Tuesday, July 3, 2018

Alberta enforcement efforts incentivize wage theft

Two weeks back, Alberta announced that it would be sending letters to employers alleged to have stolen workers’ wages. These letters will be sent after a worker files an Employment Standards complaint but before the government investigates.

The idea is to identify and resolve complaints where the employer is willing to pay as quickly as possible. The government asserts that a similar initiative in Ontario reduced the number of investigations by 25%. (I was unable to find any data about its impact on wage recovery.)

Triaging wage-theft complaints is intended to conserve investigative resources. These resources may then be focused on wrapping up investigations more quickly. This matters because fewer than half of ES complaints are being concluded within 6 months of being filed.

For workers waiting for wages, this kind of delay is very difficult. While faster resolution of “easy” complaints may help the government increase the number of complaints resolved with 6 months, it ignores the root issue: understaffing.

As I noted last October, in 2016/17, Alberta employed only 45 ES inspectors and 8 other ES staff to regulate wage theft in a non-unionized workforce of about 1.8 million. I did hear a rumour that more ES staff will be hired, but I have seen no confirmation. It is impressive that so few ES staff can resolve nearly 6000 claims per year.

EDIT 2018.09.16: A Calgary Herald story says there are now 73 ES inspectors. Doesn't change the general argument but is better data.

While the government’s press release has garnered positive press coverage, it is useful to ask what the announcement will actually mean for workers.

The release indicates employers will be told they have three options: they can pay the amount claimed, they can dispute the claim (which triggers an investigation), or they can settle with the worker for a mutually agreeable amount.

Alberta has a long history of seeking to settle ES claims through mediation. When “successful”, mediation often means workers end up accepting less money than they are owed. Here's a fictional example of how it works in practice:

The worker files a complaint for, say, $1000 in unpaid wages. The employer says, “I’ll give you $500”. The worker must then decide between $500 bucks today for sure or rolling the dice, waiting six or more months, and maybe getting an order directing the employer to pay $1000 (maybe) which many employers evade anyways (there is $19 million in orders for unpaid wages on the books rights now).

Understandably, the worker is probably going to say “fuck it, gimme the cash” and accept the $500 loss.

The problem with mediated settlements is that the law says the worker should have gotten the full $1000. Past governments have underfunded ES and forced bureaucrats to adopt mechanisms whereby the government essentially helps employers break the very law that the system is supposed to enforce by pressuring workers to relinquish at least part of the wages they are legally due is they want any of their owed wages in a timely manner.

Now, in this example, the worker is $500 better off than the worker would be without the Employment Standards system. But is this process really consistent with Labour Minister Christina Grey’s assertions that “Our government has the backs of working people” and “This action will help us better serve employees so they can get the wages they have earned”?

I’m inclined to say no.

What would help is aggressively prosecuting and publically embarrassing a few bad-actor employers. Get some serious fines imposed. Put some newspaper, radio, Facebook, and bus ads out saying “So-and-so’s Steakhouse screwed its workers out of $15,000 in wages last year. Do you really want to dine there?”

Employers are smart and, faced with enforcement, they’ll get the message that the cost of wage theft just went up and they will change their behaviour. By contrast, a policy facilitating employers having to pay only a fraction of the owed wages incentivizes employers to engage in wage theft.

This announcement is the second concerning ES issue to appear in the past few weeks. Alberta just completed a consultation about changes in its child labour laws. The proposed laws would dramatically expand the jobs 13- and 14-year-olds can do to include light janitorial work, work at a gas station, perform food prep and grounds-keeping duties, work on an assembly line, and painting.

These are hazardous jobs. The government has attempted to limit young workers’ exposure to the worst hazards of these jobs by limiting the tasks they can perform. But the evidence on child labour in Alberta is pretty clear: once workers are in the workplace, employers ignore the rules. Trusting employers to obey these new rules is naïve and endangers children.

-- Bob Barnetson

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