Unpaid internships were discussed in an April 8th posting in
this blog and it is clear that most Ontario interns have to be
paid. But what about employees in start-up companies?
Can employers provide them with stock options, shareholdings
or the promise of future payment in lieu of current payment
of wages? The short answer is that except in certain
defined circumstances, employees must be paid wages, and they must
be paid on a regular basis from the time that they begin working
for a company.
The Employment Standards Act, 2000 (Ontario) (the
"ESA") defines an employee as "someone who performs
work for an employer for wages". In turn, the term
"wages" is defined as "monetary
remuneration". Section IX of the ESA requires employees
to be provided with "at least the prescribed minimum
The Regulations under the ESA have some exemptions in
relation to Section IX, but they are limited and generally
only apply to certain defined professionals (eg. doctors, lawyers,
engineers, architects, teachers), commissioned salespeople, and
other specified groups of employees (certain student employees such
as camp counselors, and janitors/superintendents who reside in the
building that they are responsible for). It is particularly
important for start-up companies to note that there is no wages
exemption under Section IX of the ESA for information technology
professionals, managers, supervisors or executives.
In addition, because the ESA expressly prohibits employers and
employees from entering into an agreement to circumvent the
provisions of the ESA, it is not possible for a company founder
or similarly-placed employee to agree to forego wages
during the start-up period. The potential risk to
a company which permits employees to work without
receiving at least minimum wage, is that the employee can make an
unpaid wages claim, which in turn can also be a
liability to the directors and officers of the company. In
addition, a failure to pay wages as earned can lead Canada Revenue
Agency to have a claim for unpaid tax and
other withholdings which should have been made.
While there are risks with entering into independent
contractor agreements, particularly if the contractors are actually
employees under various legal tests, sometimes the safest path for
a financially strapped start-up is to consider short-term
contractor arrangements until the company is on its feet and
generating revenue which can be used to cover payroll for
employees. This can be a tricky area to navigate and should
never be done without legal advice, but done properly, it is a
better and safer option than failing to pay employees during the
initial start-up period.
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On Thursday, September 22, 2016, Dentons hosted a panel discussion about the management of liabilities and risks associated with environmental crises, including potential liabilities for directors and officers and provided insight into risk and liability techniques associated with environmental crisis management.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
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