Impact of Ongoing Labor and Employment Reforms in Canada

The new set of reforms put forth last month by the Ontario government, titled ”Bill 148” or ”Fair Workplaces, Better Jobs Act, 2017,” brings in a host of upgrades to existing labor regulations such as the Employment Standards Act, 2000 (ESA), the Labor Relations Act, 1995 (LRA), and the Occupational Health and Safety Act (OHSA). Key aspects covered in the current set of legislative upgrades include increased minimum wage, equal pay for work of equal value, expansion of personal emergency leave, domestic violence leaves, etc. These amendments are projected to collectively cause a $23 billion rise in cost for businesses operating in Canada, over the next two years, with majority of the impact (over 75 percent of cost rise) being attributed to minimum wage and equal pay provisions included in the act.

Rise in Cost of Employing Contingent Labor

The revised reading of Bill 148 has increased minimum wage from $11.6 per hour to $14 per hour from January 1, 2018 and to $15 per hour between January 1, 2019 and October 1, 2019. Also, to keep a check on the misuse of the proposed law, organizations are now not allowed to reduce the current rate of pay of employees to meet the new legislation. The equal pay clause covering part-time, temporary and seasonal employees is tipped to have a direct bearing on corporate budgets with mandates for equal pay for similar work kicking in. The cost of employing contingent labor is projected to increase by at least two to three percent in the region, with bill rates tipped to rise on top of the equal pay ruling.  Another ruling that is expected to have a potential impact on firms is the mandate to employers to pay wages for three hours of work even if the employee works less than three hours or if the shift is cancelled within 48 hours of their scheduled start time, adding to their cost-related woes.

Due to the projected rise in minimum wage, a notable impact on the hiring of employees (from staffing agencies) is expected. Increase in wages might force staffing agencies to pass on the cost rise to their clients who might, in turn, resist hiring temporary employees. Clients will rather look to get work done by their permanent employees than going to agencies for hiring contingent labor during these uncertain times. While equal pay provision regulation is not expected to directly increase the cost of labor for clients, it is anticipated to impact the cost structure of service providers, who will invariably respond with a pass-through.

Impact Beyond Wages

Employers are recommended to set up a seniority-based grouping based on working hours, to comply with equal pay provision, although it is expected to be a time-consuming exercise. They are now being pushed to negotiate with suppliers on other cost components apart from wages, which accounts for 60 to 70 percent of total rate. Going for an absolute value for the markup and not a percentage of cost could be a quick fix that could be considered. Firms should also look to hire cross-trained employees so that they are able to work on projects across streams and should also try to cross-train their full-time equivalents for multiple job roles. Bill 148 brings significant changes to Employment Standards Act and will have a major impact on how organizations hire and retain talent. HR and procurement teams are required to review new policies and bring in systems to ensure adherence, failing which, might result in drawing severe penalties and bearing significant cost implications.

Sources:

• http://www.occ.ca/wp-content/uploads/2013/05/Proposed-Changes-to-Ontarios-Employment-and-Labour-Laws-CANCEA-Final-September-2017.pdf
• http://theonn.ca/wp-content/uploads/2017/10/ONN.Bill-148-sector-survey.Preliminary-findings.PUBLIC.2017.pdf
• https://www.ontario.ca/page/plan-fair-workplaces-and-better-jobs-bill-148
• http://www.somlaw.ca/blog/blog-post/blog/2017/11/28/bill-148-receives-royal-assent-ontario-makes-substantial-changes-to-its-labour-and-employment-laws