Friday, November 9, 2012

Employer Jailed for Unpaid Wages

When employers - and Directors of corporate employers - start going to jail, you know things are getting interesting.

There are growing areas of Directors' liabilities, and while their liability for unpaid wages isn't new, this is the first time I'm aware of anyone ending up in jail for it.

A Ministry news release from yesterday morning reports that Steven Blondin, a director of six companies (in Toronto, York Region, Dufferin County, and Simcoe County) with complaints of unpaid wages of about $125,000 from 61 employees from 2007 to 2009, has been sentenced by the Ontario Court of Justice to 90 days in jail.  (He also faces fines of $280,000, plus victim surcharge.)

I hope to see Justice Bubrin's full decision published, because I think this could be a very important case, and the context is important.

In general, we don't throw people in jail for not being able to pay their debts - the notion of a debtor's prison is decidedly outdated.  In civil court, a judgment is more akin to a declaration of entitlement than an order to pay:  It remains up to the judgment creditor to take enforcement action against the judgment debtor's assets and income, and you'd never be found to be in contempt of Court for failing to satisfy a judgment.  On the other hand, if you were ordered to hand over specific assets - say, a particular Mercedes Benz - then you could be jailed for contempt if you refused to do so.

The ESA Framework

Under the Employment Standards Act, 2000, a corporate director is liable for up to six months' wages for employees of the corporation, and can be ordered to pay wages.  Failing to adhere to a Ministry order is an offence against the ESA, carrying a range of penalties.

There's "General Offence" language (s.132) saying that a breach of the Act or noncompliance with orders carries potential fines (for individuals, up to $50,000) and imprisonment of up to twelve months.  However, there's also more specific language (s.136) dealing with a director's non-payment of amounts owed because of the director's personal liability, which permits only fines (up to $50,000) and not imprisonment.  Under fairly straightforward principles of statutory interpretation, therefore, a director's failure to pay amounts for which he is personally liable ought not to make him liable to imprisonment.

The analysis doesn't end there, though.  There's a different provision, s.137, that permits a prosecution against directors or officers for authorizing, permitting, or acquiescing in breaches of the Act.  That can result in a term of imprisonment.

So I'm curious about the framework being applied here.  s.137 has some fairly specific requirements, and is a little different from the other offence provisions - I'm not entirely convinced that its language properly captures an order to pay scenario, but if it does, then it would certainly require something beyond mere non-payment, probably requiring that the officer or director took some action to circumvent the order, such as moving the assets of the corporation out of reach.  If the corporate veil is in play, then to my mind s.132 is off the table, and s.136 doesn't permit imprisonment.

Of course, in a situation where an individual ends up on the hook for unpaid wages for 61 employees of six corporations over two years, one can achieve certain inferences regarding how much control he had over the corporations and their businesses, and where the revenues may have all gone at the end of the day.  It would be hard to leave that kind of trail without some sort of intentional 'rogue' behaviour, and that's the sort of behaviour that makes the Courts want to send a firm message of condemnation.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

No comments:

Post a Comment