How the subcontracting arrangements are structured
In the course of its organizing drive and the research related thereto, the Union has observed certain circumstances in which Impact purports to contract with another entity, whether a person, group of persons, or a corporation, to perform cleaning work on behalf of Impact as a purported subcontractor to Impact. In one situation, Impact contracted with another entity (“subcontractor”) to perform work in two buildings in the City of Toronto. In exchange for the cleaning services provided by the purported employees of the subcontractor, Impact paid $9 per hour to the subcontractor for the hours worked by those persons. In turn, the subcontractor paid its purported employees, in cash, at the rate of $8 per hour.
Accordingly, this type of situation raises a series of “red flags”. First, and perhaps most obvious, the affected employees are not paid the minimum wage prescribed by the ESA. Beyond that, however, given that the minimum wage rate is $8.75 per hour and Impact pays $9 per hour to the subcontractor, it is clear that the $0.25 differential is not enough to provide for the payment of vacation pay mandated by the ESA, as well as various premiums, taxes, and levies required by different legislation, for example, WSIB premiums and the Employer Health Tax.
Impact is, or ought to be, well aware of the implications of its subcontracting structure. Indeed, subcontractors engaged by Impact are required to submit timesheets to the appropriate area manager of Impact. It ought to be reasonably clear to Impact and those persons in receipt of the timesheets, that the payments made to the subcontractor are simply not sufficient to provide for the payment of vacation pay or cover premiums required to ensure that employees are covered by such basic protections as the Workplace Safety and Insurance Act, 1997. Indeed, it also seems clear that in order for the subcontractor to make any attempt at profit, it must pay its purported employees at a wage rate well below the minimum wage.
Accordingly, SEIU Local 2 submits that Impact cannot escape the protections and benefits of the ESA and other legislation by engaging in a corporate “shell game” that attempts to shift the burdens imposed by that legislation onto another entity and then “wash its hands” of the situation, claiming that the other party bears all responsibility.
As legislation that is remedial in nature, the Ministry ought not allow employers to relieve themselves of their obligations through the use of certain commercial arrangements. To the extent that such actions are permitted the ESA and other relevant legislation are seriously undermined.