CONTENTS
Monday 29 July 1991
Employment Standards Amendment Act, (Employee Wage Protection Program), 1991, Bill 70 / Loi de 1991 modifiant la Loi sur les normes d'emploi (Programme de protection des salaires des employés), projet de loi 70
Ministry of Labour
Adjournment
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair: Kormos, Peter (Welland-Thorold NDP)
Vice-Chair: Waters, Daniel (Muskoka-Georgian Bay NDP)
Acting Chair: Wood, Len (Cochrane North NDP)
Arnott, Ted (Wellington PC)
Cleary, John C. (Cornwall L)
Dadamo, George (Windsor-Sandwich NDP)
Huget, Bob (Sarnia NDP)
Jordan, Leo (Lanark-Renfrew PC)
Klopp, Paul (Huron NDP)
Murdock, Sharon (Sudbury NDP)
Offer, Steven (Mississauga North L)
Ramsay, David (Timiskaming L)
Substitutions:
Frankford, Robert (Scarborough East NDP) for Mr Kormos
Witmer, Elizabeth (Waterloo North PC) for Mr Jordan
Clerk pro tem: Manikel, Tannis
Staff: Luski, Lorraine, Research Officer, Legislative Research Service
The committee met at 1417 in committee room 2.
EMPLOYMENT STANDARDS AMENDMENT ACT (EMPLOYEE WAGE PROTECTION PROGRAM), 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LES NORMES D'EMPLOI (PROGRAMME DE PROTECTION DES SALAIRES DES EMPLOYÉS)
Consideration of Bill 70, An Act to amend the Employment Standards Act to provide for an Employee Wage Protection Program and to make certain other amendments.
Étude du projet de loi 70, Loi portant modification de la Loi sur les normes d'emploi par création d'un Programme de protection des salaires des employés et par adoption de certaines autres modifications.
The Vice-Chair: We will call the meeting to order. I would like to say welcome back. It has been a month, and it is nice to see all these tanned faces out here. The first person on our list of presenters is the minister, if he would come up and take his seat.
Mr Offer: A point of order, Mr Chair: We have the minister at 2 o'clock and the deputy at 3 o'clock. Is it your intention, with the minister and the deputy, to combine these two, or is there something --
Hon Mr Mackenzie: The only thing we would combine would be questions, if I wanted some assistance on questions.
Mr Offer: The deputy does not have a specific presentation to make.
Hon Mr Mackenzie: Yes, he will have some comments.
The Vice-Chair: With everyone's indulgence, I believe it had been set for 2 to 3 for the minister, so we are starting a bit late and we will move the clocks back accordingly. I imagine that is what we would do. It will go to 3:20.
MINISTRY OF LABOUR
Hon Mr Mackenzie: My remarks will be very brief. Before I begin my remarks, I would like to take the opportunity to tell you that I feel a certain amount of personal satisfaction introducing a bill which I believe is a major initiative for the people of Ontario. It is one of the most important steps this government has taken to ease the damaging effects of the recession and forms part of the government's comprehensive measures to help workers through these difficult times. The employee wage protection program is a necessary and timely piece of legislation, and I hope this committee will report in a thorough and expeditious fashion so the House may proceed to third reading as soon as possible.
Since the Premier announced the government's intention to set up an employee wage protection program last October, my ministry has received more than 15,000 potential claims from workers who are owed wages. I think it demonstrates how much this program is needed that these workers have come to us on their own initiatives and without any publicity campaign aimed at them, and their number is growing every day.
We cannot let long deliberations punish these workers even more than they have been hurt already by circumstances beyond their control. We cannot forget the underlying principles behind Bill 70. As I have mentioned before, the main purpose of the employee wage protection program is to help workers recover unpaid wages when their employer is bankrupt, insolvent or does not pay because of other circumstances. I believe that with Bill 70 we have strong and effective legislation that will allow workers to recover money they have earned and to which they are most certainly entitled.
Before drafting the legislation to establish the employee wage protection program, my ministry consulted broadly with business, labour and non-profit groups. These consultations continued after the bill was before the House. Soon after the introduction of Bill 70 we began hearing concerns from various sources about the liability provisions outlined in the bill. We listened to those concerns and we acted to alleviate them.
During the deliberations of this committee I will be bringing forward motions to amend Bill 70 as it now stands. These amendments will remove the liability provisions for officers and will make the employee wage protection program generally consistent with existing liabilities outlined in the Ontario Business Corporations Act. We will also be exempting volunteer directors of not-for-profit corporations from any of the liability provisions of the employee wage protection program.
The amendments will also enhance the guarantees of a more efficient appeals process. While we want to be sure that the program pays out money only in cases where there are valid entitlements, we do not wish to tie up employers, directors or employees in lengthy and protracted appeals procedures. Once the employee wage protection program is operational, workers will be able to recover some, if not all, of the wages and vacation pay owed to them, along with the statutory severance and termination pay. The maximum for each claim has been set at $5,000.
Funds to support the employee wage protection program will come from general government revenues. In order to access the program, workers who feel they are owed money by their employers will be required to contact the employment standards branch of my ministry and file a claim. Once the validity of the claim is determined, an order to pay will be issued against the employer. If the employer fails to pay and does not appeal the order, the claimant will then be reimbursed by the program. Where an employer appeals, the program will pay out after after a worker's entitlement to compensation is established. The employment standards branch will then take efforts to recover the money paid out from the employer or directors using the liability provisions of Bill 70.
With the amendments I will be introducing in committee, I feel strongly that Bill 70 represents a sound piece of legislation that will set standards for protecting workers' wages. As you are aware, my parliamentary assistant is a member of this committee. She will be briefing me regularly on your discussions and on any questions that may arise. In addition, my ministry staff will be present during your deliberations and will be available to answer your questions.
I once again urge you to make your report in a thorough and timely fashion, so that the workers of this province receive the protection they deserve. I want to thank you for the opportunity to make those few comments and, if I can, turn it over to the deputy minister for a few moments, as well.
Mr Thomson: My name is George Thomson, the Deputy Minister of Labour. My understanding is the committee wants someone to provide a general overview of the bill and that is what I am able to do at this time. I am prepared to do that right now or at a somewhat later time, at the committee's request. Do you wish me to proceed with that at this point?
Mr Offer: That would be quite helpful. It was in fact going to be one of my first questions.
The Vice-Chair: Are there any other comments? Then proceed, please.
Mr Thomson: We circulated, before the committee began sitting this afternoon, what we have been calling our internal working draft of the bill, which is a copy of the bill that incorporates amendments which would be proposed to the committee once the clause-by-clause stage of the proceedings is reached. We thought it would make sense to make that available to you so the discussion I now have and the overview will be easier to follow, because I can refer to a number of the amendments it is proposed would be made, subject, of course, to the committee's review of those proposals.
We have also prepared a short summary of the major elements of the amendments in this document that has also been circulated to members of the committee.
There are a number of amendments to the bill, as the minister has indicated, both to reflect the changes the government has announced it wishes to make to the bill, and also to respond to some of the feedback we have received as we have talked to various interest groups and individuals since the bill itself was introduced. As I say, the summary provides an overview of that. I should also tell you that any group or individual proposing to come to the committee this week who has contacted us has, on request, been given this so they would know what those proposed changes are, so when they come and speak to you this week they would have some sense of the changes that ultimately would be before the committee for its consideration.
I should say these are not necessarily the only amendments that would be proposed by the government. It would obviously also be dependent upon the results of the presentations of this committee and the views expressed by the committee over the next period of time. There may be other motions brought by the government in addition to whatever motions are brought by the other two parties.
If I could take you in a very general way through the bill, I am using this document, the one that was handed out before the committee hearings that includes the proposed amendments for the purposes of the review. As the minister has pointed out, the purpose of the bill is to establish the wage protection program to protect employees should they be unable to collect wages, vacation pay, termination or severance owing to them by an employer; to also allow for some recovery of that money paid out, although the vast majority of the funds will come from consolidated revenue; and third, to establish a new appeal process for employees and to speed up the existing appeal process in the act to make the act more efficient in its workings -- that is, the act as a whole, not just the act in relation to wage protection.
I can go through the bill in the order the bill has been presented.
Section 1 of the bill, which actually amends section 2 of the act itself, is simply a section that takes away the application of the Statutory Powers Procedure Act to some decisions made within the Employment Standards Act. These are the minor decisions made in some cases by employment standards officers, but primarily that is to deal with situations where there is an appeal process established in the act. That appeal process then takes over from the process established in the Statutory Powers Procedure Act, and that is what section 1 deals with. If you wish it, afterwards I can take you through the kinds of decisions involved.
Sections 2 and 3 of the bill: Those sections basically eliminate the present $4,000 limit on the amount an employment standards officer can order to be paid. At the moment, even though more money is payable by an employer to the employee, the employment standards branch is limited in the amount that can be ordered to be paid, so the employee then would have to seek from the employer any money above the $4,000 amount. These sections and a couple of others later in the bill eliminate the present $4,000 limit so the employment standards officer can in fact order whatever amount is payable by the employer to the employee.
Section 4 is simply a section that allows the enforcement of settlements, and this is an amendment to the bill as a whole. If a settlement is entered into for the payment of severance pay -- this is a settlement entered into by the union with the employer -- this section would allow the employment standards branch to enforce the settlement if the settlement is not paid. In some cases the settlement can be for more than the act itself requires, and if the employer and the union have reached such a settlement, this introduces a section that would enable the employment standards branch to enforce the settlement using the terms of this act, using the procedures established in this act.
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Section 5 is perhaps the most important section in the bill that has been proposed. It proposes a number of amendments to section 40 of the Employment Standards Act, from 40b through to 40q, and this is the section that establishes the wage protection program.
The first section, 40b, basically, as you can see, establishes the wage protection program and sets out what the wage protection fund covers. The net effect of subsections 40b(2), (3), (4), (5) and (6) is that the wage protection program covers wages and vacation pay as agreed by the employer and employee, and then it covers severance and termination to the extent that is provided for by the act. So the wages and the vacation pay are as the employer and the employee have agreed; severance and termination are determined in the legislation itself. That is the difference between the extent of coverage for the different kinds of things an employee might be entitled to, and that is what 40b(2) sets out.
There will be an amendment proposed that would include commissions in the definition of wages, because when the bill was introduced we left out commissions, which for a number of people is the sole form of wage. We have allowed now for the possibility of access to the fund to cover commissions that are payable to an employee who has not been able to collect them from the employer. Otherwise that section basically remains the same as it now is.
Sections 40c and 40d basically allow for the appointment of a person to administer the wage protection program. It also allows for that person's powers to be delegated, because we have set up a regional structure in the ministry itself and it would allow the regional directors to take on responsibility for the program. It also provides civil protection for the program administrator so that those persons cannot be summonsed to be part of, for example, wrongful dismissal suits in the civil courts. That is to extend the kind of civil protection that now exists in the act.
Section 40e basically sets out when money is payable out of the fund, and the minister has already dealt with that in his opening remarks. The approach that has been proposed is one that would have the employment standards branch determine the amount that is payable, order the payment, then allow the normal process for collection to occur for a modest period of time, and then, if that is not successful, the payout from the fund. So it is not intended that the program be a program of first resort, but that it would be one that plugs in if the regular and normal enforcement process in the Employment Standards Act is not successful.
This section also sets out that if there has been an appeal, for example, by the employer challenging whether the money is payable, then the sum cannot be paid out of the fund until the appeal is over to determine whether the money is in fact owing. So the money cannot be paid out while the appeal is pending.
There is, however, later in the bill the power in the person hearing the appeal, when it is agreed that there is a certain amount owing, to order that amount to be payable, so that then there is the order that can trigger access to the fund even though the appeal is continuing. That only happens if there is agreement that there is a certain amount owing. There is the power to make an order to say, "Well, pay that while we continue the appeal with respect to the rest of the amounts that are under dispute."
There could be a company that has closed and there is some debate over the entitlement of a number of employees but for the largest number of employees there is no debate about the amount that is payable. That is to enable them to get an order which triggers access to the wage protection program if that order is not successful. The Varity case would be one where there was lots of debate about a number of the employees but no debate about a number of other employees. This would enable them to have access to the fund if you have, for example, a bankrupt employer while the appeal goes on with respect to the others.
Section 40f sets out a special process in the construction industry, because, as you will know, persons in the construction industry have access to construction liens. Section 40f is designed to ensure that employees continue to attempt to make use of the lien method of collection before they come to the fund, and they are expected to take steps to preserve the lien. As you know, there are time limits within which liens should be registered against property. This is to encourage that to be done, although there is an escape clause if for some reason it is explainable that someone was unable to preserve the lien. This is intended to place the fund behind the lien where possible, once again reflecting the view that this is an agency of, if not first resort, second resort.
Sections 40g and 40h deal with the issue of settlements again, and when there has been a settlement entered into, then the settlement is what is effective. This is to ensure that this act does not take away what now happens, which is often discussions between the union or the employees and the employer to reach some settlement of the claim under the act. When that settlement is entered into, that is what becomes enforceable, that becomes the amount that is looked to when one refers to the fund.
There is a provision in section 40h which would allow one to pay up to the total amount in the fund regardless of the settlement if the settlement is not complied with.
Section 40i is obviously an important section. It is the one that sets out the maximum amount that can be paid out of the fund for any one claim, and that is $5,000, although the bill proposes a regulation-making power that could allow for that sum to be increased at a future date through regulation should it be determined that resources are available to pay to a higher ceiling.
There is a proposed amendment in section 40i which would make it clear that it is $5,000 less whatever deductions need to take place. For example, there will be a flat 10% deduction on account of income tax in order to respond to the requirements of the Income Tax Act. So it is $5,000 less whatever deductions are to be made.
Sections 40j and 40k set out more or less the payment process. It does allow for the deduction of taxes. You will see that there is a proposed amendment in subsection 40j(3) which allows the program administrator to deduct such amounts as are required to be deducted by a law of Canada or of Ontario. That would allow, for example, the deduction of income tax. There are also ongoing discussions with respect to whether, when and if unemployment insurance would ever need to be deducted. Those discussions with the federal government are not yet completed.
Section 40k is also the section that sets out the possibility of an interim payment to be made while an appeal is under way so that a referee who is hearing an appeal can order the moneys that are undisputed to be paid out through an interim order while the ongoing appeal is being heard.
Section 40L sets out the requirement that there be a delay if the employee appeals. One of the provisions of this act, and we are coming to that later, is the section that allows employees, for the first time, to appeal to an adjudicator, rather than the present bill, which allows them just to appeal to another employment standards officer. We have introduced the possibility of employee appeals, and this section is the one that says that money cannot be paid out of the program until that appeal is over with when the employee is, for example, disputing the amount that is to be paid.
Section 40m allows for a policy to be established with respect to overpayments. If, for example, more money is paid out of the fund or the program than is due, this allows a policy to be established to seek repayment of the excess amount. We are attempting to develop a policy on that, with the thought that there will be situations where the error, for example, is the result of administrative error in the program itself, and suggesting that the approach one might take to overpayments there would be different than overpayments as a result of incorrect information being provided to the program. We are still working on that policy. This would allow for a policy to be established on overpayments.
Section 40n sets out that if the program recovers from the employer more than the amount paid out of the fund, then that shall be paid to the employee. The employee may collect fairly early from the program and then, as we are coming to the employer, the program itself then tries to recover that money from the employer. When the program administrator seeks to recover from the employer, he or she tries to recover everything that is owing from the employer. So if more is recovered than the amount that was paid out by the program, then that simply is forwarded to the employee.
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Section 40o sets out the right of the program administrator to seek from the employer the money that has been paid out of the program. That is the section that basically subrogates the program administrator to the right of the employee to collect this money from the employer. So that is the second stage. After money has been paid out of the program, that is the section that allows the program to seek recovery from the employer.
It also allows the program administrator, if an amendment we are proposing is accepted, to accept an assignment of a judgement that may have been obtained from the employer. The program administrator could accept an assignment of that judgement and then seek to recover from the employer.
Section 40p allows for the possibility of interest to be collected on money that is owing. At the present time the act, unlike the case in a number of other areas, does not provide for any interest that is paid on money that is owing, for example, by an employer, which is different from money owing in the workers' compensation area or the rules with respect to civil judgements against an employer. There has been some concern that that basically creates an incentive not to pay the funds as and when they are owing, so this section would allow for the accumulation of interest on the money that has in fact been determined to be owing. That is what that section covers.
Section 40q is really not a major section. It protects against the possibility of an employer or employee agreeing on an agreement to pay more to the employee in order to increase the claim against the fund and to do that solely for that purpose.
Section 40qa, which is an amendment that would be proposed to the committee, allows for the entry into agreements with the federal government relating to the payment of compensation from the wage protection program. That is because, as you will know, since this bill was introduced, the federal government has introduced as part of the amendments to the Bankruptcy Act amendments that would allow for the payment to employees of up to $2,000 on bankruptcies to cover wages and vacation pay, up to a ceiling of $2,000, an amount that could be funded by employers. There is an obvious need to harmonize the federal program with the provincial program, the federal program having been introduced since the provincial bill was brought in.
There are differences, of course, between the two programs. The wage protection program that has been established by the province covers situations that go beyond bankruptcies, and a number of the situations we are dealing with were not necessarily dealing with bankruptcies. We may be dealing with layoffs or closures of a certain size, we may be dealing with a company that has moved to another jurisdiction, but not dealing with bankruptcies. Second, the wage protection program as proposed in this bill covers severance and termination pay while the federal bill only covers wages and vacation pay.
However, it is the view of the province, and I think shared by the federal government, that the primary responsibility for the first $2,000 ought to be with the federal government as part of its bankruptcy legislation, so it is taking a consistent approach with every province, including those that will not have a fund such as is proposed in this bill.
We have begun discussions with the federal government on how we might harmonize the two programs. Those discussions are ongoing. There is agreement that we need to come up, if we can, with an approach that has employers go to one place and have one processing of a claim. It needs to be a speedy process. It needs to be, in our view, one that would have the federal government primarily liable for that first $2,000 with the province dealing with the excess.
The thing that is not resolved is how you best accomplish that, and we have had discussions as recently as this morning with the federal government and there will be ongoing meetings. In fact, we are attempting to develop a method of bringing in people from the private sector, particularly those who work in bankruptcy situations, to talk about what is the best way of making this work in situations where both funds are potentially relevant to the employee's claim. It is our hope that in the next month or so we will have an answer. That may require the entry into an agreement with the federal government, and that is why section 40qa is there and will be proposed, to enable that agreement to be entered into.
That is the end of section 5.
Section 6 deals with directors' liability, previously officers' and directors' liability. There are a number of proposed amendments in this part of the bill, as the minister has already indicated, the general objective being one of removing officers. That requires a lot of amendments. The officers are mentioned in a number of the sections and that means the number of amendments is pretty large; also, a number of amendments designed to neuter the liability that now exists for directors in the Ontario Business Corporations Act, rather than the broader liability that exists in the draft bill before these amendments are made. So the bulk of these amendments relate to those two issues.
Section 40r is an important section, primarily for what is now proposed to be taken out of that section, because that is the section that would limit directors to directors as defined in the Business Corporations Act, to make it clear that this section on recovery from directors does not apply to not-for-profit corporations, both federal and provincial not-for-profit corporations, and to remove the reference that was previously in the bill to officers. So that section really is important for what is being taken out of the section more than what is being added.
Section 40s is also, I think, an important section and this is the one that establishes what it is directors could be liable for. It points out, as the Business Corporations Act does as well, that directors would only be liable for wages and vacation pay, not for termination and severance. It is wages and vacation pay in the way it is set out in the OBCA, and that is six months' wages and up to one year of vacation pay, provided that money was payable while the person was a director. If the money became payable after the person ceased to be a director, then he would not be liable for the money, and it ties into services performed for the corporation, which would include work done for wages, commissions and so on.
It does allow for the recovery of interest, once again, with respect to directors' obligations. The subsection that sets out the limit of the directors' liability is subsection 40s(8), which is another page over. That is a new amendment that would be proposed to the committee that sets out the directors' maximum liability. That is the one that comes from, in essence, the Business Corporations Act.
There is also a proposed new subsection 40s(10), which would allow and make it clear, to the extent that the present bill does not, that any director who satisfies a claim for wages has a claim against any other directors, so it is a joint and several liability between the directors.
Section 40t deals with settlements again, to limit the directors' liability to the settlement, unless it is a settlement that has been entered into in an attempt, with the director's knowledge, to avoid liability under the act. In essence, it is to deal with the settlements issue again; not, I think, a major provision.
Section 40u is the section that sets out the power to make an order against a director and also allows for the director to appeal the order. This is the section that not only allows the order to be made but gives the director the right to seek an appeal on the grounds either that the money is not owing or that he or she is not or was not a director at the relevant time the money became owing. So section 40u really sets out the overall appeal right.
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I should point out that at the end of 40u, to be very clear, there is a little subsection (8) that makes it clear that nothing in that section that deals with appeal and the power to make an order against a director is designed to make the director liable for anything more than is set out earlier in the act, ie, just wages and vacation pay.
Section 40v is a separate section that allows for orders to be made against directors who are left out the first time around. Suppose there is a process that is begun against the directors who can be located at the time it is determined that the employer is unable to pay and process should be begun against some directors. If afterwards other directors appear and there has already been the time for appeal, this allows for a separate order against those directors, giving them a separate right of appeal. They do not lose their right of appeal if they are later subject to an order when they show up or are located for the purposes of an order under the section.
Section 40w is at the top there. It is a little hard to tell it is there because the number is crossed out, because the main change in 40w relates to what has been taken out rather than what is in there. That is the amendment that takes out the earlier section, if this amendment is adopted, that would have made directors liable for a period of time after they ceased to be directors. That is the subsection that somehow inadvertently had the effect of making directors liable for severance and termination in situations where they would not be under the Business Corporations Act because they would be gone or would no longer be directors at the time the severance and termination was payable. By taking out the subsection that makes directors responsible for a year after they cease to be directors, that takes away any risk of an added obligation upon directors in this bill, beyond that which exists in the Business Corporations Act.
Section 40w also sets out a two-year limitation period. That is a limitation period that is somewhat longer than the one that is in the Ontario Business Corporations Act. It is the same one that is in the federal Corporations Act. It is the standard two-year limitation period that exists in the Employment Standards Act as a whole.
Section 40x deals with service and the power to make substitutional service orders.
Section 40y takes the existing enforcement section, liability section, that exists in the Employment Standards Act, which makes a person who does not comply with an order made under this act liable to a fine and applies that to this situation as well. It is a section that is also found elsewhere in the act, although the penalty is more extensive in the other part of the act. Here it is limited to the possibility of a fine.
Section 40z basically says that a corporation cannot develop bylaws or other provisions to try to override the obligation under this act. It also, though, allows for a director to be indemnified against his or her obligation under the act, which allows for the possibility of a corporation to acquire insurance to protect the director who comes on to the board of directors and wishes to be protected against this potential liability.
I would say the bill itself sets out that the primary obligation is upon the employer and would allow any director who is subject to an obligation to recover against the employer. It assumes -- and we will be developing policies that will reflect this -- that the effort to recover would be an effort that is against the employer, and only when that is unsuccessful would one look to see whether recovery should be sought for some small portion of the money owing from the directors.
It does not say that one must have exhausted all attempts to recover from the corporation and the employer, simply because there will be situations where it will be clear that that is process for the sake of it because there are no assets available at all. The policy will be one that will seek recovery from the employer. The act establishes that the employer is primarily liable. The directors stand behind that and are liable only, in terms of practice, if it is not possible to collect from the employer.
I will come back to section 7 later because it is really dealt with later. That just allows for the creation of an adjudicator to hear appeals from employees.
Section 8 amends the present act. The present act allows for the payment of an extra 10% of an order, that would require an employer to pay an additional 10% in addition to that amount owing. We proposed an amendment that makes it clear that this is added on as an administration cost, not as a penalty, the way it is presently described in the act. Other than that, though, it does not change the present law.
Section 8 also makes it clear that if the employer does not appeal the order within the time period, but there is process that takes place with respect to the directors, then the employer owes the money and the process is over with respect to the employer while any steps are being taken with respect to the directors. That is subsection (7) there, which points out that if an employer fails to apply for a review, the order is final and binding against the employer even though there might be process continuing.
Section 9 is the section that sets up the employee appeals process. This is the new appeal process for employees to replace the present administrative appeal that simply allows an employee to be heard by another employment standards officer if he or she feels that the amount that has been determined to be owing is not the correct amount or has some other reason to be unhappy with the performance of the employment standards branch.
Section 10 alters the appeal process. There are two appeal processes set out in the Employment Standards Act, one contained in section 50, the other contained in section 51, but they are two separate methods by which the employer's obligation might be reviewed or appealed.
Sections 10 and 11 really alter that appeal process in three or four ways. The main objective here is to try to set up a faster appeal process than the one that now exists. A complaint that is often lodged against the employment standards branch is that we are not processing appeals as quickly as one ought to and there are not enough time lines to ensure that appeals are heard and resolved as quickly as possible. These sections speed up the process by saying that appeals should be first heard within 45 days of the initiation of the appeal. We are going to be proposing an amendment that suggests they ought to be completed in 90 days unless there are special reasons to extend the time period. That is to put pressure on the employment standards branch and those who hear these appeals to get them done in an expeditious way, unless there is some special reason for extending the time.
One reason that has been raised with us for extending the time might be, for example, if there is a process involving a director and the director requires additional time in order to gather information for the purposes of the appeal. So there is a power to extend the time in this section. It requires those who are appealing to at least disclose the reasons for their appeal, which is not required at this point in time, and once again allows for those interim orders I talked about where there is an undisputed amount owing.
Section 12 allows for recovery from third parties when there is money owing by third parties to the employer or the director.
Sections 13 and 14 deal with issues of enforcement. I think they are fairly minor sections.
Section 15 is the section that sets out the regulation-making power that it is proposed be added as a result of this bill. It includes five things: one for the power to prescribe payments or wages, because of the concern that there may be things that are paid or different methods of payment that ought to be included in the future to ensure that wages are protected by the fund; one that allows us to set a policy on overpayment; one that allows us to establish an interest policy; one that provides for the consolidation of hearings, when you may have both the employer and the director appealing, for example, and providing for a manner of apportioning compensation when one pays out the money -- in other words, how much is for wages, how much is vacation pay, how much is severance, how much is termination; and last, the regulation power allowing the total amount payable out of the fund to be increased should it be decided to go above the $5,000 figure.
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Finally, section 16 is the transition section. As you will know, the intention is to make the right to claim against the program retroactive to last October 1 so that any employee who was deemed to have been terminated on October 1 or afterwards is entitled to claim against the program. However, from October 1 through to whenever this becomes law that $4,000 ceiling that now exists in the act will remain, so there will not be any retroactive power to claim more than now exists in the act against employers through the employment standards program, because that would in a sense be altering the power to collect from employers retroactively if we did that, so the $4,000 limit is prospective; it does not backdate to October 1. Apart from that, the employment protection program would be available to all those who had been laid off or terminated from October 1 on.
When I say the $4,000 limit, that is the amount that can be ordered against the employer. Those persons will still be able to get up to $5,000 from the program. It is just that the section that allows employment standards officers to order employers to pay money that now exists in the act and limits that to $4,000 would have to apply up to the time when this became law. It would not, though, reduce the amount that employees can claim from the program.
Last, I would point out that it was announced when the bill was introduced that in the construction industry it would be possible to make a claim against the program relating to at least some of the benefits as well as wages. That is because the method of compensation in the construction industry is one that blends the two together. We cannot easily separate the two and that is why we proposed there would be the broader protection in that area in terms of claims against the fund. That would be dealt with by regulation.
That is an overview of the bill as it presently stands, trying to incorporate as well the amendments that would be proposed.
Mr Offer: I have a series of questions that I would like to get some further clarification on. I do not know how it is that you wish to proceed in the time which is available to us, whether by rotation or whatever. However, I will just go on and ask some questions.
First, I would like to thank you very much for the presentation in so far as you have provided some of the background information and certainly an overview of the process which is driving the legislation.
The question I have first is that it has been referred to today more than once that it is viewed that this agency be one of last resort. I am wondering if you might be able to expand on that particular clause.
Mr Thomson: The intention is to try to have expeditious payment but not to have all employees who are owed money by their employers come to the wage protection program first and then simply leave the whole collection of moneys owing from employers to the government to do. A large number of claims are dealt with and resolved between employee and employer. The employment standards branch can function as a mediator, but the goal is to try to keep that process working so as much as possible people simply collect from their employer and it is only when they do not that the fund becomes operative. It is dealt with in the act by giving some discretion to the program administrator to determine when the money is payable, and the policy would be one of expecting employees to take some steps to try to recover the money.
At the same time, we do not want to make that a process that delays unduly the payment of money that is required and needed by employees, so there is a discretion to pay it out even though there may still be steps that the employee could take, and now the program could take, to try to collect it from the employer.
Mr Offer: Thank you very much. I am going to try to be very specific. In the minister's opening statement, he talks about 15,000 potential claims. He talks about the list growing each and every day. The question is that we are in the main dealing with businesses which have gone bankrupt. There is no other resort. Is it not the intention of this legislation that those workers are going to be coming to the employment standards branch saying that this is owed to them as a result of wages, this is owed to them as a result of vacation pay, this is owed to them as a result of termination pay, and this is owed to them as a result of severance pay, and, "I would like the money"? Is that not what it is? There is no last resort. They are coming first off. I think it is important, certainly from my perspective, that I know, and certainly that the world outside this place knows, that the workers, 15,000 -- and the lineup is growing longer, by the minister's own words, each and every day -- are going to come to this branch program first. I would just like to get --
Hon Mr Mackenzie: They basically are people who are entitled to the money. It is money that they are owed, that they have earned. How they approach it, I guess, is not that important to me, but most people will make an application. In some cases, it will be resolved without having to take any further action on it.
Mr Offer: So probably, as far as many of the workers are concerned, involved in bankruptcies and what not, it is not going to be viewed as one of last resort. But I would like to ask, if I might, a second question, and that is the interrelationship between the provincial and federal program. I am not very much aware of this federal program, except that it is $2,000 for wages, and I do very much appreciate being given that information, but we are talking about the same worker. We are talking about the same business going bankrupt. Where was it anticipated that the person goes? It is the same person. It is the same business.
Hon Mr Mackenzie: We have had some specific discussions on this, but I will let the deputy answer that first, and then I have a comment.
Mr Thomson: If I could just make one point about the previous question, our best estimate at this point is that about 66% of the cases of employees coming and seeking money under the Employment Standards Act relate to bankruptcies or receiverships. The rest relate to situations where there are companies, or related companies, that still are in existence. We are a little unsure of that. We are still working on what the percentage is, but somewhere in around that.
In answer to the second question, it partly becomes one of saying what we think ought to be the answer, subject to further discussions with the federal government. Since it is our program that would be the top-up, the extra, it would seem to us it makes sense to try to set up a process whereby the employee would come to us. We would do all the work to process the claim, and then the federal government would compensate us for that portion for which it is liable. In other words, we could do the whole calculation, we could pay out the money, and then the federal government could reimburse the provincial government for that part of it that relates to its Bankruptcy Act.
They have raised with us the possibility of us using receivers in bankruptcy situations to possibly get the money out even faster from a receiver, and maybe that is a way to get the first $2,000 out very quickly, while we are verifying the claim. The thing that can hold up a claim usually is the part relating to severance and termination and trying to verify that. They do not want to have their payment held up while there is still calculation being done on the amount of severance and termination owing, so they want to talk about that further to make sure that would be a fast enough process. But at this point we think it makes most sense to have the employee come to us because we are the ones who would be doing the top-up part, the extra amount above the $2,000, so the one paying the largest amount should be the one the employee comes to, with reimbursement coming from the federal government. That is the position we have been taking.
Mr Offer: What are the feds saying about it?
Mr Thomson: We had one meeting with them where we came away somewhat concerned about whether they shared that view, although I spoke today with the assistant deputy minister responsible for this at the federal level, who is eager to have a sit-down and find a one-stop shopping model, recognizing we still have some work to do.
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Mr Offer: To carry on with that response, it would be that the employee would come to the branch, prove his or her claim, and in the event that there is no review, get the money and then the province would go to the federal government to ostensibly collect up to $2,000 of the money. The question I have is, if that is the case, can you give me a breakdown as to what figures we are looking at? When somebody comes to the employment standards branch under this legislation he is going to be primarily saying, "This is what is due and owing to me: my wages, my vacation pay, my termination pay and my severance pay." They will be proving those particular things. My understanding is that under the federal program they could only get the wages and vacation up to $2,000. According to your statistics, what is the breakdown of the average amount a worker in an average situation would be owed in terms of wages and vacation pay? I am asking you. There have to be some figures we are working on.
Mr Thomson: I think we can give you an average figure. I do not have it right here in front of me. We did develop an average claim that we thought would represent all four under our program, and that average claim was around $4,200. But that is wages, vacation pay, severance and termination for the average claim. What portion of that is wages and vacation pay in the average case I do not know at this point, but I think I can get you an estimate of that. It would be, in the average case, I think, considerably less than $2,000.
Mr Offer: I appreciate being given that information; I think that is going to be quite useful. In the event this particular legislation is passed, as proposed and further amended, and in the event the federal legislation is passed, as proposed, and, third, if your discussions between the province and the federal government work out as you hope, then an employee will come before the province, before the board, asking for wages, vacation pay, termination and severance, and that will be determined, and most likely the wages and vacation pay will be something under $2,000. You then will be able to claim over, you hope, to the federal government, and in fact the wages and vacation pay, the hallmark of this legislation, will be paid for by the federal government, which will have received the money by a head tax on employees.
I see some of the officials shaking their heads. Tell me why not.
Mr Thomson: I will try and then I will ask for advice.
Mr Offer: If it is under $2,000, it has to be --
Mr Thomson: The only difference would be, first of all, it is only 66% of the cases. For the rest we will be on the hook for both wages and vacation pay, not the federal government, unless it is bankruptcy. In other words, most cases where it is not a bankruptcy or a receivership it will be the province that is paying, with no recovery from the federal government.
Second, the largest amount of the liability, in most cases, will be for severance and termination. That is where we would be fully responsible up to the ceiling.
Mr Offer: Okay. I appreciate that, and I recognize that the distinction is really on the basis of the provincial program dealing with bankruptcies and insolvencies and layoffs, whereas the federal program deals basically with bankruptcies. But even using your figures in a conservative estimate -- small-c conservative -- there is no question that a very large portion of this particular bill with respect to the wages and vacation pay may -- I am not saying "will" -- be funded through the federal program which receives its money through an employee type of tax. I am trying to put that as fairly as possible.
Hon Mr Mackenzie: Just before you leave that, the one thing I wanted to say is that we have the figures, I am sure, that we can come up with very shortly. But the amount that would be covered by the federal plan is by far the smallest part of the money that would be available to use. It is not a huge amount that is covered by the federal plan.
Mr Thomson: To say it another way, the work we have done on the claims to date suggests that about 90% of the money owing is for severance and termination pay, so the largest amount paid out of the wage protection program will be to assist employees who are not getting severance and termination pay. The wages and vacation pay represent only 10%, but it is true the majority of that would be reimbursed by the federal government.
Hon Mr Mackenzie: The other thing that should be made clear is that we were encouraged in the conversations this morning with the federal authorities, but you will know, as many people in this room will, that there have been at least seven or eight major commitments over I forget how many years now, but it is a lot of years, to move in this area, and there is still no indication that it will be ready even within a year's time federally. So we are looking at a bit of a nebulous potential payout.
Mr Offer: Okay, I thank you very much for those remarks. I recognize what you are saying, but I also recognize that we are also dealing with some federal legislation, which is how it works.
Hon Mr Mackenzie: We are happy with what we hear, even this morning. Everything we get is certainly a gain.
Mr Offer: I want to carry on with that last response, by the deputy I believe, dealing with the vast majority in terms of dollars being paid on account of severance and termination pay. In this respect, I am somewhat curious over the interrelationship between subsection 40b(2) and subsection 40s(1). Basically, subsection 40b(2) talks about what the program is responsible for and section 40s(1) talks about what the directors are responsible for. Help me out on this, because there is a curious difference. My reading of this is that the program is responsible for wages, vacation pay, termination pay and severance pay. You have noted that of those four, it is probably anticipated that severance and termination pay will constitute a big dollar figure.
Section 40s(1) states what it is that the directors will be potentially liable for on a joint and several basis, which is the wages and vacation pay. I believe there is probably some sort of figure that you have dealing with the possibility of successfully recouping wages and vacation pay from directors. But putting all that aside, it means the taxpayers will be footing the bill for the severance and termination pay of potentially every worker in this province.
I am wondering if you can share with me whether, first, that is a correct reading and, second, on the basis of the minister's opening statement talking about workers recovering unpaid wages when their employer is bankrupt, that you are going far beyond the principle you had initially announced.
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Mr Thomson: There will not be recovery from directors for anything other than wages and vacation pay. It is true that is the smallest amount of the total amount owing, if you take the total liability of the program. So to that extent you are right, we will not be going beyond that which the Business Corporations Act now makes directors responsible for, just wages and vacation pay.
We are hopeful, however, that we will be successful in our efforts to recover from as many employers as possible that severance and termination pay. In other words, we will still be going after employers wherever we can and, as I pointed out, somewhere between 30% and 40% of them are not bankrupt. We have been more active recently in trying to go after related companies, two companies that have in fact gone bankrupt, and we have some optimism that we can collect a fair amount from employers. But to the extent that we cannot collect from employers severance and termination pay, we also cannot collect it from the directors, and that would be money paid directly out of the fund, out of the program, up to the ceiling of $5,000 per employee.
Mr Offer: The response seems to just lend to the way I read this legislation. I would ask the minister, based on your opening comments, if the principle behind the bill is to help workers recover unpaid wages when their employer is bankrupt, insolvent or does not pay because of other circumstances, do you not feel, on the basis of an interrelationship between the two sets to which I have previously referred, that the principle of the bill is much wider?
Hon Mr Mackenzie: I think the difference is that their determination of wages is much broader than what we are using, and we have included in that termination and severance pay. There are usually contractual obligations. It is money that is actually owed, in any event, to the workers before they can claim it, and it has certainly been part of our interpretation.
Mr Offer: To carry forward, you feel there is in principle nothing that is wrong with -- because it is coming out of the consolidated revenue fund --
Hon Mr Mackenzie: I have no difficulty with it if it is actually money owed to the workers, no.
Mr Offer: There is nothing wrong with taxpayers paying for that?
Hon Mr Mackenzie: No.
Mr Offer: Can we, on that basis, ask the question whether businesses in general should pay? I am talking about a levy, a tax imposed on businesses; potentially, the good businesses paying for the bad businesses, the good employers paying for the bad employers. Do you see something improper about foisting a potential tax, if not on the taxpayers generally, on businesses specifically, in the area of severance and termination pay?
Hon Mr Mackenzie: Certainly no more than I see its being improper that a worker who has earned that money and, through no fault of his own, all of a sudden finds that he is not entitled or cannot get it because of the situation of the company.
Mr Offer: So you would then view this particular program as a social program?
Hon Mr Mackenzie: I think anything that assists workers or others in society probably has a socialist element to it, if that is the interpretation you want to give it. I do not see it particularly as a socialist program.
Mr Offer: I did not say "socialist," I said "social."
Interjection: You said "social" as well.
Mr Offer: Okay, I will leave it at that, then.
The Vice-Chair: I am sorry, I do not want to cut you off, but I wanted to make sure everyone had an opportunity. If there is anyone who wanted to jump in now --
Mr Offer: I have some other questions I would like to ask and if there is anyone else who would like to --
The Vice-Chair: All I would like to do is just offer an opportunity or we will --
Mr Offer: Sure, I would certainly stand down for a few moments and let whoever else wishes to ask some questions.
Mrs Witmer: To Mr Mackenzie or Mr Thomson, is this fund, this program, going to be accessed as it is in Manitoba, only as an absolute last resort after all reasonable efforts to recover wages have been made, or how is this different?
Mr Thomson: We have attempted to find a balance between an approach that would just pay the money out of the program right at the beginning on the one hand, and on the other hand waiting until all processes, all possible procedures an employee could take against an employer, have been exhausted. Neither one of those seems to us to make sense. To pay the money out of the fund immediately would mean the fund or the program would be doing all the collecting and employees would not be asked to do what they ought to do when they are owed money, to the extent that they are able to do it.
On the other hand, if we make them exhaust all remedies to collect the money, then there is a real risk they will not get the money owing to them at the time they most need it, when they are trying to make the transition from one job to another. You might say, following on something Mr Offer said, this program does achieve a social purpose to the extent that it assists an employee through a very difficult period of time by ensuring that he or she gets at least a portion of the statutory entitlement as he or she is trying to move on to a new job, or to be retrained or whatever.
What we have done is try to strike a middle ground that says, "You're expected to attempt to recover, but there is a discretion to pay out before you have exhausted all remedies," and pay out of the program so that employees are not sitting there for ever waiting for the money from the program or from the employer.
Our thought was that we would do what we more or less do now, which is to ask the employee to deal with the employer, seek the money, have the employment standards officers work with the employer, if there is an employer to work with, to collect the money and to do that for a very modest period of time. The first three or four weeks, for example, are very important, and at that point allow an application to the program even though there may be more things that could be done to collect the money. Then it would be the responsibility of the program, with the employee, ideally, to still try to collect from the employer to be reimbursed.
Hon Mr Mackenzie: I do not know what you get in your constituency office, Mrs Witmer, but I know that in mine, over the number of years we were dealing with workers' problems and other problems, for the vast majority who came to me after they had made their efforts to collect where they were owed money in terms of their employment problems, we were usually dealing with it not only two or three weeks, but in some cases two or three months after the fact. I am not sure what is actually going to happen in hard practice, but I suspect most workers will make an effort to collect when they find they are out and are either missing a couple of weeks' vacation or pay or are entitled to six, eight or ten weeks' severance and have not got it.
I do not know whether you could call it a last resort effort or not. I would not really get too upset about it and I do not see it necessarily as a last resort effort.
Mrs Witmer: I guess the point I am trying to make, and I would certainly agree with you is that those first three or four weeks become very critical to the employee and the employee's family, and some of them have to go to other avenues to get money to carry on. I guess my concern is that every attempt possible will be made to collect from the employer so that the taxpayers of this province are not again forced to subsidize what Mr Offer has referred to as a social program. I hope this does not become second resort and that we never go beyond that. I hope every attempt is made to recover from the employer if at all possible, and I think we need to give a lot of thought to making sure that process does take place, that all reasonable efforts are made to recover those wages. I am concerned about that.
The other concern I have at the present time is not knowing what the federal government is going to be doing. I am glad the discussions are ongoing and that there is hopefully going to be some harmonization. What guarantee, though, is there that the federal government is going to reimburse the provincial government for the administrative costs? I hear you saying we are going to do the work and recover from the feds. Are we also going to be recovering money to cover the administrative costs that we are going to be incurring beyond what needs to be collected?
Mr Thomson: It is too early to answer that question because the discussions are still at a relatively early stage. It is our hope that if we become the place one goes to have the whole claim processed, some form of the administrative costs will be covered by the federal government. We have not gotten to that because we have yet to agree on what the process would be. We have real optimism that the federal government agrees that it is primarily liable for wages and vacation pay right up to the $2,000 in bankruptcies, because it would have to take the same position with every province whether or not that province has a wage protection program. We have heard nothing to suggest they would feel otherwise, but we still have not got to the stage of determining whether they are going to help us with the administrative costs if we process their claims.
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Hon Mr Mackenzie: I think it is worth noting that in one of the very first meetings we had, the idea of harmonizing our approach was one that also came from the federal people we met with, and we agreed with it. We got some conflicting stories thereafter as to whether they wanted a second approach to collect the money, and we see some real difficulties with that. We were once again this morning, when the deputy was speaking to the federal people, a little more encouraged that there was not to be two separate efforts, but it is an issue we just have not been able as yet to resolve. We recognize the importance of it and we will do what we can, because it makes sense to us. Obviously, it means bearing some of the cost, and that would be important to us as well if we can access the federal Parliament.
Mrs Witmer: In all fairness to the taxpayers in Ontario, if Ottawa is going to introduce this fund and we are the ones it is coming to to do the administrative work, the taxpayer in Alberta is not going to have to pay that additional money, so obviously we are going to have to get some sort of reimbursement.
Hon Mr Mackenzie: The difficulty in making arrangements with other provinces is that if they are not able to work out, I am not going to be absolute on that until I see what the final results are.
Mrs Witmer: That is right. I would hope, then, we would try to be reimbursed for those administrative costs.
What if an employee has been receiving unemployment insurance and now receives a payment from this fund? What is going to happen? Is the employee going to have to pay back the money?
Mr Thomson: You have raised an issue of some real importance that is still not fully resolved, particularly with respect to severance pay. At this point, the federal government's position with respect to unemployment insurance is that if one receives severance pay, that is offset against an unemployment insurance obligation or payout, so even if you get it after you receive the unemployment insurance it can claim it back from you, or if you get it while you are collecting unemployment insurance you can be terminated from unemployment insurance.
As you may know, this is a practice that has been very strongly criticized, and there are a number of reports that propose it be changed. We do not yet have an indication that the federal government will do that. We are hoping to achieve some positive answer to that before this program is operative.
Hon Mr Mackenzie: We are also hoping we will have a clear indication of whether we can amalgamate the two plans before ours is in place. As I mentioned earlier in response to Mr Offer, we have been raising the issue -- I am aware of it since 1976-77 -- of the federal responsibility in terms of bankruptcy situations. We have had at least seven starts on it or what we thought were starts, so it is a question of wanting to have something pretty firm before I would want to hold up what we are doing.
Mr Thomson: It is our hope to be able to report to the Legislature what has been worked out with the federal government before this bill is brought forward for third reading. We are assuming we can develop some understanding with the federal government before then on this issue, although its bill may not pass for some time.
Mrs Witmer: It certainly would be beneficial to everyone in the province if the federal legislation were to be passed at the same time and we knew exactly what the real costs of the program were going to be to the people in Ontario.
Another concern I have is about the ability to increase the amount of compensation and the method by which that can be done. Has there been any consideration given to changing that?
Hon Mr Mackenzie: We have left it so that it can be done by regulation. That would depend to a large extent, I think, on the economic circumstances and whether the employment situation improves drastically, whether we find that the costs are not as high as we anticipate for this plan. Those and probably other arguments would enter into it. We just wanted the ability to be able to move if the circumstances indicated we could pay more to workers. I might say that the $5,000 covers most of what is owed to the vast majority of workers in the first place.
Mrs Witmer: That is right. I think you said the average claim is going to be about $4,200, so that would be covered. One other concern I have, certainly one that is raised by people throughout the province, is the fact that eventually this will become another tax on the employer.
Hon Mr Mackenzie: I must confess I was surprised and indicated it to the federal minister when we talked to him about its move to have a federal payroll tax for its part of it, but our intent is that we deal with it under general revenue for the first try. We will wait to hear what arguments we get from the Treasurer before we take another look at it. That is always a difficult anticipation.
Mrs Witmer: When you say first try, are you referring to the first 18 months?
Hon Mr Mackenzie: I am referring to the first 18 months. That is the only firm commitment we made on it.
Mrs Witmer: After that it is certainly a possibility. You are going to review the situation?
Hon Mr Mackenzie: We have indicated to the Treasurer that we would like to discuss it with him. He has not given us a hell of a lot of encouragement, so it may stay the way it is; it may not. I cannot tell you that for sure.
Mr Thomson: At this point there are no plans to introduce such a tax or levy.
Mr Klopp: It has been an interesting time for me, this whole idea about a wage protection act. I come from an agricultural background and we have somewhat the same ideas in agriculture. A farmer goes and processes something and takes it to an elevator, and if the elevator goes broke the farmer is the last one holding the bag. In this case, it is usually eight or nine months' work down the drain. Ironically, sometimes it is the same bank after him for his money that foreclosed on the elevator.
Government's answer to that a number of years ago was to put in a kind of fund. I guess I pay a little of my money from my crop. One of the arguments we had was that it may be paying people to get out of the industry and not feel so bad because they ripped off the farmer. I congratulate you that you have recognized this a little for the employee.
Some of my questions have been answered very well. In my riding, one of the concerns was how it was with the owners and the commissioners. I commend you, because we had some quite frank discussions in my office and I think you have answered them fairly well. My employers were concerned about their families and how it was going to relate to them; it is now out. I gave them the opportunity to submit written submissions and come here. They said no. Really, how can you argue against a wage protection plan? It only makes sense.
One of the arguments we have heard is that the $5,000 is too high. After what we have heard today, we have batted around $4,200 -- is that correct? I can take that back? -- as about average, so it is not overly high, and indeed it might probably not reach that.
Hon Mr Mackenzie: It is worth recognizing at the same time that if somebody is entitled to close to the maximum severance pay and did not get notice of termination, we have had figures as high as $15,000 or $20,000, so somebody could be out a pile of money -- fortunately, it is a small percentage of the cases -- and the $5,000 does not begin to cover what he might legitimately be owed.
Mr Klopp: I thank you very much for that point. I think it is a good start. In agriculture, we have had somewhat the same thing. Indeed, general revenues have had to make up the shortfalls in some of those programs. We are in tough times right now, and in most of these times with the plans we put forth in agriculture there was a big pile of money being owed. It is interesting to note that most of those funds are actually in pretty good shape right now. Maybe down the road this thing will not be as big a bugaboo as it is right now. I would hope that down the road we get back into some better times and things will even out.
Hon Mr Mackenzie: We have some hopes in terms of the cost. When we looked at the costs and came as close as we could to them, the 18 months and $175 million -- that was the first figure in this -- was a worst-case scenario situation. Hopefully, if we have started to improve things, those costs will be in a downward spiral. I just do not want to make any predictions until we see what has happened in a few more months.
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Mr Frankford: Section 12, on section 52 of the act: Do I understand this to mean that if it appears a company is getting into trouble, the director could ask for payment of our funds?
Mr Thomson: This is to deal with a situation where you have made an order against a company or a director that has not been collected. You would still have to have made that order, and then it turns out there is a third party who owes money to the company, for example. This would allow the director to seek to recover from the third party who owes the money to the company, in order to satisfy the order that has been made against the company. It would not become operative until an order had been made, a determination made that either the company or the director is liable for a sum of money.
Mr Frankford: So the company would have gone into bankruptcy before this took place.
Mr Thomson: Yes. You would have had the layoff or closure or whatever it would be. You would have had a determination that money is owed to the employees, an order that the employer pay it, and an attempt to recover that from the employer. But suppose the employer has gone bankrupt and you find somebody who owes money to that employer. Assuming there are not some secured creditors ahead of you, that would be a situation where one could go after that money.
Hon Mr Mackenzie: It is an incentive for officers and directors to collect what they can in the case of a bankruptcy situation and not give up.
Mr Frankford: You said secured creditors. Does this make you the first creditor?
Mr Thomson: No. There is nothing in the bill that would have the program that has paid out money to an employee stand ahead of other creditors. The right of the program would be no greater than the right of the employees, and the employees, as you know, stand behind the secured creditors, for example. We do not have the power at the provincial level to alter the order of creditors in a bankruptcy. That is federal legislation, and they have not altered the order of the creditors.
That is a long way of saying the program administrator has no greater right than the employees have to recover, but this would allow, in going after the company, to go after a third party who owed money to the company that might be money that would otherwise have been available to the employees, and therefore in this situation is available to the fund.
Hon Mr Mackenzie: It raises another whole question that has been there for a long time, whether there should be changes in who are preferred creditors, but that is another battle that is down the road somewhere.
Mr Frankford: I am still not quite clear what this paragraph does, why it does not make you the preferred creditor if you have the right to go after an individual.
Mr Thomson: The law relating to bankruptcy is federal law and the province does not have the right to change that law. It would have to be done federally. If someone were going to stand ahead of secured creditors, for example, it would have to be a federal law that would do that, a federal law relating to bankruptcy. You have to follow whatever the federal law is with respect to liability on bankruptcies. We would not have the power to say the fund should get paid before the secured creditors. Only the federal government could do that on a bankruptcy.
Hon Mr Mackenzie: But certainly if there were money owed the company -- and officers and directors would be conscious of that -- they could make an extra effort to collect it.
Ms S. Murdock: I just have one question. Under section 40u, if two directors ask for a review within the 15-day period but the other directors do not, would that have any effect on any pending appeal?
Mr Thomson: No. If anybody has been served with an order and does not appeal within the time period, the order becomes final against those persons --
Ms S. Murdock: Against the other ones.
Mr Thomson: Against the other ones, but those who are appealing, whoever they are and however many they are, an employer and maybe a number of directors, all of those would not be liable unless and until the appeal determined they were liable. Am I answering your question?
Ms S. Murdock: I think at the beginning, under section 40e -- I was just wondering, when I read 40u in relation to 40e, whether or not any of the funds would be held back pending appeal if all of the directors were not affected. Do you see what I mean?
Mr Thomson: Yes, I understand the question. I am not sure I know the answer. You are raising the question of a situation where you have some directors you can collect against and where it is a final order. Let's suppose you have taken steps to collect, successfully or otherwise. Can you pay out the money even though there are appeals pending launched by other directors or by the company? I will have to get back to you with the answer to that. I do not know the answer to that.
Ms S. Murdock: You mentioned in your presentation that under section 1, some cases that you would describe would come under the Statutory Powers Procedure Act. I am just wondering if you could give me an example. I cannot think of one.
Mr Thomson: The section I talked about is primarily to deal with appeals, for example. We have introduced the employee appeal, so we have a separate process for appeals and we want that to apply instead of the process established under the Statutory Powers Procedure Act.
There are some decisions that employment standards officers make, and I can undertake to provide you with a list of some of those, that are the kinds of decisions where we did not want to set up a process that would require an employment standards officer to have a full hearing under the Statutory Powers Procedure Act before he could do the initial steps; for example, under the Employment Standards Act, those that involve verifying a claim.
Those would be the kinds of steps that we wanted to be sure employment standards officers can take without being pulled into the SPPA process. Then, when they do make major determinations, the act itself sets out a process instead of the one that the SPPA requires, although we think the process that is in the bill would meet all the intent of the SPPA in terms of protections.
Mr Offer: My first question really emanates out of the response to the last question by Ms Murdock, which dealt with when an order has been issued by the branch in the first instance. I do not know how it is styled. I cannot get a picture as to what it would be. I do not know what it would look like, but you are saying no matter how it looks, if there are 10 directors and four of them appeal, then the order is not stayed, for want of a better word, pending the determination of that appeal. It is joint and several liability. Those remaining six are on the hook for 100%. If, for instance, the equation is 10 directors and nine appeal, that one person is on the hook for all of it.
Is it the intention of the legislation that no matter how many directors there are, if one registers a notice to appeal to review, the order will proceed unless all have taken part? In many cases you do not even know how many directors there are.
Mr Thomson: Essentially it deals with staying things. It deals with when you can actually pay the money out of the wage protection program. You are asking when you can go and collect from some even though others are appealing. Is that the issue you are raising?
Mr Offer: There are two issues. The first is that the appeal may be valid and you have either got the money or you have not got the money and you have only heard an appeal from 50% of the directors, or some of the directors, to determine that. I guess the question is, is the money out or is the money not out?
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Mr Thomson: My understanding, and I will need to confirm this, is that at least with respect to the company versus the directors, if you have a final order against the company, we can act under the wage protection program. I am not sure what the answer is if we have appeals from some directors against whom orders have been made and not from others. I will need to determine that and let you know.
Mr Offer: That would be quite helpful.
The next question I have deals with the regulation-making power, and there are two areas which are of concern. The first is the regulation to increase the compensation. The second is this other thing called "such additional amounts as may be prescribed by regulation," and that is in both areas, that of liability by the program and that of liability by directors. Of course what we are talking about is something where we do not know what the additional amounts are. You may be able to give us some sense as to what they are today, but with all due respect, that may change in a couple of months' time.
The second problem I have is that this can be done without it going before the Legislature. I am wondering if you might be able to share with us your position on increasing compensation and potentially widening it out without it being debated in front of the Legislature when it may impact either on taxpayers or on employers or on both.
Hon Mr Mackenzie: The question I was just asking, almost in anticipation of your question, was: "What is the current status in other areas? Do we have the authority by regulation to change?" I think we do. That is something I would have to get you an answer on. The question of the merits of it is another argument altogether.
Mr Offer: You do not want to share with me the merits of that right now?
Mr Thomson: I could say the intention in the subsection that relates to broadening the coverage was not to allow -- and I am quite sure it would not -- the power to bring in, for example, liability for termination and severance pay where we have now cut it back with respect to directors. It was simply to allow us to be able to define as "wages" for the purposes of paying out from the program things that we might have missed. For example, we missed commissions and we were concerned that we should have the power to define as wages that might be paid to employees other things that really stand in the place of wages. We have left ourselves the opportunity to do that when and if an example comes along.
Mr Offer: I understand that very well, but you will also understand our position that these potential liability issues are ones that a great many people outside this room might wish to share with their member of Parliament. When it is done by regulation it is not on the floor of the Legislature and never finds its way into committee. In a very real and fundamental way it somewhat excludes people from meaningful input through their MPPs. This is not to say through the ministry, but it does mean to say through MPPs, and so it does raise some concern.
Hon Mr Mackenzie: You are raising the point that instead of $5,000, we could very well end up guaranteeing a $6,000 payout if things improved another year, or something like that?
Mr Offer: While we are on that topic, and you have brought it up, the point is that we are also well aware -- we are not working in a vacuum -- that you are now having a certain consultation paper dealing with the whole issue of severance and termination with respect to potentially -- I do not believe any final decision has been made yet -- lowering the criteria for severance, termination, and increasing the amount that could potentially be paid.
All of this could funnel right into this type of program. When we speak about an average liability of $2,000 or $3,000 or $4,000, you will know very well that if the severance pay is moved up, if more people are potentially liable, if termination is in fact enhanced, that you go right to the top and you do not need more bankruptcies, insolvencies or layoffs to do so. That is also what leads me to some severe concern over regulatory powers in a matter which can in a very real sense impact on liability to business, if there is, 19 months from October 1, 1990, an employers' tax, or if not, to the taxpayers of the province. I think we have a responsibility for that.
Hon Mr Mackenzie: The fact that we might raise the amount you are entitled to in terms of severance, or raise the severance, would not necessarily raise this ceiling. But you are right that there would be the possibility there in regulations. We decided anything we were doing would be on the basis only of moneys that were actually owed. As it is, what we have really taken a look at is the potential cost of the program. That in itself is restricted at more than we might have liked, simply because of what bank you can afford at any given time.
Mr Offer: I think we can debate that, but the concern I have today is that those two aspects in particular are under regulatory power as opposed to having to go through the legislation.
My next question is that it seems that under the legislation, in principle, a director is a director is a director is a director. It does not allow for a director to say: "Yes, I am a director, but I should not be as liable. I should not be jointly and severally liable because I am not the same type of director as all of those other directors." It takes away an argument on the basis of reasonableness, on the basis of, in many ways, a certain sense of justice. I am wondering if that is a fair reading of the legislation, before I go further.
Mr Thomson: It is true that this legislation -- I should stress it simply mirrors the present obligations that exist in the Business Corporations Act -- assumes that all the directors are equally responsible and equally liable and does not allow for different types of directors depending upon their involvement in the corporation.
Mr Offer: There are a number of companies, especially as we try to maintain a certain competitiveness, which have on their boards directors who come from other jurisdictions and who lend a certain expertise to a corporation which is quite valued in terms of a corporation being able to be competitive. I wonder if there is a concern that maybe these individuals who have very much to give with respect to their particular expertise, but do not have that type of control and management of the day-to-day operations of the corporation, may now have a certain reluctance to be part of some growing Ontario corporation.
Hon Mr Mackenzie: I think when you take on the job of a director, you take on the responsibilities that go with it. I suppose we could always argue over whether one director has more authority or more power than another, but I think you would have a difficult time if that is the criterion you are going to use.
Mr Offer: Okay. It is important for me to hear your position.
Mr Thomson: We did decide to narrow down very carefully the obligation of the directors to only wages and vacation pay owing during the time that they are directors. That was the way we felt we would deal with the concern we have heard expressed with respect to the draft bill that broadened that liability.
Mr Offer: Right. I asked the question because under subsection 40f(2), you give that type of protection to employees who are construction lien claimants. They have an opportunity to argue before the program administrator that though they are not entitled prima facie to the program, they can be if they can persuade the administrator that they could not get sufficient information to preserve rights, were unable to preserve or were unaware of rights, and a whole variety of other things. It is giving the construction lien claimant, as an employee, that right to make the argument, but that same type of argument, though not in the same words, directed to a director is excluded under this legislation. I understand the point you are making, but I guess I am just somewhat concerned about what this means for other individuals, and directors of companies, and making those companies grow and prosper, be competitive and create jobs.
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Mr Thomson: I would point out that section 40f only deals with the situation where one failed to file a construction lien in time. It only deals with the power to pay out of the program when one, for good reason, failed to do that. I guess our thought is that it is a very different issue than the one of different kinds of liability for different kinds of directors, which it was our view ought to be dealt with in the Corporations Act if it is going to be dealt with anywhere.
Hon Mr Mackenzie: I do not want the least bit to hurry anybody here. I do not know what time your intention was to finish, but the note I just got said they are holding up the policy and priorities committee because mine is the first item that is up and I know we were due to leave at 4. Is there a difference in time that you people have? The deputy certainly could stay for a few minutes longer. I know what is up and I know the importance of it.
Mr Offer: I understand.
I guess the last point I wanted to make on this one issue was that I believe it is a right given to people, for instance under the Income Tax Act or indeed under the Ontario Business Corporations Act, that directors and individuals can make those types of arguments that maybe primarily they are liable, but in certain circumstances they have the ability to argue they should not be liable. The only point I make here is that this legislation says a director is a director and they cannot argue it.
Mr Thomson: It is my understanding, and it may need to be corrected, Mr Offer, but with respect to the OBCA obligation with respect to this issue I do not think there is the power for directors to excuse themselves or to be excused in certain circumstances. However, I will verify that for you.
Mr Offer: While you are doing that, I hope one takes a look at the Income Tax Act, which has very specific references.
The Acting Chair (Mr Wood): On behalf of the committee, I want to thank you very much, Mr Mackenzie, for coming forward. Did you have another question?
Mr Offer: Yes, as a matter of fact, I have. Really, I have just potentially one more, if you can just help me out on this. I think it will be very important for all members of the committee as we proceed with the public hearings.
A company goes bankrupt. An employee is out all four of the categories. Simply, what would he do, where would he go and how quickly would he be able, first, to improve his claim, and second, to get his cheque? I appreciate going through the bill, but I think we will have to have a very strong appreciation of this as people come before us and potentially talk about the process.
Mr Thomson: If I could set aside for a moment how the federal program might work and deal with the provincial program --
Mr Offer: Absolutely.
Mr Thomson: -- that employee would, as he or she does now, come to the employment standards branch and launch a claim. The employment standards branch and an employment standards officer within that branch would then seek to verify the claim. There are two issues here -- really, one issue: Is there a valid claim and for how much? It is all really one issue.
That can take a short amount of time. In some cases it can take a bit longer, because in particular in relation to severance and termination pay there may be debate about how long the person has worked at the corporation and what kind of records are there in the corporation, particularly in bankruptcy situations. If the person was away for a period of time, how long was it? Did it affect how much severance is payable?
It is our hope that in all cases, even the more difficult ones -- I am setting aside cases like Varity, for example, very major cases -- we can have processed the claim in approximately three to four weeks maximum. There are a number of cases that can be done almost immediately, but there will obviously be cases that will take longer than that. At that point in time an order is made against the employer.
What we have yet to determine firmly as policy is, "How much time should then be spent trying to collect that money?" It is our hope that at that point, either before the order is made as a result of mediation efforts involving the employment standards officer or after the order has been made when the employer recognizes that he or she owes that money, payment can be made by the employer and there is never any need to go near the wage protection program.
If, though, it becomes clear that there will be a passage of time or there is going to be some real difficulty in collecting the funds, assuming there is no appeal, which as you know kicks in a whole different process, the assumption would be that relatively soon after that, in a matter of a couple of weeks, perhaps a bit more than that, a payment could be made out of the program to that employee in those cases where it does look as though the money cannot be collected or there cannot be an agreement about how much is to be paid, and then it is paid or there is going to be a very long process to try to collect those funds.
In the bankruptcy situation, we assume that money would be paid fairly quickly, because it should be fairly obvious as soon as the claim is verified, which can take some time, whether or not there are going to be any funds left after secured creditors and other creditors are paid. That is a situation where the money ought to be payable fairly quickly, as soon as or very soon after the determination is made that the money is owing.
Mr Offer: That is helpful. If the employer has not paid -- certainly in a bankruptcy it would be highly unlikely -- then is it the same order that would go against directors or is it served on the employer and directors at the same time?
Mr Thomson: There would have to be separate service on the directors, and remember, that is only for a small portion of the amount, so it has to be a separate order against directors. That could be done at the same time. If there is an employer from whom the money can be collected, then the plan would be not to do that until efforts have been made to collect from the employer. If it is a bankrupt employer and there is no hope of collecting from the employer, and assuming there are any directors who could be asked to contribute the portion for which they might be responsible, one could serve the directors soon after that and then seek to collect from the directors.
As we have estimated it, we think a very small portion of the total funds paid out would ever be recovered from directors. By far the largest amount of the money is coming from consolidated revenue, with a certain amount of recovery from employers, especially the non-bankruptcy situations, and then a small amount of recovery possible from directors.
Mr Offer: Just as a final question for myself at this point, if you have some of those figures, and I recognize that they are based on predictions, that would be very helpful.
Mr Thomson: All right. Those figures are different depending upon one's assumption about the economic climate over the next period of time, but we can provide you with some of those figures.
If I could, I have been asked by the staff, quite properly, if I would stress something I did not earlier. The directors' liability as well is not retroactive to October. It is only prospective as well. It does not date back to last October.
Ms S. Murdock: I have just one comment, and I do not know whether I am right -- I think I am, though -- in regard to Mr Offer's question in terms of directors' liability. Would the insurance that they get not cover any differential, or the fact that they were from another jurisdiction or whatever the company's insurance that they get?
Mr Thomson: Yes, certainly it is our expectation that there would be insurance that would cover the potential liability of the directors, and that is going to be much more readily available given the fact that we have narrowed the directors' obligation down to that which now exists. So the directors' obligation under this bill would be no greater, in fact somewhat less than now exists in the Business Corporations Act.
The Vice-Chair: Hearing no other questions, I would like to thank you for your presentation and all your assistance. We will be needing it, probably, as we go through this process. Does anybody have anything to bring before me before I adjourn? Hearing none, I would like to adjourn until 10 am tomorrow.
The committee adjourned at 1610.