Should Wage Stealing Bosses Be Imprisoned?

I have reported in the past on a number of deadbeat employers in Ontario who have been imprisoned for failure to comply with orders to pay wages to their employees.

In 2013, one Peter Check was imprisoned for 90 days for failure to pay nearly $70,000 in wages in a scheme in which he would open pool cleaning businesses each summer, have employees work for him all summer, and then disband the company and claim poverty and inability to pay the wages owed.  Check refused to pay and the court ordered jail plus an additional $15,000 fine.

In 2012, Steven Blondin was sent to jail for 90 days for repeated violations of the ESA and he was ordered to pay $280,000 in wages and fines.

This week, an Ontario Court sentenced Yuk Yee Ellen Pun, the owner/director of a now bankrupt Toronto restaurant chain to 90 days in jail for failure to pay nearly $700,000 in wages and benefits to 68 employees.

In all these cases, the guilty owners had compiled a series of Orders to Pay and

Should Wage Stealing Employers Be Jailed?

ignored them.  The threat of additional fines did not provoke payment and the accused argued they had no money.  In these cases, prison is a last option available in Section 132 of the ESA.  It is used infrequently, in outlier cases such as these.

Years ago, I argued on this blog that the state should prosecute deadbeat employers more frequently and make the prison threat more poignant.  When employers skip out on wages it causes real hardship to the victims.  From the employee’s perspective, there is little practical difference between an employer who refuses to pay $10,000 in wages and being robbed of $10,000 in a holdup.  If the employer has been given an opportunity to make good but fails to do so, prison is an appropriate response to signal that the state treats wage theft as a serious offence.

I make some additional proposals back then:

Restrictions on the Right to Own and Operate Future Businesses

I would go further and restrict those convicted of violating the ESA from registering new companies or acting as an officer of a corporation in the future.  Their name should be registered with the Companies Branch so that they are flagged whenever their name appears as a principal on an incorporation filing or business registration.  This bar could be lifted once all outstanding amounts have been paid, and after a period of time has passed, but even then, these people should be subject to special inspections and reporting requirements, because they have demonstrated they are high risk employers. Acting as a principal of a business is a great responsibility, and people who demonstrate a pattern of law-breaking behaviour have no business running businesses or serving as a Director.

Requirement to Disclose History of Wage Theft to Job Applicants

I would also require employers convicted of wage theft to disclose to all future job applicants that the company has been convicted previously of violating employee protections legislation.   This requirement could be lifted after a period of time with no ESA violations.  This information would give job applicants the opportunity to look elsewhere, to take precautions, or to ‘bargain’ a higher wage rate to offset the added risks. To use the language of our neoclassical friends, information that the employer violates wage laws is relevant to the marketplace, but there is no market incentive for employers to disclose it.  Therefore, this is a textbook example of the need for information disclosure legislation to correct information asymmetries in labour markets.  We allow employers to ask employees to disclose if they have been convicted of a criminal offence so employers can refuse to hire them.  The theory is that an employer should have the information to decide if it wants to hire someone convicted of a crime. We should also require employers to disclose when they have been found guilty of violating employee protection legislation.

Issues for Discussion
1.   Do you think imprisonment for executives, owners, and directors for wage theft is too harsh a sanction?
2.  What do you think of my additional proposals?  What arguments would you make against them?