Should We Imprison Employment Standards Violators?

Sometimes when I teach employment law, I begin with a short documentary about Canadian garment workers who are paid a few dollars in day, far below the minimum wage they are legally entitled to.  I like this clip because it quickly disabuses students of the notion that employment standard laws protect workers from bad employers.  They don’t.  Employment standards legislation is only as effective as the state’s ability and willingness to enforce the standards, which in recent years has been very low.  Non-compliance with employment standards is high.

Take the story in the Star today about an employer who hired university and high school students to work at his pool maintenance and service company as administrators and lifeguards. The villain in this story is an upstanding character named  Peter Check, who sets up companies, hires young employees, and then doesn’t pay them.  According to the Star, he then puts the company into bankruptcy, so the employees’ debts are wiped out.  Then, later, he sets up a new company, and hires a new batch of students and does the same thing all over again.  When I used to work at Parkdale Community Legal Services, I saw this sort of thing all the time.
Now, three years later, the Ministry of Labour is still trying to get some money out of this loser for the workers.  But it is having difficulty, because Check has bankrupted the companies and has been careful to put all of his assets into his wife’s name so he can claim he can’t afford to pay his debts to the workers.

What can the government do to ensure workers are actually paid their statutory entitlements?

Well, usually the answer proposed is to improve enforcement.  But that’s just talk, because governments today show no inclination to actually put more money into employment standards enforcement.  Another option is to impose fines or penalties, or permit  enforcement against Directors personally.  Both of those powers already  exist under the ESA in Ontario, but they don’t seem to be helping the government very much deal with bad employers like Check.

Another option is to throw bad employers who refuse to comply with the ESA into jail as criminals and give them a criminal record.  I like that one.   I’m not talking about the employer who makes a mistake, and when ordered to pay, does so.  I’m talking about employers who deliberately violate the ESA and arrange their affairs so as to avoid satisfying their legal obligations.

In fact, the power to imprison rogue employers already exists, in Section 132.  Unfortunately, it isn’t used nearly enough, I think because we treat ‘white collar crime’ too leniently in this country.  I would use criminal sanctions more often to punish employers who flagrantly violate employment legislation.  And 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.

Also, I would require employers convicted for ESA violations (which would include all those companies listed on the government’s Bad Employer Sunshine list ) to disclose to all future job applicants that the company has been convicted previously of violating employee protections legislation.  That would give the employees 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 Neoclassicalist’ friends, this is information that is relevant to the market, 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.  That’s only fair, right?