Retailers squeezed by new rules

Ontario’s updated employment laws have dominated public discussion for most of the past year. But while many have focused on the increased minimum wage, restaurants and retailers are dealing with changes that are harder to calculate, like new calculations for holiday pay, equal pay for equal work requirements and changes to scheduling.

Retailers squeezed by new rules

Ontario’s updated employment laws have dominated public discussion for most of the past year. But while many have focused on the increased minimum wage, restaurants and retailers are dealing with changes that are harder to calculate, like new calculations for holiday pay, equal pay for equal work requirements and changes to scheduling.

They’re concerned about more than just how to afford the increasing cost of business. Because the changes are so recent, it’s hard to know how businesses will be impacted in the future, employment lawyers say.

The Ontario government passed Bill 148, The Fair Workplaces, Better Jobs Act last November. It contained sweeping reforms to the Employment Standards Act and also changed parts of the Labour Relations Act and the Occupational Health and Safety Act. This included raising the general minimum wage to $14 an hour from $11.60 an hour in January. It will climb to $15 an hour in 2019 and increasing each year based on inflation. 

It’s not the only concern for restaurants and retailers. Increased automation, the prevalence of online shopping and large retailers declaring bankruptcy has already disrupted the industry. Now, the new rules mandate that: part-time, seasonal and casual employees be paid the same for doing the same work as full-time employees; holiday pay calculations change and all employees are given two paid emergency leave days off, while saying employers can’t ask for a doctor’s note to verify illnesses; and the amount of notice employers must give to employees about changes to their schedule be increased. Combined with the minimum wage increase, many employers are seeing a sudden hit to their bottom line. 

The new rules say employees who perform “substantially the same job” can’t be paid less because they’re part-time or were hired on a temporary, seasonal or casual basis. This makes retail and restaurant industries particularly vulnerable. Many rely on part-time and seasonal work, especially during the holidays. Students often work part-time or seasonal jobs to pay for their studies. These part-time jobs often don’t lead to full-time careers. These rules came into effect on April 1, so it’s too soon to say if they will cause businesses to hire fewer part-time or seasonal staff. But some employment lawyers say it could be a possibility. 

Andrea York, a partner with Blake Cassels & Graydon LLP in Toronto, says she wonders if these changes will reduce the number of jobs available for students or part-time workers. The law may have been written to reduce dependency on part-time workers, but if these changes cause “a reduction to employment overall,” it may not be good for the province, she says.

Some employers are hiring more full-time employees than part-time employees, says Karl Littler, vice president of public affairs at the Retail Council of Canada. Retail jobs in Ontario dropped about two per cent during the first three months of 2018, he says, drawing on Statistics Canada data. It’s unclear how many of those job losses are because of the ESA changes, he says.

Julia Nanos, an associate at Hicks Morley LLP in Toronto, has helped retailers and restaurant owners of all sizes respond to the new requirements. Those who already paid all employees the same, regardless of employment status, won’t have to adjust too much. For others, the equal pay for equal work requirement is “significant.” Still, she says, there isn’t “any uniform pattern in how it affects any particular employer.”

The changes impact grocery and non-grocery retailers differently, says Littler. Many grocery stores have unions with collective agreements. The ESA cannot change these agreements and the agreements expire at different times. It’s also more likely to have long-term part-time employees at a grocery store than in other retail businesses, he says.

The ESA says employees can be paid different rates because of seniority, merit, systems that measure earnings by quantity or quality of production or anything else besides an employee’s sex or employment status. It does not specify if seniority is calculated by the number of hours someone has worked or the date they started working.

The uncertainty has made some employers anxious. “People are afraid they’ll get caught doing something that seems perfectly innocent, but it wasn’t, and is in violation [of the law],” says James Rilett, vice president of central Canada for Restaurants Canada. The government has also promised to increase employment inspectors. Many restaurant owners don’t have time to study all the legal changes, Rilett says. They’ve had to raise menu prices to afford increased wages. Others have cut costs by reducing the amount of time they’re open. Small restaurant owners have had to work longer hours. 

Employers have more quickly noticed the impact of other recent changes. Many businesses are having a hard time adjusting to new rules about calculating holiday pay. York says most of the questions she’s heard from employers are about these new rules. They came into effect in January, less than two months after they were passed. Employers had little time to learn the new rules or adjust their payroll systems. 

The new rules calculate public holiday pay by dividing the amount an employee earned in the pay period before the holiday by the number of days they worked in that period. This means employees who worked fewer hours before a public holiday may receive more holiday pay than employees who worked more during the same time. If someone worked one day during the pay period before a public holiday, their public holiday pay would equal one day’s wages. Employees who may only receive one shift a week may not be scheduled at all before a public holiday to avoid this situation.

On May 10, employers were told to use the new formula for calculating holiday pay until July 1. On July 1, they are to revert back to the old formula — the one that was in place before the ESA changes. That was: “The employee’s public holiday pay for a given public holiday shall be equal to the total amount of regular wages earned and vacation pay payable to the employee in the four work weeks before the work week in which the public holiday occurred, divided by 20.”

It’s causing a lot of “consternation,” says Littler, who has met with the Ministry of Labour to discuss concerns about the new calculations.

More changes are coming. Beginning next year, Ontario employees can refuse additional shifts if they’re asked to work with less than four days’ notice. (This does not apply in emergency situations.) This limits employers’ flexibility — an important part of the retail industry.

“Not surprisingly, most retailers like to maintain flexibility in terms of scheduling people,” says York. “Because on any given day, you don’t know how many people are going to be in and out of the store.”

The changes also increase the amount employees are paid if their shifts are cut short, cancelled or they are not asked to come in while on call. Employees are entitled to three hours’ pay if their scheduled shift is cut short, cancelled within 48 hours or they are not called in to work while on call. This does not apply in emergency situations or for weather-related cancellations.

Employers need to consider their current practices, especially about leaves. Now, all workers are guaranteed 10 job-protected emergency days a year after one week of employment. The first two of these days must be paid. Nanos says employers should carefully examine leaves they already provide to see if what they give employees is equal to or greater than what the government requires now. 

Some workers have taken advantage of the paid time off. York says she heard of a business that received 60 call-ins for sick days by the middle of March. Most employees call in sick for legitimate reasons — and employers don’t want employees coming to work unwell or making customers sick. But this can make scheduling difficult, especially around holidays. Employers cannot ask employees for a doctor’s note.

Lawyers will have to wait for case law to see how these new changes are interpreted.

“The combined effect of all of those changes make it very challenging,” says York.

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