ESA compliance: What employers need to know about wages and laws for manufacturing workers
by Lai-King Hum (she/her), Principal of Hum Law Firm
Many employers in the manufacturing industry regularly violate the Ontario Employment Standards Act, 2000 (“ESA”), knowingly or unknowingly.
ESA compliance: What employers need to know about wages and laws for manufacturing workers (Getty Images)
Many employers in the manufacturing industry regularly violate the Ontario Employment Standards Act, 2000 (“ESA”), knowingly or unknowingly. Failure to schedule workers within the ESA hourly limits and to pay minimum or overtime wages are two of the most common violations. ESA violations may have serious implications – the fines are high, and sometimes result in jail time. Therefore, ESA compliance is an essential part of a company’s policy-making process.
What is the ESA?
The ESA regulates employment relations in Ontario. It establishes minimum employment standards related to issues such as hourly minimums and maximums and wages for most employers – including those within manufacturing industries.
What does the ESA say about work time?
The maximum number of hours an employee can work is limited both daily and weekly. Generally, the daily limit is eight hours or, if more, the number of hours in an established regular workday. The weekly limit is 48 hours. However, there are exceptions, such as for managerial and supervisory staff.
Only with a written or electronic agreement between the employer and the employee is it possible to go above the daily and weekly limits. Regardless of such an agreement, an employer is required to pay overtime pay in cases when employees work overtime.
How does the ESA regulate wages?
The lowest compensation that an employer can give its employees lawfully, or the minimum wage, is determined by the ESA. Employers are free to pay more but not permitted to pay less than the minimum wage.
Each year, the minimum wage is reviewed and adjusted based on Canada’s Annual Consumer Price Index. The minimum wage for the period starting on October 1, 2022, and ending on September 30, 2023, is $15.50 per hour. Within a unionized workplace the collective agreement will override ESA standards.
The ESA also determines guidelines for overtime pay in a manufacturing setting. Despite the 48-hour weekly worktime limit, the ESA sets out a different threshold for overtime pay. For every hour worked in excess of 44 hours in a week, employees are entitled to time and a half of their regular pay. Similar to the work hour limit, managerial and supervisory staff are exempted from overtime pay provisions.
The ESA allows employers to average work hours over a period of 2 to 4 weeks for determining an employee’s overtime pay entitlement, but it requires an agreement between the employer and the employee. No “averaging” is allowed without a written or electronic agreement. Such an agreement must be renewed every 2 years.
What happens if my company fails to pay minimum or overtime wages?
If an employer pays less than the minimum wage or owes overtime wages to an employee in Ontario, Employment Standards Officers (ESO) may issue an order to pay the wages owed plus maximum 10% administrative costs. On top of the extra 10% administrative costs, employers may have to pay a penalty of up to $1,000 for each employee and further administrative fees for the collection of money owed under an ESO order.
Employers should also keep detailed records of the calculation and payment of wages. Failing to do so, employers may receive a compliance order.
In addition to penalties under ESO orders, employers may be prosecuted and fined up to $500,000 upon conviction in some cases.
What happens to the directors of a company?
Company directors may be found liable for wages owed to an employee under the ESA. If a director of a company is found liable, an ESO can order the director to pay the wages owed.
If the director fails to comply with the order, they may be prosecuted and subjected to a fine of up to $50,000. Additionally, the director may be prosecuted for authorizing, permitting, or acquiescing in the contravention of the company and liable to a fine and/or jail time on conviction.
Employers facing the issuance of ESO orders (or notice of contravention) or prosecution are encouraged to engage legal counsel as early as possible.
Consequences of ESA violations could be severe. To avoid costly errors, employers should be aware of their ESA obligations when drafting both policies and all employee contracts. An employment law expert can save time and money when it comes to ESA compliance.
