A new package of labour and employment law reforms in Ontario is poised to potentially impact the competitiveness and the viability of small and medium-sized businesses across the province.
Bill 148, The Fair Workplaces, Better Jobs Act, 2017, became law this week, and introduced a range of new amendments designed to modernize the province’s Employment Standards Act and level the playing field for workers in Ontario. The new measures are highly contentious. Perhaps most controversial is the move to increase the minimum wage to $14 by Jan. 1, 2018, and then again to $15 by Jan. 1, 2019, up from the current $11.60 base wage.
The challenge with increasing the minimum wage so quickly and by so much is that many small and medium-sized employers will struggle to keep pace with such a rapid increase in overhead. Many will be forced to cut staff, cut shifts or even lay off workers. We know of several businesses—especially franchises and other organizations that rely on lower-wage employees—who are planning to downsize in response to Bill 148.
Indeed, even the province’s Financial Accountability Office has weighed in, predicting job losses of up to 50,000 people. Estimates by the Keep Ontario Working Coalition peg potential job losses at 185,000, while TD Bank predicts that as many as 90,000 Ontarians will wind up unemployed by 2020 due to the changes.
Julie Kwiecinski, director of provincial affairs at the Canadian Federation of Independent Business—an advocacy group for Canadian SMEs—has been highly critical of the government’s unwillingness to delay the increase to the minimum wage.
“They turned a blind eye to numerous surveys and evidence-backed studies warning of significant job losses, especially among lower-skilled workers,” she said, according to media reports.
The changes don’t end there.
Bill 148 increases minimum vacation entitlements for workers who have been employed by the same organization for five years or more, to three weeks from the current two, while staffers will now be entitled to three hours of pay if their shift is cancelled within 48 hours of its scheduled start. In addition, the legislation requires part-time and temporary employees to be paid the same as their full-time colleagues when carrying out “substantially the same but not necessarily identical” duties. Another contentious point: Personal Emergency Leave.
Bill 148 increases PEL to 10 days per year, and requires employers to pay two of them. Not sure how to confirm whether a PEL day is legitimate? Forget requesting a doctor’s note. The Ontario government effectively banned medical notes for workplace absences of up to 10 days.
Employers will also face the threat of costly penalties and possible prosecution for misclassifying full- or part-time employees as contractors. While this practice has always been illegal, the new penalties are far more serious and pose major risk to employers, many of whom may unwittingly misclassify an employee as that individual’s workplace duties change over time.
Now, Bill 148 would pose a threat to entrepreneurs in Ontario even as a standalone package—although it could be argued that measures such as increasing minimum vacation time are long overdue to pull Ontario in line with other jurisdictions, most notably in Europe, where employees in countries such as France receive as many as 25 paid vacation days. One could make the case that more paid leave produces happier, more productive workers. Not all CEOs would agree with that assessment, but it’s a reasonable argument nonetheless.
But when coupled with the federal government’s proposed tax changes for corporations—including placing a $50,000 threshold on the passive income that can be earned in a corporation in a given year, and curtailing income sprinkling to family members—it’s clear why employers in Ontario are reeling at what they see as an attack on business competitiveness.
While the extent to which the federal government proceeds with its tax proposals remains to be seen, this week it became even more difficult for entrepreneurs in Ontario to achieve bottom-line success—and that’s never good for business.
Armando Iannuzzi, Partner