Soumission

Submissions to the Federal Labour Standards Review Commission

Presented By:

Income Security Advocacy Centre
425 Adelaide Street W., 5th Floor
Toronto, Ontario
M5V 3C1

Index

Introduction

Poverty and Enforcement of Employment Standards: How They are Connected

A Living Minimum Wage

Enforcement of Employment Standards

Conclusion

ISAC would like to acknowledge the contribution of the Canadian Labour Congress in preparing these submissions. In particular, the paper "Labour Standards for the 21^st Century: Canadian Labour Congress Issues Paper on Part III of the Canada Labour Code". ISAC also drew extensively from the "2005 Ontario Alternative Budget: Addressing the real fiscal imbalance" in the preparation of these submissions.

I. INTRODUCTION

The Income Security Advocacy Centre (ISAC) is a provincial test case and community legal clinic that is funded by Legal Aid Ontario, which includes 79 community legal clinics.

Our mission is to work with and on behalf of low-income communities in Ontario and address issues of income security and poverty.

In the short term, we hope to address the perpetuation of poverty resulting from the rules and administration of income security programs. In the longer term, we hope to shine a light on the government policies that create poverty and move closer to what we strive for: a decent standard of living for all Ontarians.

II. POVERTY AND ENFORCEMENT OF EMPLOYMENT STANDARDS: HOW THEY ARE CONNECTED

While all workers benefit from and require the strict enforcement of employment standards, it is low-income workers¹ - the majority of the workers most dependent on employment standards legislation - that pay the steepest price when governments decline to implement their own employment standards laws. For low-income workers, a failure to ensure entitlements to the minimum wage, overtime pay, severance, and other provisions compel ghastly choices between paying the rent and feeding the kids. No civil society should tolerate that.

Rising Income Gaps

In Canada, as in so many parts of the world, the rich are getting richer while the poor are getting poorer. A recent report prepared by Statistics Canada² revealed that between 1990 and 2000 incomes among the richest 20% of families have risen by about 10% while total family income stagnated among the poorest 20% of families. Recent immigrants, Aboriginal people and people living with disabilities are amongst the most affected groups. The numbers are frightening. Of the 11 million households in Canada, 1.7 million live on less than $20,000 a year. Female-headed households dominate this category.³

Declining social transfers are identified as being a significant factor in the growing income inequality. While many Canadians benefited from the economic growth of the late 1990s, the most marginalized were hit by unprecedented cutbacks to income support programs. Governments mercilessly chopped away at the social safety net in the name of deficit reduction and tax cuts. This was coupled with a stagnant and eroding minimum wage as well as the replacement of full-time jobs with precarious and low-wage work. In Ontario, for example, more than one million workers in the province earn less than poverty level wages.⁴

The result is enduring and deepening poverty.

Both individual and community health suffers in direct proportion to the gap between the rich and poor. Despite this, governments have consistently attacked the poor and by their policy decisions chosen to create rather than eradicate poverty.

In a recent Ontario government report, Deb Matthews, Parliamentary Assistant to the Honourable Sandra Pupatello, Minister of Community and Social Services, noted that abysmally low social assistance rates have implications for nutrition, housing, participation in community life, and physical and mental health. Specifically, Matthews links low rates to increased demand for health care, child protection, and other government services.

The same can be said of an inadequate minimum wage and, by extension, the non-payment of wages that result from the failure to enforce employment standards.

Low-income Workers and Social Assistance

When employers fail to pay wages and governments fail to compel them to do so, low-income workers have no choice but to turn to social assistance. By design and intent an income support system of last resort, increasingly, social assistance has come to replace wages earned. The problem is compounded by restricted access to other income support programs such as Employment Insurance, an issue that is beyond the scope of this paper.

Canada cannot sit by while errant employers drive low-income workers on to social assistance rolls. The old equation works well and ought to be honoured: work = wages. Governments must not permit employers to line their own pockets at the expense of workers.

Canada's Commitments

The House of Commons unanimously agreed to eliminate child poverty by 2000. Consistent with that promise, Canada has made commitments on the world stage in Beijing and Copenhagen to reduce poverty and enhance women's equality. In 2000, the federal government endorsed the Millennium Development Goals. And of course, since 1985, our Constitution has guaranteed equality rights by virtue of s. 15 of the Charter of Rights and Freedoms.

Employment standards laws are part of a series of anti-poverty measures undertaken by Canadian governments. The failure to strictly enforce them violates Canada's domestic and international commitments and has contributed to the rising rather than declining rate and depth of poverty. This is no surprise given the lack of follow through on Canada's commitments.

Why Aren't Employment Standards Enforced?

Canada has fallen prey to the "race to the bottom" mentality that has swept the globe. Pleading constraints allegedly imposed by globalization and the need to remain competitive, and in the name of deficit reduction and tax cutting, Canada has mercilessly slashed and burned its social programs and has reduced social transfers despite enviable economic and fiscal capacity. In fact, there is a direct correlation between the failure to make good on Canada's commitments and the remarkable and embarrassing bulge in the government's surplus, once again to the tune of billions.

Disturbingly, Finance Minister Goodale quickly rejected the notion contained in a report prepared by a well-respected economist the government appointed to investigate its poor fiscal forecasting record. Stop fretting about balancing the books, the report said. The "surprise surpluses" generated by the obsession with not running a deficit unnecessarily constrains budgeting choices.⁵

It is odd, indeed, for a government to fail to enforce its own laws. Why would anyone respect and abide by laws if a government won't do so? When this results in increased poverty, we all suffer.

It isn't good enough for the government to say that it can't afford to enforce employment standards. It can't afford not to do so. Non-enforcement of these essential anti-poverty measures shifts costs on to already vulnerable workers and in fact increases costs to the government resulting from long-term impacts on individual and social health and well being.

III. A LIVING MINIMUM WAGE

Why It Matters

A living wage for Canadian workers must be implemented because the minimum wage is an essential component of any meaningful anti-poverty program. Social benefits should deal with the issue of child poverty and inadequate family incomes, and EI benefits should provide adequate income assistance to deal with unemployment. Employers have their contribution to make, and setting a wage threshold that is adequate will lower the cost to governments of abolishing poverty. A living wage means at least an indexed $10 per hour wage across Canada.

Inadequacy of the Current Minimum Wage

Current social assistance rates in Canada are nowhere near what people need to cover basic necessities such as food, rent, utilities, clothing, and transportation. The minimum wage effectively acts as a "ceiling" for social assistance rates – provincial governments stubbornly refuse to set benefit levels higher than the minimum wage. An inadequate minimum wage means inadequate social assistance rates.

Minimum wage rates fall well below the poverty line⁶ in provincial jurisdictions, and for workers in federal jurisdiction industries, the minimum wage is the general adult minimum wage rate of the province or territory where the work is performed.

Ontario's minimum wage is $7.45 per hour. British Columbia is the only province with a higher minimum wage, at $8 per hour. The rest of the provinces have minimum wages that range from a low in Alberta of $5.90 per hour to $7.25 per hour in Manitoba. The territories have minimum wages of $8.25 per hour in the Northwest Territories, $7.20 per hour in the Yukon, and $8.50 per hour in Nunavut.

A fulltime worker⁷ in Ontario earning minimum wage falls short of the poverty line by 33% if she lives in Toronto. Nor does she fair well if she lives in small town Ontario. This same worker will fall short of the poverty line by 15% if she lives in a small urban area, defined as less than 15,000 residents.

The same holds true for workers in British Columbia – the provincial jurisdiction with the highest minimum wage in Canada. A fulltime worker in British Columbia earning minimum wage falls short of the poverty line by 28% if she lives in Vancouver, and that same worker will live 9% below the poverty line if she lives in small town British Columbia.

It goes downhill from there with respect to single workers in the other provinces.

Sole-support parents and their families fair even worse than do single workers within the minimum wage structure in Canada. A mother working fulltime at minimum wage who has two children aged 13 and 14 years earns a wage that is 56% below the poverty line if she lives in Toronto. Even after her Canada Child Tax Benefit basic benefit and National Child Benefit Supplement (NCBS) are taken into account her family will still be 38% below the poverty line.

This same family will fare even worse if the mother must go on social assistance because of job loss. Her social assistance benefit will be 63% below the poverty line after the federal NCBS benefit is clawed back from her provincial social assistance.⁸ Even after her Canada Child Tax Benefit basic benefit and the small portion of the NCBS she is allowed to keep are factored in her family will still be 44% below the poverty line.

In Ontario, approximately 191,000 workers earn the minimum wage.⁹ Low-wage workers are more likely to be people of colour and women – 60% of workers earning less than $10 an hour are women. Thirty-two percent of workers of colour fall into this group, as do 38% of women of colour¹⁰. Given lax enforcement of employment standards, there are undoubtedly many workers who are paid less than the minimum wage.

An Immediate Increase to $10

Canadian and American studies have shown that raising the minimum wage would have a minimal impact on employment levels. Factors such as the business cycle, economic growth, and labour supply are far more important than the minimum wage in determining employment levels. These studies illustrate that raising the minimum wage will not automatically lead to job loss.¹¹ Politicians have to resist the argument that minimum wage workers have to choose between a decent wage and a job. The "job killer" argument has been used over and over in the past against any attempt by government to regulate the economy. Child labour laws, workplace safety legislation, the 8-hour day, maternity leave, and paid holidays stand as illustrations of policies that were falsely heralded as "job killers."

It is also not true that employers paying minimum wage are small and struggling family businesses. In 2000, 71% of low wage jobs were in businesses with more than 20 employees; 40% were in businesses with over 500 employees.¹²

It is important to note that a minimum wage of $10 per hour is not a windfall for low-income workers. A minimum wage of $10 per hour will still mean a worker in Toronto will fall short of the poverty line by 11%, but workers will reach or exceed the poverty line in every other community size in Ontario. Raising the minimum wage, therefore, is not a complete answer to poverty in Ontario or Canada.

It is ISAC's position that the federal government should take a leadership role in setting the bar for the minimum wage across Canada. The federal government should immediately introduce a federal minimum wage of $10 per hour in its own jurisdiction and thereafter index it to the cost of living as an important step toward ensuring the right of all workers to an adequate standard of living. The new federal minimum wage should be applied to all federal contractors, and provinces should be encouraged to match the federal minimum wage.

IV. ENFORCEMENT OF EMPLOYMENT STANDARDS

Current Realities

Enforcement of employment standards laws is critical to any strategy for eradicating poverty. Establishing a living minimum wage means little if it is not coupled with effective enforcement. Workers are forced to leave their jobs when their rights to be paid minimum wage, overtime, and other basic entitlements are violated. Low-income workers move from one precarious and inadequately paid job to another. When all else fails, there is often no choice but to turn to social assistance.

Effective employment standards require that measures be enacted which ensure employer compliance will be undertaken. It is trite to state that there is little point in legislating substantive improvements in employment standards if these do not become the lived reality of the workplace. The federal government should again take a leadership role in setting a high bar for enforcement, a new standard that could be copied by the provinces.

In the present environment, employment standards are almost non-existent in Canadian workplaces, as workers will attest. Standards are widely ignored and violated by employers. There is only limited education and proactive enforcement by government inspectors. Individual complaints arise almost entirely after the severance of the employment relationship for unpaid wages, unfair dismissal, or similar issues. In other words, when workers are without an income source and frequently must turn to social assistance to sustain themselves and their families. Even employers found to be in persistent violation of the law face weak, if any, sanctions.

Employers in Ontario¹³ have learned the lesson well that they can break employment standards without penalty. Of the 350,000 workplaces in Ontario, the Ministry of Labour conducted only 357 inspections in 2004 – that's a 0.1% chance of being inspected.¹⁴ In the few cases where a claim actually succeeds against employers who have violated the law, the employer has only to pay the worker the wages that should have been paid in the first place. No interest or penalty is charged. In 2003, the Ministry of Labour determined that employers owed $28.7 million dollars in unpaid wages to over 15,000 workers in Ontario. Despite that fact, the Ministry initiated only one prosecution in 2003.¹⁵

The federal jurisdiction does not appear to be any different. According to the Canadian Labour Congress, government-funded independent evaluation studies undertaken in 1997 and 1998 found massive non-compliance by employers with federal employment standards. Non-compliance was found to be greatest with respect to maximum hours, no payment or provision for statutory holidays, no provision of severance pay, sick leave, and maternity and parental leave. Further, the evaluation report found that most complaints are made following termination of the employment relationship, for unpaid wages or for unfair dismissal.

Problematic also is the fact that investigations are almost exclusively undertaken of individual complaints. The administrative practice – because of scarce resources – is that a single complaint does not usually lead to comprehensive consideration of compliance or non-compliance by an employer, even if there is evidence of a pattern of violations by an employer or within a specific industry. Often individual complaints reflect general working practices of an employer or an industry. Moreover, non-compliance in the federal jurisdiction was found to be as high in firms from which no complaints had been filed as in firms from which complaints originated. Also, individuals filing complaints may be subject to employer reprisal or fear such reprisal. Clearly, the complaints-driven enforcement of employment standards fails to ensure employer compliance.

Since the mid 1980s, the official federal government policy has been to promote “voluntary compliance.” The current practice is to prosecute only as last resort, and no prosecutions have been undertaken for almost twenty years. Resolutions of payment orders with respect to unpaid wages generally require employer compliance to be effective, since the onus is on workers to initiate and continue, often, lengthy legal procedures. There are effectively no sanctions at all for employers in non-compliance with non-monetary provisions.

What We Need

ISAC's position is that compliance will not occur without greater political will to undertake education and enforcement. ISAC recommends the following:

• an infusion of more resources, including hiring of more inspectors;
• mandatory posting of employment standards in all federal sector workplaces;
• popular materials summarizing employer obligations and employee rights and how complaints can be filed should be distributed on a regular basis to employees, starting from the date of hire;
• funds should be made available to community and worker organizations to promote greater worker awareness of standards and of the procedures through which violations could be reported;
• workplace education sessions should be required in cases where an employer has shown a pattern of frequent violations;
• comprehensive audits should be undertaken of individual employers, based upon identified patterns of complaints and on information available to inspectors;
• in the course of a complaints-based inspection, employers should be routinely liable to a general audit of their degree of non-compliance;
• detailed orders for compliance should be issued with minimum delay after an inspection;
• targeted inspections of high-risk business sectors should be undertaken even if an employee has not filed a complaint;
• inspectors should be mandated to investigate third-party complaints filed by non-profit organizations representing workers;
• complaining employees should be given the option to remain anonymous;
• dismissal of an employee for filing a complaint should be prohibited, with violations subject to prosecution;
• escalating fines for non-compliance should augment enforcement through prosecution, and
• orders should be made for prompt back-payment of any unpaid wages, including unpaid overtime and vacation pay, as well as interest on the unpaid monies to all workers affected by previous non-compliance.

V. CONCLUSION

ISAC urges the federal government to provide leadership with this review of Part III of the Canada Labour Code and set a high bar for employment standards that other jurisdictions in Canada can look to for example. Strengthening and enforcing federal employment standards will help avoid the creation and perpetuation of poverty. The creation and perpetuation of poverty is, after all, contrary to Canada's domestic and international commitments.

Endnotes

¹ Not unlike the demographics of poverty more generally, low-income workers are disproportionately women, disabled and from racialized and immigrant communities.

² Garnett Picot and John Myles, Income Inequality and Low Income in Canada: An International Perspective, Statistics Canada, February 2005

³ Armine Yalnizyan, "Divided and Distracted: Regionalism as Obstacle to Reducing Poverty and Inequality", Canadian Centre for Policy Alternatives, September 2005.

⁴ Statistics Canada, Income Statistics Division, Survey of Labour and Income Dynamics, Custom Table R16253YC-1, 1999.

⁵ Tim O'Neill, Review of Federal Fiscal Forecasts and Budget Planning Procedures, 2005.

⁶ Statistics Canada's 2004 pre-tax, low-income cut-offs (LICOs).

⁷ Full-time worker is defined as working 35 hours per week.

⁸ The NCBS is a child benefit paid to low-income families in Canada with children under the age of 18 years. It is effectively the baby bonus. According to the federal government, the NCBS is paid to approximately 40% of Canadian families. For 2005/06 the full NCBS is paid to families with incomes of less than $21,480. The Canada Revenue Agency administers the NCBS, and the benefit is paid monthly. On an annual basis, $1,722 is paid for one child, $3,224 is paid for two children, and $4,644 is paid for three children as of July 2005. In Ontario, families receiving social assistance have their social assistance benefits subject to an annual deduction of $1,463 if they have one child, $2,717 if they have two children, and $3,893 if they have three children. This is known as the NCBS clawback. These families keep only the relatively small increases to the NCBS instituted in 2004/05 and 2005/06.

⁹ Ontario Ministry of Labour Fact Sheet, December 1, 2003 – www.gov.on.ca/LAB/english/news/2003/03-65f.htm.

¹⁰ Statistics Canada, Income Statistics Division, Survey of Labour and Income Dynamics, Custom Table R16253YC-1, 1999.

¹¹ D. Card and A. Krueger, Myth and Measurement: The New Economics of the Minimum Wage, 1995 and M. Goldberg and D. Green, Raising the Floor: The Social and Economic Benefits of Minimum Wages in Canada, 1999.

¹² Statistics Canada 2000 Labour Force Survey.

¹³ The Ontario experience is mirrored in all other Canadian jurisdictions.

¹⁴ 2002-3 Fiscal Year Report, Employment Practices Branch, Ontario Ministry of Labour.

¹⁵ Ibid.