Canada: The Ministry Of Labour Is Coming For Retailers: 5 Common ESA Violations

The Ministry of Labour (MOL) conducts inspections to ensure compliance with the Employment Standards Act, 2000 (ESA). The MOL targets employers in (as they put it) "sectors where there is a history of employment standards violations and where vulnerable workers are employed." Thankfully, at least the MOL announces the targeted sector so that employers can prepare. This time, the target is the retail industry.

The "blitz" (as the MOL terms it) will take place from October – December 2013 and will deal with such issues as record keeping, deductions from pay, hours of work, eating periods, overtime pay, minimum wage, public holidays and vacation pay. As someone who advises many retailers, and to assist retailers in passing any inspection (in the unfortunate event the MOL comes knocking), here are five employment standards violations I see with retailers:

  1. Not all "managers" are overtime exempt.  As I noted in a previous post, only true managers are excluded from overtime pay. In other words, the employee must have actual authority over workers (e.g., direct, supervise, hire, fire, performance manage, schedule, etc.) or, alternatively, participate in substantial policy making or budgetary decisions. In addition, the employee must only perform non-managerial/non-supervisory tasks on an irregular or exceptional basis. Employees who are paid a salary or who merely have the title of manager/assistant manager will not be excluded on that basis alone. Non-compliance with overtime pay can lead to significant liability.
  2. Careful in calculating holiday pay.  The ESA rules around holiday pay are technical (and confusing). As such, some retailers do not properly calculate statutory holiday pay for employees. For example, if an employee agrees to works on a holiday (instead of receiving a substitute day off with pay), the employee is entitled to "public holiday pay" + "premium pay" for the hours worked on the holiday. Sometimes I see retailers pay the "premium pay" (time-and-a-half) but forget to pay the "public holiday pay" (which is based on a a formula of the last 4 weeks' wages divided by 20). This could equal 2.5 x the employees' pay if the formula comes out to a day's pay. The MOL has a useful public holiday pay calculator.
  3. Time off in lieu of overtime pay. Some retailers allow employees to take paid time off work in lieu of overtime pay. This is permissible under the ESA. However, just as overtime pay must be compensated at "time-and-a-half", time off in lieu of overtime must be as well. In other words, for each hour of overtime worked, the employee is entitled to 1.5 hours off work with pay. As an example, if an employee works 2 hours of overtime in a week, that employee should receive 3 hours off (2 x 1.5) with regular pay (not 2 hours off).
  4. "Use it or lose it". A common policy in many workplaces forces employees to take vacation or else the vacation entitlement disappears at the end of the year. This is especially common when a retailer adopts a U.S. vacation policy. While providing an incentive to take vacation is laudable, such policies can be contrary to the ESA. The ESA provides that employees must receive 2 weeks' vacation and take such vacation within 10 months of earning it. In addition, employees must receive at least 4% of wages as vacation pay each year. Depriving employees of these entitlements on the basis of a "use it or lose it" policy is not only offside, but potentially costly.
  5. Service accrual during maternity leave.  Many retailers understand the general rule that an employee on maternity leave has job protection in the sense that, upon returning to work, she is either entitled to her job back or a comparable position if her job no longer exists. However, sometimes retailers do not properly recognize the employee's service during the leave. Under the ESA, an employee on leave is generally entitled to have his or her service recognized for rights/benefits under an employment contract. An example would include an employee who, under an employer policy, requires 2 years of service to receive 3 weeks' vacation. If an employee spends 1 year on maternity leave and 1 year actually working, the employee should generally receive the 3 weeks' vacation.

The ESA is very technical legislation. It is designed for the protection of employees and is interpreted against the employer. MOL Inspectors have a wide array of powers in the event of a violation, including issuing orders to pay wages to affected employees. There is also potential prosecution. They have not been shy to use these powers and the MOL has even hired more inspectors recently. As such,  now is as great a time as ever to review your employment standards compliance.

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