Canada: Government Report Indicates Potential Overhaul Of Ontario Labour And Employment Landscape

Ontario employers may soon face significant changes to workplace laws. That is the main conclusion that can be drawn from the recently released Changing Workplaces Review: Special Advisors' Interim Report (the Interim Report). While the stated focus of the Review is on issues facing "vulnerable workers in precarious jobs," many of the potential changes would impact all provincially-regulated employers and employees in Ontario. The Review deals exclusively with the Employment Standards Act, 2000 (the ESA) and the Labour Relations Act, 1995 (the LRA), and does not address other laws concerning health and safety or discrimination.

The Interim Report identifies approximately 50 issues and includes over 225 proposals for change. The proposals are often conflicting or contradictory, reflecting the wide range of opinions that have been submitted to the Special Advisors conducting the review. For almost every issue, maintaining the status quo is presented as an option. Critically, the bulk of the submissions to date appear to have come from unions and other employee advocates.

In this blog post, we highlight and discuss in further detail seven groups of proposals from the Interim Report that would have broad implications for Ontario employers:

  1. Revamping who is exempt from what rules under the ESA
  2. Wholesale changes to the ESA's employment termination requirements
  3. Expanding the powers of the Joint Health and Safety Committee to deal with employment standards matters
  4. Changing union certification rules to encourage unionization
  5. A complete overhaul of the relationship between franchisors, franchisees and the employees of the franchisees
  6. Eliminating an employer's ability to bargain directly with a union by imposing sectoral bargaining
  7. Several options that may benefit employers

The deadline for submissions on these proposals is October 14, 2016. The full text of the Report, with over 225 proposals, is available here.

1. Revamping who is exempt from what rules under the ESA

The ESA is a complex statute with more than 85 exemptions, partial exemptions, and special rules which limit its application in certain circumstances. Many, but not all, of these exemptions are open to scrutiny in the Review process. Accordingly, if your business benefits from a particular exemption in the ESA, you should consider making or supporting a submission in favour of maintaining that exemption.

ESA exemptions that may be subject to elimination or variation include:

  • Independent contractors. Currently, independent contractors are not considered employees under the ESA. Therefore, they are not entitled to vacation pay, overtime pay, or termination pay. The Interim Report contains several proposals to expand the scope of the ESA to include contractors. One such proposal would see the adoption of a "dependent contractor" provision, which could make ESA standards applicable to contractors who are in a position of economic dependence upon the company for which they perform services.
  • Information technologists. This is an important exemption for many Ontario employers because it exempts "information technology professional" from all hours-of-work and overtime pay rules. An "information technology professional" is defined in ESA Regulation 285/01 to include employees who use specialized knowledge and professional judgement to investigate, analyse, design, develop, implement, operate or manage computer-based information systems. Several options in the Interim Report would limit the scope of this exemption, or remove it completely.
  • Pharmacists, like many other professionals, are currently exempt from ESA requirements respecting hours of work, overtime, public holidays, vacation and minimum wage. The Interim Report contains proposals for narrowing the pharmacists' exemption but indicates that similar exemptions for dentists, engineers, lawyers, physicians and surgeons, and public accountants are not currently being considered as part of the Review process.
  • Managers and supervisors. Currently, employees whose work is primarily managerial or supervisory in character may qualify for exemptions from hours-of-work rules and overtime pay. The Special Advisors do not appear to be considering eliminating this exemption completely, but several of the proposals would narrow the definition of managers and supervisors to restrict its application.
  • Residential building superintendents, janitors and caretakers. This exemption applies to employees who reside in the building or complex where they are employed. It allows employers to avoid some hours-of-work, overtime, public holiday and minimum wage requirements. The Interim Report presents the removal of this exemption as an option.
  • Student exemption from the "three-hour reporting pay" rule. Under section 5(7) of Regulation 285/01, when an employee who regularly works more than three hours a day is required to report to work but works less than three hours, he or she must be paid no less than three hours' minimum wage. The rule does not currently apply to students, but one option presented in the Interim Report is the elimination of this exemption.

The Special Advisors have indicated that they do not think that the "special industry rules" (SIRs) created after 2005 – including exemptions pertaining to mining and mineral exploration, automobile manufacturing and ambulance services – should be reviewed at this stage because they were approved pursuant to a policy framework that involved appropriate consultation with affected stakeholders.

The Special Advisors also indicate that many other ESA exemptions should only be changed if there is a separate review in the future. These include exemptions for hospital employees, public accountants, and hospitality industry employees. The Special Advisors are seeking submissions on how to run an effective review process for these exemptions as well as any new exemptions that may be proposed in the future.

2. Wholesale changes to the ESA's employment termination requirements

Many proposals in the Interim Report deal with employee rights upon termination. For example, the Interim Report proposes amending the ESA in order to:

  • provide "just cause" protection for employees. This would allow employees to contest their termination and be reinstated and/or compensated if an independent arbitrator finds that there was no just cause for the termination of their employment. This would represent a radical departure from the current state of the common law, which permits terminations without just cause, so long as appropriate notice and/or compensation is provided;
  • require that employers provide advanced notice of termination, or pay in lieu of notice, even in cases where the employee has been employed for less than three months;
  • raise the 26-week cap on severance pay and the 8-week cap on the period of notice of termination (or pay in lieu thereof) required by the ESA;
  • increase the number of employees who are entitled to severance pay. Currently, an employee is only entitled to severance pay if he or she has worked for the employer for five years or more, and either (a) the employer has a payroll of $2.5 million or more; or (b) the severance occurred because of a permanent discontinuance of all or part of the employer's business that impacts at least 50 employees.

3. Expanding the powers of the Joint Health and Safety Committee to deal with employment standards matters

One of the few conclusions reached by the Special Advisors is that "there is a serious problem with enforcement of ESA provisions." Indeed, they dedicate over 40 pages of the Interim Report to issues relating to the enforcement and administration of the ESA. While some of the proposals deal primarily with government processes (such as having the Ministry of Labour adopt systems that prioritize complaints and investigate accordingly), others have the potential to severely disrupt existing HR practices and impose substantial new burdens on employers.

One such proposal is the implementation of an "ESA Committee," as an expansion of the Joint Health and Safety Committee which is required under the Occupational Health and Safety Act for all workplaces where 20 or more workers are regularly employed. The proposal, if adopted, could require employers to conduct self-audits to check for ESA compliance, and meet with the ESA Committee to review these audits. It would also likely require employers to train ESA Committee members (or, in smaller workplaces, ESA representatives) on the complexities of the ESA. Under the so-called "enhanced model" proposal, ESA committees/representatives would have an ongoing responsibility to monitor and promote ESA compliance, as well as the authority to investigate complaints and access necessary employment information from the employer.

4. Changing union certification rules to encourage unionization

The Interim Report contains several proposals to amend the LRA that would have the effect of making it easier for unions to certify new bargaining units, including:

  • The return of a card-based certification procedure, which is associated with higher rates of unionization. Under this system, which was in place between 1950 and 1995, unions would be certified if and when a specified percentage of employees in the proposed bargaining unit signed membership cards. In 1995, card-based certification was eliminated and replaced with a mandatory vote model. Under this model, the Ontario Labour Relations Board (OLRB) holds a secret-ballot vote and certification occurs if the majority of workers who cast ballots vote in favour of unionization. According to research commissioned as part of the Review, studies consistently find that the current voting model is associated with a statistically significant reduction in certification application activity and success rates. Indeed, the Special Advisors note that unions strongly favour card-based certification and employers strongly prefer the current secret-ballot vote model.
  • Requiring employers to provide unions with employee lists earlier, with or without contact information, if unions achieve a certain threshold of support. This would make it much easier for unions to identify potential new bargaining units and rally the 40% support needed to apply to the OLRB to conduct a certification vote under the current secret-ballot vote model.
  • Conducting certification votes in a location away from the workplace. Employers argue that having the vote at an off-site location tips the scales in favour of the unions since the union would ensure that its supporters attended the vote, whereas anti-union voters might be less inclined to make the trip.

The Interim Report also includes several proposals that could give unions more bargaining power during collective bargaining, including a proposal to prohibit the use of replacement workers during a strike.

5. A complete overhaul of the relationship between franchisors, franchisees and the employees of the franchisees

The Interim Report proposes amending both the LRA and the ESA to impose additional employment-related duties on franchisors, including:

  • The introduction of a new joint employer provision in the LRA whereby franchisors and franchisees could be declared joint employers for all of the franchisee's workers. This could force franchisors into collective bargaining negotiations in respect of workers over whom they have no day-to-day oversight, and could impose on them the obligations contained in a collective agreement, including potentially joint liability for a franchisee's failure to pay its workers. For those interested, a recent Osler update discussed the risk of a franchisor being found to be a joint employer under current law.
  • Adopting a new model for unionizing franchises that would allow employees at one franchise site to unionize, negotiate an initial collective agreement, and then allow other franchise sites of the same franchisor to be brought under the terms of that initial agreement.
  • Amending the ESA to make franchisors liable for employment standards violations of their franchisees. This amendment could incline franchisors to exercise additional control over the operations of their franchisees, which would in turn enhance the risk that franchisors are found to be the true employers of the franchisees' workers.

The Interim Report notes that employer/franchisor groups have made submissions strongly opposing these changes, as they would disrupt existing business structures and potentially threaten the entire franchise model.

6. Eliminating an employer's ability to bargain directly with a union by imposing sectoral bargaining

"Sectoral bargaining," also known as "broader-based bargaining," would be a radical departure from the status quo. Whereas, outside the construction industry, traditional collective bargaining takes place between a single employer and a group of its employees (often at a particular workplace), sectoral bargaining involves multiple employers with employees at various different workplaces negotiating with one union for one collective agreement.

The Interim Report proposes eight models for sectoral bargaining. Some of the models would only be applicable to specific industries (e.g. home care, agriculture, artists). Others would have much wider ramifications. One such model would allow for multi-employer certification and bargaining in an entire sector and geographic area. As examples, the Special Advisors propose that all hotels in Windsor or all fast-food restaurants in North Bay could certify as bargaining units and negotiate a master collective agreement on a sectoral, multi-employer basis.

7. Options that may benefit employers

Although the majority of suggestions in the Interim Report appear to have come from advocates for employees and unions, there are also several proposals that could potentially reduce costs and increase flexibility for employers. This is in keeping with one of the Review's guiding principles, which is to create an environment supportive of businesses. Examples of employer-friendly proposals include:

  • requiring an employee to provide two weeks' written notice when he/she is ending an employment relationship, giving employers more time to find a replacement;
  • expanding existing ESA exemptions to include employees who earn more than a certain amount in wages/salary. The Interim Report is unclear on exactly what role salary could play in a reformulated ESA exemption, and the Special Advisors appear to be open to submissions on this issue. One option would be to adopt exemptions similar to those found in the United States' federal Fair Labor Standards Act, which exempts certain executives and administrative employees from minimum wage and overtime requirements based on a "salary-plus-duties" test.

How to make submissions

Submissions on any of the proposals in the Interim Report, or any new proposals, can be made to the Ministry of Labour by fax, mail, or email (CWR.SpecialAdvisors@ontario.ca). More information on how to make a submission is available here.

A word of caution about submissions – the Ministry has reserved the right to post or otherwise publish submissions and comments as part of the public consultation process. Therefore anyone who wishes to make a submission should prepare for it to be made public, and should not include any information by which third parties could be identified.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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