Can An Employer Go To Jail for Failing to Pay Wages?

July 2nd, 2013 by

Steven Blondin is an interesting man. Until a year and a half ago, he was the sole director of a slew of corporations across Southern Ontario: Steven’s Inc. and Automotive CSI Inc. in Alliston; Automotive Containment Solutions Inc. in Concord; Automotive CSI Inc. in Richmond Hill; Automotive CSI Inc. in Newmarket; and AXCEA International Inc. in Toronto. All provided quality assurance testing in assembly under contract with various manufacturing companies in several locations across Ontario.

However, Mr. Blondin’s outer appearances of success hid a secretive lifestyle. For one, Mr. Blondin went by a number of aliases: Allan Davidson, Allen Davidson, Steven A. Blondin, Steven J. Blondin, Steve Joseph Blondin, Steven Joseph George Blondin, Steven Davidson and Steven Anderson. He also has a criminal record, having been convicted for fraud in 2003 and 2005. While a criminal past is not necessarily indicative of poor character (some in fact would call Mr. Blondin’s record ancient and tepid), how Mr. Blondin managed his companies and remunerated his many employees drew the recent ire of the Ontario Court of Justice.

For over two years, Steven Blondin struggled to pay his employees. Between March 2007 and October 2009, 61 employees filed claims with the Ministry of Labour alleging they had not been paid. The amounts of wages owed ranged from $183.20 to $9,491.42. These complaints resulted in an investigation by an Ontario Employment Standards Officer who, finding that Mr. Blondin did in fact owe all 61 employees the wages they claimed, issued 112 Orders to Pay compelling Mr. Blondin to remunerate his employees. Mr. Blondin failed to comply with any of the Orders to Pay, and as a result charges were brought against him under the provisions of the Employment Standards Act permitting for criminal punishment against a director who fails to comply with the Employment Standards Officer.

Mr. Blondin plead guilty on all 112 charges. Justice of the Peace Vladimir Brubin issued his judgment on November 1, 2012, sentencing Mr. Blondin to 90 days in jail and ordered him to pay $280,000 in fines – $40,000 personally, and $40,000 from each of his six companies. Some might say he got off lightly – the Crown had sought eight to ten months’ imprisonment, a fine of $135,000 personally and $325,000 against his companies. The full text of the decision can be viewed here.

Perhaps more interesting is the commentary amongst lawyers and government officials in the wake of the decision. As the Law Times News recently reported, many lawyers are divided on the appropriateness of assigning jail terms for breaches of the Employment Standards Act. See, the idea that an employer could be sent to jail for failing to pay their workers is somewhat unprecedented. For example, in the early years of employment legislation, the governing statute – the Master and Servant Act, passed in 1847 – held that in fact it was workers who faced criminal prosecution for failing to obey the directives of their employers.
But more to the point, a dispute over a facet of one’s employment is at heart a dispute over a contract. The basic employment contract holds that in exchange for certain services delivered over a certain period of a certain quality, the employer will pay the employee and agreed-upon wage. It is frequent that one side will fail to live up to their end of the contract – for example, imagine a restaurant signing a contract with a liquor distributor for the weekly delivery of 100 bottles of wine in exchange for payment. If the distributor fails to show up with the wine, or the restaurant fails to pay, the risk that either side will end up imprisoned is very low. Instead, the proper recourse is found in the civil courts by way of one party suing the other for completion of the contract (delivery of the wine, or payment).

Conceptually, then, it’s not much different when an employer fails to pay his employees’ wages. The worker tells his or her employer, “I am going to deliver these services to the benefit of your business,” to which the employer responds, “And in exchange, I will pay you X.” So for an employer to be facing jail time seems “excessive” to some people, including Toronto lawyer Arthur Zelikman. “To take away a guy’s liberty because basically he did not pay them is excessive. A contractual dispute like that should have had its resort in civil court.”

On the other hand, some are touting the ruling as enshrining the protection of workers’ rights in law. By attaching stiff consequences to the failure of employers to live up to their end of the bargain, says Markham lawyer Hermie Abraham, sends “a good message to employers that if you are contravening the law, there is accountability whether they like it or not.”

Linda Jeffrey, Ontario’s Labour Minister at the time, hailed the decision for much of the same reasons: “The sentence serves as a warning to those who believe they are above the law. Our government is committed to ensuring that all Ontarians are treated fairly at work, and we will continue to help ensure that Ontarians know their rights and responsibilities.”

Which is all well and good… except it should be borne in mind here that the relevant provision of the Employment Standards Act, Section 132, only imposes imprisonment on an individual. So if you are employed by a corporation, the maximum punishment is still a fine.

Thus some questions have to be asked about the comments of these lawyers and the Right Honourable Ms. Jeffrey. If the naysayers like Mr. Zelikman are right, what protections are afforded to some of the most marginalized workers in Ontario – people who earn a subsistence living, or worse are undocumented residential workers? Shouldn’t there be a strong deterrent against abusive employment practices committed by individual directors? When thinking about that question, really appreciate that smaller business organizations like Mr. Blondin’s often lack the means of redress – human resources department, employee counselling, complaints procedures, benefits – that offer protections against mistreatment from employers like Mr. Blondin.

Then again, if the protection against employer abuses now supposedly “has some teeth” according to Alex Heaslip, employment lawyer at Miller Thompson, one should really be aware of why Mr. Blondin is going to jail. In his decision, Justice Burbin stated at the outset that Mr. Blondin’s real offence, the one that left him open for criminal sanction, wasn’t that he simply failed to pay his workers – it was that once the Labour Relations Board ordered him to pay, he ignored them. So again, in a situation where an employee has no idea what their rights are, and furthermore is terrified for a variety of possible reasons of upsetting their employer and losing their job – does this decision really mean anything?

For further information or assistance with a legal matter regarding employment law, or if you believe you have been a victim of a Employee Fraud, contact one of the Employment Law Lawyers at Devry Smith Frank LLP.

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