety and Insurance and Human Rights, (e.g., Occupational Health Clinics for Ontario Workers, Office of the Workers Advisor, Human Rights Legal Support Centre).

8 Workers Action Centre 720 Spadina Avenue, Suite 223 Toronto, ON M5S 2T

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