(Not) April Fools Day – Changes To The Canada Labour Federal Code Effective April 1, 2014

by Dentons
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For those federally regulated employers that are governed by the Canada Labour Federal Code (the “Federal Code”), there are some substantive changes coming of which you should take note.

The Jobs and Growth Act, 2012 made certain amendments to the Federal Code. The amendments stem primarily from the public consultations that followed the Report of the Federal Labour Standards Review Commission that was released in 2006. The Government has indicated that the amendments are designed generally to make compliance with the Federal Code easier for employers and employees, and to reduce the employers’ costs of administering the legislation.

It has now been announced that the changes will come into force on April 1, 2014.

Limitation Period for Recovery of Wages

Currently there is no established time limit beyond which wages under Part III (labour standards) cannot be recovered. As a result, inspectors can issue written payment orders to employers or directors, ordering them to pay to the employee any wages or other amounts owing to which an employee is entitled going back as far as the evidence establishes that an amount is owing, potentially years prior.

The amendment will set a six-month time limit for the filing of a complaint alleging unpaid wages. As such, if an inspector concludes that an employer has paid to an employee all wages and other amounts under Part III for the six-month period preceding the complaint, the inspector will issue a notice of unfounded complaint. If an amount is found to be owing within this period, the inspector may make an order for wages and other amounts owing for a period starting 12 months (or 24 months for vacation pay) before the date on which the complaint is made, the date on which employment was terminated, or the date on which the inspection started (where a payment order results from a proactive inspection).

For employers, this means that an inspector will not be able to reach back indefinitely in reviewing an employee’s complaint for wages, and brings the Federal Code in line with most provincial statutes in setting a reasonable limit on the inspector’s power to issue orders.

Establishment of a 30-Day Time Period to Pay Vacation Pay on Termination of Employment

The Federal Code currently requires employers to pay outstanding vacation pay “forthwith” to employees when they cease to be employed. As vacation pay is considered wages under the Federal Code, this creates an anomaly, because the Federal Code generally requires employers to pay any wages “within 30 days” from the time when the entitlement to the wages arose. The amendment will ensure that employers pay employees any vacation pay owed within 30 days (rather than “forthwith”) after the day on which the employment ends.

Administrative Review Mechanism for Payment Orders and Notices of Unfounded Complaint

The amendments provide for an administrative review mechanism. Within 15 days of a payment order, the rejection of an unjust dismissal complaint or a notice of unfounded complaint, a person affected by an inspector’s decision can request a review of the decision, with written reasons. An employer or corporate director requesting a review would have to pay the Minister the amount indicated in the payment order as a condition of the review. A payment order or a notice of unfounded complaint could be confirmed, amended or rescinded on review. The decision on review could be further appealed to a referee, but only on a question of law or jurisdiction. The Minister could also refer a complex case directly to a referee, rather than going through the new review mechanism.

While these changes do not represent a major overhaul of the Federal Code, they do move in the right direction, in providing additional clarity and efficiency for employers subject to the Federal Code. The most significant change, the introduction of a limitation period for orders to pay wages, is an important and long overdue addition to the Federal Code, and is a welcome change for employers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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