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Employment - ESA s.116 Reviews

. 2517906 Ontario Inc. (o/a Temporary Personnel Solutions) v. Ontario (Director of Employment Standards)

In 2517906 Ontario Inc. (o/a Temporary Personnel Solutions) v. Ontario (Director of Employment Standards) (Div Court, 2024) the Divisional Court dismissed a JR of ESA officer (under the Ministry of Labour, Skills, Immigration, Training and Development) orders against an employer to pay unpaid wages, based on the finding that the applicants were employers of 'sub-contracted' employees.

Here the court considers 'impecuniousity', as argued against the applicant's ability to use ESA s.116 reviews (which can require the payment of ordered money into trust):
[18] For these reasons, where an employer seeks judicial review because of its inability to meet the requirement to pay money into trust, courts should be wary of accepting bald statements of impecuniosity.[6] There must be a high evidentiary threshold, requiring financial disclosure with “robust particularity,” as in a motion for security for costs.[7] This high standard is especially important in the employment standards context, as the Act was created to remedy the unequal bargaining power that non-unionized employees face.[8] As noted by this court, the administrative process under the Act “is not meant to be readily avoided”.[9]

TPS Has Not Demonstrated Impecuniosity

[19] The high standard required for a corporation to establish impecuniosity was summarized in Grayker Corporation v. Fadalti, 2006 CanLII 18365 (Ont. Div. Ct.),[10] [“Grayker”] which, like the current application, was an attempt to bypass the statutory appeal process before the Board and go directly to judicial review:
Impecuniosity is something more than having no assets. The plaintiff must establish that it and its shareholders cannot sell assets, borrow or otherwise raise the funds to post the security. That is… the claimant must show that money may not be available to it from its shareholders and associates.
[20] In Grayker, Justice Ferrier concluded that, in addition to information about the employer itself, information about its shareholders’ and associates’ personal financial positions may also be relevant to a finding of exceptional circumstances.[11]

...

[22] TPS also relies on Carillon Decorative Products Inc. v. Ontario (Employment Standards Officer) (2004), 2004 CanLII 1535 (ON SCDC), 71 O. R. (3d) 500 (Div. Ct.), where the court found that the unchallenged evidence was that Carillon did not have the funds or access to funds sufficient to meet the deposit required.

[23] These cases relied on by TPS are readily distinguishable from the facts in this case. This case does not raise an issue which has never been judicially construed nor is TPS’s evidence of impecuniosity unchallenged. While the amount involved is large, the record does not satisfy me that the high evidentiary threshold has been met to establish that the financial circumstances are such that the employer cannot pay or that doing so would amount to serious hardship that constitutes exceptional circumstances.

[24] No details have been provided of the finances or assets of TPS’s shareholders, directors, or any of their associated businesses. All four of the relevant directors had their own holding companies, none of which have provided any financial disclosure. Two of the directors, Mr. Zefkic and Mr. Venneri, were in a financial position to operate businesses that “engaged in secondary mortgage lending and small business investment”, suggesting that they have sufficient assets to loan sums of money as part of their business operations. The limited financial evidence indicates that one of Mr. Zefkic’s business accounts – the one that TPS was transferring its own account balances into at the time the Orders were made in January and February 2020 – had a balance in excess of $500,000 at the relevant time (and this does not account for his or any of the other directors’ personal or other business’ assets).

....

[35] TPS has an adequate alternative remedy under s.116 of the Act which is part of a comprehensive scheme to provide an accessible and expeditious process for the investigation and adjudication of basic employments standards and rights. TPS has not established that it is unable to access the Board review due to impecuniosity. In the circumstances of this matter, a s.116 review is a more suitable and appropriate alternative than judicial review. The Board is in the best position to determine to what extent the Test Case decisions create issue estoppel or an abuse of process. It can also determine the issues raised of procedural fairness, decide the matter de novo and substitute its findings for those of the ESO.
. 2517906 Ontario Inc. (o/a Temporary Personnel Solutions) v. Ontario (Director of Employment Standards)

In 2517906 Ontario Inc. (o/a Temporary Personnel Solutions) v. Ontario (Director of Employment Standards) (Div Court, 2024) the Divisional Court dismissed a JR of ESA officer (under the Ministry of Labour, Skills, Immigration, Training and Development) orders against an employer to pay unpaid wages, based on the finding that the applicants were employers of 'sub-contracted' employees.

Here the court considers ESA s.116 ['Review'] as an 'adequate alternative remedy', argued by the respondent against the exercise of JR discretion to hear the case:
[5] TPS comes directly to the Divisional Court without seeking a review of the challenged orders by the Board under s.116 of the Act. In order to have a review by the Board, s. 116(1)(b) requires the person challenging the orders to pay the amounts owing under the orders to the Director in trust or provide the Director with an irrevocable letter of credit in that amount. TPS submits that there are exceptional circumstances permitting the court to hear its application for judicial review. Specifically, it relies on its impecuniosity and its being unable to otherwise access its right to appeal the orders.

....

[7] The application should be dismissed. TPS has an adequate alternative remedy under s.116 of the Act. It has not established that it is unable to access the Board review due to impecuniosity. In the circumstances of this matter, a s.116 review where the Board can decide the matter de novo is a more suitable and appropriate alternative than judicial review.

....

TPS Has an Adequate Alternative Remedy

[11] TPS has the right under the Act to a full hearing with the opportunity to present evidence and make submissions before the Board. If the application was considered and allowed by this court, the remedy sought by TPS is to send it back for redetermination by an ESO. On a s.116 review, unlike on a judicial review application, the Board may exercise the powers conferred on an ESO and may substitute its findings for those of the officer who issued the order (s.121 of the Act) or may amend, rescind or affirm the order or issue a new order (s.121(7) of the Act).

[12] Under s.116 (5) of the Act, the Board may extend the 30-day period for applying for review if it considers it appropriate in the circumstances to do so.

[13] The Act is public welfare legislation aimed at protecting vulnerable employees. The appeal to the Board is part of the comprehensive scheme created to provide an accessible and expeditious process for investigation and adjudication of basic employment standards and rights.

[14] In Happy Landing v. Employment Standards Branch, [1998] O.J. No. 2416 (Gen. Div.), at para. 14, the court commented on the advantages of a hearing de novo compared with a judicial review:
It is doubtful that it is better to proceed by judicial review on affidavit evidence and cross-examinations rather than viva voce before the referee. The appeal to the referee is by way of trial de novo and as noted above the employer has an absolute right to a fresh start untainted by the difficulties the applicant alleges in the investigative process.
[15] A review before the Board has advantages over judicial review. As it did in the Test Case, TPS would have the opportunity, as noted above, to call evidence at an oral hearing and the Board would decide the matter de novo. The Board has the power to grant a full remedy to TPS. In a review by the Board, the employer has an absolute right to a fresh start untainted by the difficulties TPS alleges in the investigative process. A hearing de novo can cure the procedural unfairness that TPS claims to have suffered. The presence of natural justice concerns or other alleged legal errors in the original decisions does not constitute exceptional circumstances.[2] The Board is an expert tribunal in the area of employment standards. It reviews orders to pay like those against TPS as part of its core mandate.[3]

[16] The requirement to pay the money into trust or provide a letter of credit to have an Order reviewed under s. 116(1)(b) of the Act is an important tool in fulfilling the purpose of the Act. It ensures employers do not have an incentive to challenge orders to postpone paying, thus weeding out frivolous Board applications. It also ensures that where an order is ultimately upheld, employees will not have to wait a further period of time while the DES attempts to recover that money from the employer.[4]

[17] By requiring the placement of money into trust, the Act essentially sets out an alternative to a stay of the underlying order. It recognizes the substantive right of employees to access unpaid wages that are long overdue, fulfilling one of the key purposes of the Act.[5] At the same time, s. 116(1)(b) ensures the funds can be returned to the employer should the first-level decision be varied or rescinded by the Board.


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Last modified: 11-06-24
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