Employment Standards Complaint Resolution, Compliance and Enforcement: A Review of the Literature on Access and Effectiveness

This report was undertaken in response to concerns about whether Ontario’s current processes and tools for enforcing the Employment Standards Act, 2000 (“ESA”) are effective and adequate. It reviews and synthesizes findings of the literature on the accessibility of claims resolution and the effectiveness of compliance and enforcement systems under employment standards and similar statutes in common law countries, in light of the more general literature on regulatory compliance and enforcement. On that basis, it identifies good practices and options for further consideration. In specific terms, the report seeks to address, to the extent that this literature permits, the questions set out in its mandate, reproduced in Annex A. This is not an assessment of the current systems and practices of the Ontario Ministry of Labour. The two overarching issues addressed by this report are fundamental and distinct. Barriers to access put redress for violations of the law out of reach. But remedying violations in response to complaints is not enough to give effect to the Act. As the Federal Labour Standards Review Commission (FLSRC) observed: Labour standards ultimately succeed or fail on the issue of compliance. Widespread non-compliance destroys the rights of workers, destabilizes the labour market, creates disincentives for law-abiding employers who are undercut by law-breaking competitors, weakens public respect for the law. (FLSRC, at 53) The growth of the vulnerable workforce and the fissuring of workplaces in many networked industries pose very significant and likely insuperable challenges to the effectiveness of any approach to compliance and enforcement that is primarily complaint-driven. The literature suggests that attending to these changes in Ontario workplaces will require a renewed focus on (1) strategically targeted and proactive inspection; (2) deterrence of deliberate or recurrent non-compliance; and (3) strategies for networked industries aimed at root causes of non-compliance. Part 1 of the report first reviews the theoretical and empirical literature on the nature and extent of barriers to bringing forth employment standards complaints for resolution. It concludes that many workers, especially those who are most vulnerable to low pay and precarious working conditions, are likely to face barriers to accessing the complaints system. These include well-founded fears of employer reprisal, direct and opportunity costs of the claims process, difficulties presenting and documenting their claims, and lack of access to professional advice or representation. Part 1 next reviews options. Among other options, it suggests that the review give further consideration to: • ensuring that workers know that they need not first contact their employer about a claim when they are afraid of employer reprisal; • providing stronger remedies for violation of the ESA’s anti-reprisal provisions; • reviewing options for delivering free advice to workers on how to file and pursue a claim; • enabling workers to recover some of the costs associated with pursuing a claim and interest on amounts owing; • clearly communicating to workers, employers and the general public the limits on the role of Employment Standards Officers in effecting settlements of claims; and • reviewing the policy benefits and risks of allowing class actions to pursue claims for amounts owing as a result of violations of the ESA. The report does not find strong justification in the literature for further consideration of allowing anonymous, confidential or third party complaints. Part 2 reviews the theoretical and empirical literature on the likely extent of compliance with employment standards laws, and on reasons for compliance or non-compliance with employment standards and similar regulatory laws. The report finds that the literature is consistent with the view that most employers probably comply with most employment standards most of the time. It also indicates however that at least a significant minority of employers does not. Of these, there are probably many whose failure to comply is due to inadvertence. But there is probably a substantial fraction whose non-compliance is deliberate. Of these, many are responding to systemic competitive pressures not to comply, pressures that have intensified with changes in workplaces and the economy that have fissured employment relationships, detaching legal responsibility for working conditions from the economic power to influence them, and heightening competitive pressures on labour costs. This analysis suggests that separate strategies are needed for each of three broadly defined groups of employers. First, for many employers an effective compliance strategy mainly entails dissemination of clear information on what compliance requires. For a second group, compliance may impose moderate cost and administrative burdens. For such employers a sense of normative duty and/or reputational incentives may nonetheless be sufficient to maintain compliance. Compliance and enforcement strategy might therefore: • enlist the support of respected industry and professional human resource associations; • use an approach to enforcement that avoids the appearance of unreasonableness that can arise through sanctioning technical violations or stigmatizing unintentional violations; • conversely, use an approach to enforcement that visibly and firmly deals with deliberate non-compliance so as to provide reminders and reassurance to the community of regulated employers that the government takes the rules seriously and to provide a level playing field; and • use an approach to enforcement publicizing findings of deliberate non-compliance in order to provide reassurance and reminders to compliant members of the employer community and to provide appropriate incentives to those facing moderate incentives not to comply. Finally, for employers that operate under competitive conditions placing compliance with labour standards under continuous pressure and having weak reputational incentives to comply, an effective enforcement strategy will likely require: • reliable detection of violations; • predictable imposition of monetary remedies and sanctions with significant deterrent value; • problem-solving approaches that seek to relieve where possible some of the competitive pressures that lie at the roots of systematic non-compliance. The report goes on to propose seven principles of good practice that emerge from the literature on effective regulatory compliance and enforcement strategy. It then discusses the evidence and analysis in support of, and the implications of, each principle. It lists under each a range of options to give it effect. The principles are: 1. Information on what compliance requires should be readily available and proactively disseminated to employers and employees. 2. Non-compliance should be detected and targeted proactively and strategically. 3. Voluntary compliance approaches should be preferred in dealing with non-deliberate non-compliance, or where an employer is willing to commit to credible and enforceable undertakings to eliminate deliberate non-compliance. 4. Deliberate or persistent non-compliance should face deterrent remedies and sanctions. 5. Enforcement methods should include tools and strategies addressing systemic root causes in sectors where non-compliance is pervasive. 6. Consider enlisting complementary state and non-state regulatory systems. 7. Be prepared to consider increasing resources. For convenience the full list of the identified options for further consideration is set out in Part 3, the report’s conclusion.

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