Priority of Claims

What is the Employment Standards Act?

The Employment Standards Act is the law that contains basic rules about employing people and working. Both employees and employers have rights and

responsibilities under the Act.

Does the Act cover all employees in Ontario?

Most employees are covered by the provincial legislation. However, employees working in industries that fall under Federal jurisdiction, such as, Post office, Banks, Railways, Radio stations, Airlines, Television stations etc. are not covered. 

If you are currently employed with the company, you may be able to file a claim with a request that your name not be disclosed. The Act protects you when you are exercising your rights under it.

Section 14(1) of the Act states:

Despite any other Act, wages shall have priority over and be paid before the claims and rights of all other unsecured creditors of the employer, to the extent of $10,000 per employee.

This section prevails over other provincial Acts to the extent that they that they purport to grant a different level of priority for the employee’s wages, or to grant priority over wages to some competing claims.

In matters of insolvency, this section gives wages as defined in section 1 priority over all unsecured creditors of the employer (including the Crown) to the extent of $10,000 for each employee.

However, this section does not give priority over the claims of secured creditors of the employer such as trade creditors or suppliers. A secured creditor is one with an interest in the debtor’s property to secure payment or performance of an obligation.

This section does not, by itself, create any lien or charge upon an employer’s assets as do the “deemed trust” provision for vacation pay contained in section 40 of the Act.

It should also be noted that because “wages” under the Employment Standards Act, 2000 includes vacation pay, the amount of vacation pay deemed to be held in trust under section 40(1) will be included in the $10,000 amount that is given priority under section 14(1).  However, the deemed trust status under section 40(1) confers a greater priority over other creditors with respect to the vacation pay component of the $10,000 than the priority afforded under section 14(1).

Section 14(2) of the Act states:

Subsection (1) does not apply with respect to a distribution under the Bankruptcy and Insolvency Act (Canada) or other legislation enacted by the Parliament of Canada respecting bankruptcy or insolvency.

This section clarifies that the provincial guarantee of wages under section 14(1) does not extend to the Federal Legislation concerning bankruptcy and insolvency as it is presently enacted or in future if the Canadian Parliament so chooses.

If you or the employer disagrees with the investigating officer’s decision, both parties have a right to appeal to Ontario Labour Relations Board within 30 days of the officer’s decision. The Board appoints a referee to hear the appeal. It does not cost the employee to request an appeal but the employer may be required to deposit monies in trust with the Ministry of Labour if it is found to be owing. The referee decision is final and binding on both parties.    

In the past, the Ministry was very aggressive in defending the rights of an employee and would send a legal counsel to represent the employee at the Board’s hearing to deal with the matter. It rarely does so now. Obviously, the employer has advantage over the employee in these circumstances. The question arises, should the employee also engage the services of a professional? It is my view, employee’s may not engage such services at the officer’s level hearing but may do so at the at the referee level hearing, particularly, if the issues are complex.

It is important that if a hearing has been scheduled, the employee must attend such a hearing to present evidence to support its position or to contest the employer’s evidence, otherwise, the officer or the referee may rely on the evidence of the employer to render a decision.   

This information is provided for guidance only and should not be considered as a legal advice.

If you have further questions regarding your entitlements under the Act, please send your questions by e-mail at [email protected] or by fax at (905) 331-1805.

Comments

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