Banning Orders: Should Persistent Labour Standards Violators Be Denied the Right to Run a Business?

Written by David Doorey, York University

I’m intrigued by a New Zealand law, introduced in 2016, that permits a labour court to essentially shut down a business and to ban a person from entering into employment contracts, acting as an officer of a company, or being involved in hiring employees.  A “banning order” can be made as a penalty for “persistent breaches” of employment standards legislation. The power to issue banning orders is found in Section 142M of the New Zealand Employment Relations Act, 2000.

Harnessing Risk to Provoke Legal Learning and Compliance

I have argued for many years that our system of labour standards enforcement in Canada is too weak and is poorly designed.  Our enforcement machinery fails to incentivize employers to invest in learning the laws and it fails to disincentivize and prevent persistent, deliberate violations by unscrupulous employers.  I described some of these rogue employers in this post from a few years back, in which I argued that the existing right to imprison employers who are persistent labour standards violators should be used more frequently.  I’m talking about deliberate, persistent violators, not the employer who just makes a mistake or is sloppy.  Remedies that simply order back-wages, compliance orders, and relatively small fines are reactive and weak.  Remedies and penalties need to provoke even rogue employers to learn and comply. That requires the law to alter the risk equation so that it makes more sense to comply than not comply with employment protection laws.

Prison is perhaps the ultimate sanction for wage thieves.  However, I have also advocated other types of remedies that would cause businesspeople to perk up, learn the law, and comply.

For example, I argued in a paper called A Model of Responsive Labour Law published in the Osgoode Hall Law Journal back in 2012 that among the remedial arsenal available to labour boards as a remedy for persistent or egregious labour standards violations should be the ability to order that employers remain neutral during union organizing campaigns, that such employers must provide a union demonstrating a basic threshold level of support a list of employees and their contact information, and that any union application for certification be dealt with pursuant to the card-check  method of testing employee wishes rather than mandatory certification vote.

In other words, the law would impose a form of “neutrality agreement” on employers who violate labour standards legislation on the theory that employers who won’t bother to learn and comply with basic standards are “low road”, “high risk” employers who have forfeited their right to speak about the supposed benefits of being non-union.  Labour Boards already have broad powers to remedy violations of labour relations legislation that disrupt union organizing campaigns, but I argued that access to unionization for employees of low-road employers should be fast-tracked through broader remedial powers under employment standards legislation. This regulatory technique involves harnessing risk to influence behaviour and provoke legal learning; it would also incentivize unions and other labour activists to assist in bringing statutory complaints on behalf of nonunion workers.  Professor Cynthia Estund of NYU Law has built on this model in her own work.

I’ve also argued in the past (see this post from 2010) that persistent violators of labour standards should be prohibited from being principles in a business, a right they forfeit when they demonstrate a lack of respect for the rule of law.  This is why the New Zealand law is so interesting to me.

The New Zealand “Banning Order”

Here’s the text of Section 142N, which explains what a “banning order” prohibits:

(1) If the court makes a banning order, the order must prohibit the person from doing 1 or more of the following:

(a) entering into an employment agreement as an employer:

(b) being an officer of an employer:

(c) being involved in the hiring or employment of employees.

(2) A person who is subject to a banning order may do something prohibited by the order if the person first obtains the leave of the court to do so.

A banning order can last up to 10 years and it essentially shuts down the affected business and prevents an individual subject to the order from acting as an officer in any business or from being involved in the hiring of any employees.

The New Zealand Labour Court has ruled that the remedy is “draconian” and should be used sparingly.  However, banning orders have been issued. For example, in a 2018 decision called Victoria 88 Limited,  the Court imposed a banning order on an employer and its principal for persistent wage and holiday violations as well as failure to provide notice of termination. The Court has said that a banning order should be perceived as an order that protects the public and workers and that serves a deterrent role. In the Victoria 88 case, the banning order prohibited the employer from entering into any employment contract for three years, basically shutting down the business, and the principal from serving as an officer of any employer, being involved in hiring of any employee, or being a party to an employment contract for three years.

This type of order in Canada would at least prevent employers, like Peter Check, who create a business, exploit workers, disband the company, and then create a new company and repeat the entire process.  The right to create a corporation or serve as an officer of a corporation should be conditional on demonstration of responsible business behaviour, including compliance with basic labour protections.  The New Zealand law provides an example that puts this ideal into practice, and also serves to create a strong incentive for employers to learn and comply with those protections.

What do you think of New Zealand’s “banning order” law?  Is this something Canada governments should consider?  Why or why not?

David Doorey, “Banning Orders: Should Persistent Labour Standards Violators Be Denied the Right to Run a Business?” Canadian Law of Work Forum (May 26 2021): https://lawofwork.ca/banningorders/