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By Kevin MacNeill Pay now or pay later Ontario director jailed, companies fined for failing to pay employees. M ost employers know that corporate directors can be held personally liable to pay unpaid wages and face fines for non-compliance under Ontario's Employment Standards Act, 2000. However,  financial penalties are not the only potential liability under the ESA.  Directors can also face jail time when they flagrantly ignore their responsibilities under the ESA. On Nov. 8, 2012, Steven Blondin was sentenced to 90 days in jail for violations of the ESA. Blondin owned and operated six corporations in the Greater Toronto Area. Between March 2007 and October 2009, 61 employees from the six corporations filed individual claims for unpaid wages with the Ministry of Labour. After a twoyear investigation, the MOL concluded that all 61 employees were entitled to unpaid wages. The corporations and Blondin were issued 113 orders to pay,  totaling $125,000. Blondin ignored these orders and did not pay the owed wages. As a result, the MOL prosecuted all six corporations and Blondin personally for failure to comply. Blondin and the corporations pleaded guilty to charges of failing to comply with the MOL's orders. The Ontario Court of Justice sentenced him to 90 days in jail, ordered him and the corporations to reimburse the employees for the unpaid wages, and  fined them an additional $280,000, plus a 25 per cent victim fine surcharge as required by the Provincial Offences Act. Under the ESA, the employer is primarily responsible for unpaid wages, while corporate directors can also be held jointly and severally liable for wages that go unpaid. Enforcement powers rest with the MOL, who under the ESA has the authority to issue orders to pay wages against corporations and some or all of their directors. The ESA does, however, limit a director's liability: they can be held jointly and severally liable only for unpaid wages that became payable in the previous six months, while they were directors. Further, directors can only be jointly and severally liable for unpaid vacation pay accrued in the previous 12 months, while they were directors. Despite these limitations on director liability, the MOL has recovered more than $90 million in wages and other monies owed to employees from corporations and directors over the last eight years. Moreover, non-compliance with the ESA or with subsequent orders to comply can result in significant costs beyond the amounts owing for unpaid wages. As Blondin learned, the ESA also gives the MOL the power to prosecute corporations and directors who fail to comply with its orders to pay wages.  If a director is guilty of failing to comply with an order issued to him or her personally, the penalties include a monetary fine of up to $50,000 per offence. However, if a director "authorizes or permits" a corporation to contravene the ESA, he or she can be fined up to $50,000, be sentenced to imprisonment for a term of not more than 12 months, or both. Blondin's sentence is significant because, while the ESA contemplates that a director may be fined or jailed for non-compliance, such sentences are rare. However, this prosecution is not cause for panic. Directors and corporations can easily prevent such severe consequences by first ensuring the company's practices and procedures with regard to payment of wages, holiday pay, vacation pay, and hours of work are ESA compliant, and that payroll and other such records support compliance. Second, if an employment standards officer issues an order for compliance, the corporation and its directors should promptly seek legal advice on how to comply with that order, or whether to appeal it.   Directors and corporations should also be aware that the MOL conducts proactive inspection blitzes to ensure ESA compliance and prosecutions are up. The MOL commenced only three ESA prosecutions in 2003 but it commenced 500 in 2012. Currently, the MOL is conducting targeted inspections in the following sectors: • Auto mechanics; • Building services, including security, parking, cleaning, and food services; • Car dealerships; • Fast food restaurants; • Gas stations; • Hotel and hospitality; • Private schools, including elementary and high schools, business, secretarial, computer, trade or technical training, and ESL/Language schools; and, • Temporary help agencies. Although the current focus is on these specific sectors, the MOL continues to conduct unannounced inspections in other sectors on a proactive and reactive basis. Directors should monitor the MOL's employment standards web site for up-to-date information on sectors targeted for inspection. IH Kevin MacNeill is a labour and employment lawyer with Heenan Blaikie LLP in Toronto. w w w. c a n a d i a n law y er m a g . c o m / i n h o u s E February 2013 • 9

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