A Guide to the Employment Standards Act for Ontario Small Business Owners

Business owners in Ontario are expecting major changes to the minimum workplace standards. While these changes are intended to result in greater rights and benefits to employees, this will also result in corresponding additional expenses to employers. Businesses will need to find ways to adjust to the changes before it is implemented in the coming months.

According to the Government of Ontario, small businesses represent 95% of all employers in the province and given the proposed amendments, this business demographic will be affected the most. Small business owners will likely have the greatest impact to make changes to existing strategic and financial obligations that are planned for the following year.

The Proposal

In review of the Employment Standards Act, 2000 and the Labour Relations Relations Act, 1995, the Ministry of Labour is in the process of approving legislative changes to address today’s modern workplace.The Government of Ontario proposed amendments with the purpose ofdemonstrating “true fairness and compassion for workers [to] ensure Ontario has a strong economy to help create jobs and increase economic growth”.

On May 23, 2017, the Government of Ontario released the Changing Workplaces Review Final Report. The 419-page Report to address the Changing Workplaces Review, contains 173 recommendations – approximately 140 of which relate to the Employment Standards Act. The review places strong emphasis on compliance measures to achieve a “culture of decency and compliance” in Ontario workplaces.This marks the largest review conducted in decades, of Ontario’s labour laws.

On May 30, 2017, the Ontario Government announced the Fair Workplaces, Better Jobs Act, 2017 with the first reading passed on June 1, 2017. As of November 2017, the third reading to pass Bill 148: fair Workplaces, Better Jobs Act, has been ordered. This means, Ontario is well on its way to making these changes official.

How does the Ministry of Labour enforce compliance?

The Ministry of Labour enforces compliance with the Employment Standards Act and the Employment Protections for Foreign Nationals Act, 2009 (EPFNA). This is regulated through claim investigations, proactive inspections, and if necessary, prosecutions.

Fast facts: statistics to guide employers

From April 1, 2016 to March 31, 2017, 15,498 claims filed by an employee against an employer were investigated. Most of these claims were reported in violation of the ESA, including:

1. Payment of Wages
2. Employee Termination Pay
3. Vacation Entitlement and Pay
4. Overtime Pay
5. Public Holiday Entitlement and Pay

[source: Ministry of Labour]

What’s next?

In response to the Changing Workplaces Review, the Government of Ontario has proposed legislative changes to the province’s Employment Standards Act and Labour Relations Act. Because of the strong focus on updating the minimum standards for employment, Ontario employers should plan for these changes, as they are expected to impact their business.

If passed, there will be changes to your business operations as of January 2018.

There are several amendments that are expected to come into effect as early as January 2018. It is recommended that employers take the coming months to prepare for the transition by understanding and planning for these changes.

If passed, here are ten of the legislative changes to the Employment Standards Act that will apply to employers:

1. Minimum Wage Increase: The minimum wage that can be paid to employees will increase to $14.00 per hour under the general minimum wage. This will continue to increase yearly, and it is projected to reach $15.00 per hour by January 2019.

2. Termination of Assignment: If an assignment is scheduled to last for three months and ends earlier than the allotted term of work, a minimum of one week’s notice will be mandatory.

3. Overtime Pay:If an employee has two or more regular rates for work performed for the same company, an employer must pay the overtime rate based on the position worked during the additional hours.

4. Vacation Entitlement and Pay: For employees who have worked over five years with the same company, vacation entitlement will increase to a minimum of three weeks and include pay.

5. Public Holiday Pay:The calculation of pay for public holidays will be based on the number of days worked over a pay period that immediately follows the holiday day.

6. Paid Emergency Leave:All employees will be entitled to 10 personal emergency leave days per year, two of which must be paid.

7. Family Medical Leave:All employees will be entitled to time off for family medical leave from up to 8 weeks in a 26-week period to up to 27 weeks in a 52-week period.

8. Sick Leave:Employers will no longer be able to request a doctor’s note from employees who take personal emergency leaves.

9. Paying Employees:Additional methods of payment will be authorized. This refers to the consent that an Employment Standards Officer can order money to be paid directly to an employee when money is owed.

10. Electronic Agreements:An agreement made electronically between employers and employees will serve as an agreement in writing.

Take the increase in minimum wage, for example. Given the projected changes set to occur over the next 18 months, the minimum wage in Ontario will have increased by over 29 percent. This impacts small businesses the most. The reality is, these companies have a smaller profit margin and therefore, will be hit the hardest.

Are you prepared for the financial consequences of these proposed changes?

These proposed changes will force business owners to reevaluate their budgets for increased costs to operate, whether they have employees or not.

With these changes, it is important for employers to understand what their obligations are, in addition to the rights of their employees. Start by reviewing your business plan and financial model and see which areas you’re able to make appropriate adjustments at ease.

It is recommended to get in touch with a financial planner, HR advisor, or legal consultant to help evaluate how your business can adhere to these changes for continued growth and success.