Wage Recovery Procedure - Canada Labour Code - Part III - OPD 817-1

1. Purpose

The purpose of this directive is twofold:

  • to establish procedures to be applied consistently throughout the Labour Program of Human Resources and Skills Development Canada (HRSDC – Labour Program);
  • to define the legal and administrative roles and responsibilities of those involved in the application of the wage recovery provisions of the Canada Labour Code (the Code) so as to ensure that there is a uniform and effective response to non-compliance.

2. Scope

This directive applies to the regions and the Labour Standards and Workplace Equity Division with respect to wage recovery procedures. These procedures are not meant to negate the voluntary compliance approach, which is the preferred approach to follow.

3. Background

Since the 1960's, there have been periodic demands for an administrative wage recovery system in Part III of the Code. A general payment of wages standard, including the requirement for the timely payment of wages, was enacted in 1978. In 1984, the then Labour Canada adopted a compliance policy emphasizing voluntary and administrative methods of obtaining compliance with the Code. The wage recovery provisions were enacted in 1993.

4. Authority

This directive is issued under the authority of the Director General, National Labour Operations Directorate, HRSDC – Labour Program. Wage recovery complaints, payment orders, notices of unfounded complaint and appeals arising from these matters are processed by HRSDC – Labour Program under the authority of sections 251.1 through to 251.19 inclusive of Part III of the Code.

5. Definitions

In this directive,

5.1 – "Inspector" means "Labour Affairs Officer".

5.2 – "Labour Regional Head" means the most senior position in Human Resources and Skills Development – Labour Program within a region.

5.3 – "Wages" includes wages or other amounts owing pursuant to Part III of the Canada Labour Code. Therefore, for the purposes of this directive only, the term "wages" includes severance or termination pay.

5.4 – "Certified copy" refers to a copy of a document or record, that has been signed and certified as a true copy by the person who has possession of the official document and, for the purposes of this directive, is to be used only where actually stipulated.

6. Guiding Principles

6.1 – HRSDC – Labour Program officials must perform their duties in an objective and unbiased manner.

6.2 – It is an objective of section 251.1 to provide employees and employers an inexpensive and expeditious method of resolving disputes related to allegations of wages owed under Part III of the Code.

6.3 – Payment orders should not be issued against employers who are being prosecuted on the same matter. Under subsection 258(1) of the Code, where an employer has been convicted of an offence under Part III in respect of any employee, the convicting court shall order the employer to pay to the employee any wages and other amounts to which the employee was entitled under Part III. To issue a payment order against an employer to collect the same amount the employer is being prosecuted for, represents an improper multiplicity of actions.

6.4 – "Closed files" can be reopened. Payment orders should not be issued in cases where HRSDC – Labour Program has informed the employer that the claim has been either discontinued or abandoned. In the event that a file is re-opened, the employer must first be contacted and advised that the file has been reactivated and be given an opportunity to voluntarily comply. If voluntary compliance is not obtained, then the full range of enforcement procedures should be used.

6.5 – Where information is received indicating that an employer or director may be in bankruptcy or receivership, the inspector should obtain documentary or other evidence to that effect and the name and address of the trustee or receiver. Before any further action is taken, such as contacting the trustee or receiver or issuing a payment order to employer, payment order to director, or order to debtor, the inspector is advised to seek guidance from his or her Technical Advisor, and/or Manager.

7. Procedures

7.1 Inspector's Determination

Attempts to recover wages should first be made in accordance with HRSDC – Labour Program's policy on voluntary compliance, as set out in OPD 700-1 – Compliance Policy, OPD 700-4 – Response to Non-Compliance, and OPD 700-10 – Complaints Handling. If the employer does not respond to a letter of determination or if there is a need to accelerate wage recovery because the employer's funds may disappear quickly, the inspector should issue a written payment order.

Note: A payment order should only be issued once the question of jurisdiction, including employer/employee relationship, the identities of the employer and employee and the amount of wages in dispute have been determined by the inspector. The payment order must never be used as a negotiating tool. A payment order should not be issued until the inspector has duly completed the investigation, and has ascertained and verified all factual and documentary information.

The governing factor is that, unless exceptional circumstances occur, the payment order to the employer or director, or the notice of unfounded complaint, should be seen as the final exercise of the inspector's statutory authority, reviewable only through the appeal process set up by the Code.

A payment order is normally issued in the language that the inspector used throughout the investigation when dealing with the employer. If, following the issuance, either party wishes to have it in the other official language, then the inspector must comply with the request. In order to avoid issuing multiple payment orders, in different languages, with different dates, a duplicate payment order should be generated, but it must be designated as "Translation of the payment order issued on [date of issue of original payment order]" and contain the identical information to that of the original document. This document can be faxed or sent by regular mail. It need not be served as it is merely a duplicate and no appeal period applies. The employer should be advised that the fifteen-day (15) period for appeal commences the day after the date of receipt of the original payment order.

Subsection 251.1(1)

Where an inspector finds that an employer has not paid an employee wages or other amounts to which the employee is entitled under this Part, the inspector may issue a written payment order to the employer, or, subject to section 251.18, to a director of a corporation referred to in that section, ordering the employer or director to pay the amount in question, and the inspector shall send a copy of any such payment order to the employee at the employee's latest known address.

(a) Procedure for completing payment order to the employer (Appendix A)

To: Legal name and address

The use of the legal name of the employer is critical to the enforcement of orders. Inspectors must verify the legal name of the employer through a search of the provincial and/or federal corporate registries before issuing a payment order.

If the employer is an incorporated entity it will be registered and the legal name will include Limited, Ltd., Incorporated, Inc., or Corporation. No reference is required to individuals or to business names registered to an incorporated entity.

Where the employer is not an incorporated entity but carries on business under a registered business name, the individual(s) to whom the business name is registered is used together with the registered business name. For example, John Smith carrying on business under the name and style of John Smith Trucking, or, John Smith and Linda Smith carrying on business under the name and style of John Smith Trucking. Each individual named as the employer in the payment order is served with a copy of the payment order.

Where the employer is a registered partnership, all partners' names as the search indicates are used together with the registered partnership name. For example David Jones and Donald Jones carrying on business under the name and style of Jones Trucking. Each individual named as the employer in the payment order is served with a copy of the payment order.

Where the employer is a society registered under provincial legislation, the registered name of the society is used. No reference is required to any individual(s) or other entity.

If a search of the provincial and federal corporate registries reveals that the employer is not registered as an incorporated entity, proprietorship, partnership or society then the name of the individual(s) identified as the employer through the inspector's investigation is used. It is not necessary to refer to a business name that is not registered. Each individual named as the employer in the payment order is served with a copy of the payment order.

The address should be where a representative of the employer is based who can either respond to the order or who can refer the order to someone with such authority. Normally, this is the person with whom the inspector has been dealing, such as the contact person identified in the LA2000 records. In the case of an incorporated entity, if necessary, service may be performed on the registered and records office of the corporation.

Re: Employee's name and address

The employee's name and address as provided on the complaint form or as revealed upon inspection of the employment records.

Due date for payment

Payment is due at any time within the time period provided for an appeal (see item 7.3).

Amount owing

The total amount owing, clearly identified for each employee, with a breakdown of major components as well as the time periods of non-payment or non-compliance, i.e. :

  • regular wages;
  • overtime pay;
  • vacation pay;
  • general holidays;
  • pay in lieu of notice;
  • severance pay;
  • unauthorized deduction from
  • wages; or,
  • other amounts.

A payment order to an employer may also include deductions authorized by the employee in writing under section 254.1, that were not processed by the employer for purposes approved by the employee.

For example, an employee has authorized the employer, under paragraph 254.1(2)(c), to deduct $10 per pay as a contribution to a charity. The employer, in fact, used the money for some other purpose. These deductions are considered unpaid wages and are to be included in the payment order.

Inspector's signature

The inspector signs and dates each copy of the payment order. The inspector's telephone number should appear on the order.

Appeal request return address

The name of the Labour Regional Head and the name and address of the regional office should appear as the return address for appeals.

Date

The date showing on the payment order must be the date on which the order was signed.

Return address

District office name and address should appear as the return address for payments.

Distribution

Produce the required number of copies of the payment order. Each copy of the payment order is then signed and dated by the inspector. Copy one of the payment order is served on the employer, either in person or by registered mail. Copy two is served on the employee either in person or by registered mail. (re service, see item 7.3)

Note: If the payment order covers wages or other amounts owing to more than one employee, each employee receives only the information relating to his/her claim.

Copy three is filed for possible future use by the referee. Copy four is placed on file.

(b) Procedure for completing order to debtor of employer (Appendix B, Appendix B.1 for banks and other financial institutions)

Subsection 251.13(1)

A Labour Regional Head may issue a written order to a person who is or is about to become indebted to an employer to whom a payment order has been issued under subsection 251.1(1), to pay any amount owing to the employer, up to the amount stated in the payment order, directly to the Minister within fifteen days, in satisfaction of the payment order.

Subsection 251.13(2)

For the purposes of this section, a bank or other financial institution that has money on deposit to an employer's credit shall be deemed to be indebted to that employer.

The debtor is relieved of its financial obligation to the employer up to the amount it has paid pursuant to the order from the Labour Regional Head. There is no appeal mechanism for an order to debtor of employer.

Orders to debtors of employers can only be used for a debtor of the employer and can only be issued by the Labour Regional Head after a payment order has been served against the employer. Generally speaking, an order to debtor should not be issued until the appeal period of the payment order to employer has expired. However, there are instances where an order to debtor of employer may be issued prior to the expiration of the fifteen-day (15) appeal period, such as:

  1. the employer has expressly refused to comply with the payment order; or
  2. when there is a likelihood that the employer does not have the funds to satisfy the payment order; or
  3. there is a necessity to speed up the collection process as it appears likely that the funds of the employer may disappear quickly.

Note: If the order to debtor provides full or partial payment, the funds received should not be remitted to the employee prior to the expiration of the appeal period for the payment order to the employer.

An inspector should prepare an order to debtor of employer for the signature of the Labour Regional Head and send it, along with an explanation of the circumstances, to the Labour Regional Head for action. It is strongly recommended that the Labour Regional Head have the Technical Advisor review the document and the supporting rationale prior to signing.

To: Legal name and address

The use of the legal name of the debtor is critical to the enforcement of orders. Inspectors must verify the legal name of the debtor through a search of the provincial and/or federal corporate registries before issuing an order to debtor.

If the debtor is an incorporated entity it will be registered and the legal name will include Limited, Ltd., Incorporated, Inc., or Corporation. No reference is required to individuals or to business names registered to an incorporated entity.

Where the debtor is not an incorporated entity but carries on business under a registered business name, the individual(s) to whom the business name is registered is used together with the registered business name. For example, John Smith carrying on business under the name and style of John Smith Trucking, or, John Smith and Linda Smith carrying on business under the name and style of John Smith Trucking. Each individual named as the debtor in the order to debtor is served with a copy of the order to debtor.

Where the debtor is a registered partnership, all partners' names as the search indicates are used together with the registered partnership name. For example David Jones and Donald Jones carrying on business under the name and style of Jones Trucking. Each individual named as the debtor in the order to debtor is served with a copy of the order to debtor.

Where the debtor is a society registered under provincial legislation, the registered name of the society is used. No reference is required to any individual(s) or other entity.

If a search of the provincial and federal corporate registries reveals that the debtor is not registered as an incorporated entity, proprietorship, partnership or society then the name of the individual(s) identified as the debtor through the inspector's investigation is used. It is not necessary to refer to a business name that is not registered. Each individual named as the debtor in the order to debtor is served with a copy of the order to debtor.

The address should be where a representative of the debtor is based who can either respond to the order or who can refer the order to someone with such authority. In the case of an incorporated entity, if necessary, service may be performed on the registered and records office of the corporation.

Whereas

The legal name of the employer is to be shown as the name of the employer as it appears on the payment order.

Amount

The total amount indicated in the payment order to the employer less any amounts already received. No breakdown is required.

Employee(s)

Name employee(s) identified in the payment order.

Due date for payment

The payment is due within fifteen (15) days after the date on which the order to debtor of employer is received.

Return address

Insert name and address of the regional office.

Closing paragraph

Include the telephone number of the inspector so that the debtor has a contact should any questions arise.

Date

The date showing on the order to debtor of employer should be the date on which it was signed.

Labour Regional Head's signature

The Labour Regional Head signs the order to debtor of employer.

Distribution

Produce the required number of copies of the order to debtor of employer. Each copy of the order to debtor of employer is then signed and dated by the Labour Regional Head. Copy one of the order to debtor of employer is served on the debtor of the employer, either in person or by registered mail (see item 7.3). Copy two is sent to the employer. Copy three is sent to the employee. Copy four is placed on the assignment file. (re service, see item 7.3)

(c) Procedure for completing payment order to director of employer corporation (Appendix C.1)

Section 251.18

Directors of a corporation are jointly and severally liable for wages and other amounts to which an employee is entitled under this Part, to a maximum amount equivalent to six months' wages, to the extent that: (a) the entitlement arose during the particular director's incumbency; and (b) recovery of the amount from the corporation is impossible or unlikely.

When are directors of a corporation liable? Their liability for unpaid wages arises only after the conditions outlined in section 251.18 have occurred. Directors are jointly and severally liable for wages, and other amounts under Part III, the entitlement to which arose during the director's incumbency, to a maximum amount equivalent to six months wages per employee claim. Directors' liability arises only when recovery of the amount from the employer, either a corporation or a cooperative, appears impossible or unlikely.

If a payment order has been properly served to an employer, and there are still wages or other amounts owing, action may be taken against the Directors of the Corporation. Prior to the issuance of a payment order to director, the inspector should use the Letter of Determination to a Director (Appendix C) to communicate with the director to confirm that he/she was a director at the time in question, and to obtain voluntary compliance.

In cases where the employer is no longer conducting business and the corporation has not been served with a payment order, the directors must be given an opportunity to review and respond to the information which has been obtained from the corporation and complainant(s). Prior to the issuance of a payment order to a director(s), the inspector must send all the directors of record a Preliminary Letter of Determination (Appendix C.2a or C.2b) outlining the complaint information and Director liability.

If new information is received on the merits of the complaint from the Director, or complainant, a Revised Letter of Determination (Appendix C.3a or C.3B) should be utilized. If the inspector is upholding their decision, utilize the Letter of Confirmation (Appendix C.4a or C.4b) to confirm amounts owing.

If the new information received from the Director supports the position that no violation of the Code has occurred, the inspector will advise the employee in writing, with a copy to the Director, explaining the reasons for the decision that the employer is in compliance. (Please use Appendix I of the Complaints Handling OPD 700-10 and send a copy to the Director instead of the employer.)

If the employee responds with further information, please refer to the Complaints Handling OPD 700-10 and follow the procedures from 7.7(v) of that OPD. Any resulting correspondence to the complainant should be copied to the Director instead of the employer.

In cases where one or more of the Directors prove that at least one of the conditions for Director's liability has not been met, then send that Director the Letter to Director (Appendix C.5) indicating that there is no liability.

As a general rule, when proceeding under s.251.18, all directors of the corporation should be served with payment orders with due regard for their respective periods of incumbency.

For example, a director held office only during the month of March. The employee has a wage claim covering the entire year. The recovery of wages from the employer appears impossible or unlikely. The director would only be liable for the unpaid amount which became due to the employee for employment in March. The director would not be liable for amounts outstanding from any other month of the year.

To: Legal name and address

The name and address of the director of the corporate employer.

First paragraph

The employer's name and address and the name(s) of the employee(s) to whom the employer has failed to pay wages or other amounts under Part III along with the total amount determined to be outstanding by the inspector.

Amount ordered

This amount may differ from the amount given in the first paragraph as it is limited to entitlements which arose during the incumbency of the director named in the order.

The amount cannot exceed the amount stated in the original payment order to the employer or, at most, the equivalent to six month's wages of the employee.

Due date for payment

Payment is due at any time within the time period provided for an appeal.

Return address and telephone number

Payments should be sent or delivered to the inspector at the district office's name and address. The inspector's telephone number should be included.

Appeal request address

Appeals must be addressed to the Minister of Labour and sent to the Labour Regional Head. Insert the name and address of the regional office.

Inspector's signature

The inspector signs and dates the payment order.

Distribution

Produce the required number of copies of the payment order to director. Each copy of the payment order to director is then signed and dated by the inspector. Copy one of the payment order to director is served on the director, either in person or by registered mail. A copy of the payment order to employer accompanies the order to director (see item 7.3). Copy two is sent to the employer and copy three is served on the employee either in person or by registered mail. (re service, see item 7.3)

Note: If the payment order covers wages or other amounts owing to more than one employee, each employee only receives the information relating to his/her claim.

Copy four is filed for the possible future use of the referee. Copy five is placed on the assignment file.

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Date Modified:
2012-08-14