Fissuring, Fairness and Employment Standards in Ontario

1. Fissuring, Fairness and Employment Standards in Ontario WESTERN UNIVERSITY, NOVEMBER 4, 2017 PROFESSOR KEVIN BANKS CENTRE FOR LAW IN THE CONTEMPORARY WORKPLACE QUEEN’S UNIVERSITY

2. Fissuring • Organizational forms that enable effective control over the methods and output of a production network, while strongly influencing but not directly determining terms and conditions of work within that network

3. Forms • Outsourcing • Franchising • Subcontracting / supply chains • Third party management

4. Causes Interaction of: • Effective demand of capital markets for increased profitability; • Focus on core competencies as a competitive strategy; and • Opportunities and incentives to shed employment related costs and liability risks.

5. Enabling Conditions • Development of information technologies that permit coordination without a firm. • Legal technologies: franchising, supplier contracting, third party management agreements, contracts that conceal employment relationship under an appearance of arm’s length dealing…

6. Key Consequences for Working Conditions Pressure on wages (and working conditions) in the middle and at the bottom of the income distribution. Erosion of legal accountability: • Increased evasion of legal responsibility   • Assignment of legal responsibility to entities with greater propensity to violate the law and diminished capacity to provide redress.

7. Inequality1980-2000: a ‘new normal’ in Canada

8. Stagnation in the middle and spectacular growth at the top

9. Potential Responses to Declining or Stagnating Real Wages and Working Conditions • At the bottom end of the income distribution: increased minimum wage + guaranteed minimum income (?) may go some way towards addressing the problem of growing inequality and (to a lesser extent) working poverty. • The stagnant middle: • Employment standards as the new collective agreement? • For wages, the answers lie outside of employment standards – possibilities include a combination of more effective labour laws enabling new forms of organizing; portable (public) pensions and benefits; more progressive tax and transfer; regulation of executive compensation(?) …

10. Key Symptoms of Erosion of Legal Accountability • Widespread misclassification. • High or increased rates of violation of wage and hours rules: off the clock work, unpaid overtime, minimum wage violations associated with fissured organizational forms. • High or increased rates of inadequate safety and health systems and practices associated with fissured organizational forms.

11. Potential Responses to Erosion of Legal Accountability • Improved compliance and enforcement: detect, deter and respond more effectively to violations of the law in fissured industries: focusing on wage and hours violations and misclassification. • Address the root causes of violations by altering incentive structures.

12. Improved Compliance and Enforcement • Detect, deter and respond more effectively to violations of the law in fissured industries: focusing on wage and hours violations and misclassification. Understanding compliance: • Interplay of norms, and economic and reputational incentives. • Available data: consistent with the supposition that while most comply most of the time, a substantial minority is persistently out of compliance.

13. Improved Compliance and Enforcement Three compliance strategies • Good apples: dissemination of clear information. • Contingent good apples - Reinforce norms and the level playing field.

14. Improved Compliance and Enforcement Three compliance strategies  3. More than a few bad apples: effective detection and deterrence: • Expand proactive inspection • Strategically target enforcement and compliance activity • Gather intelligence • Impose deterrent sanctions (economic and reputational) and remedies where non-compliance is deliberate. • Enable the use of enforceable undertakings as an alternative or complementary means of responding to deliberate non-compliance.

15. Improved Compliance and Enforcement Structural Challenges Posed by Fissuring Fissuring creates structures and business models that increase incentives that push employers towards “bad apple” behaviour. This heightens the importance of strategies 2 and 3.

16. Improved Compliance and Enforcement Structural Challenges Posed by Fissuring But the pervasiveness and persistence of these incentives raise two difficult problems: • The costs of a sanctions regime with due process – balancing a wholesale vs. an exemplary approach. • Can compliance and enforcement strategies get at root causes?

17. Addressing Root Causes by Altering Incentive Structures Possible compliance strategies • Seek agreements with lead firms in networked industries to address underlying conditions driving pressure for non-compliance. • Pursue monitored self-regulation arrangements with leading employers. • Give the Director the capacity to embargo the shipment of goods produced in contravention of the Act. • Condition access to government procurement.

18. Addressing Root Causes by Altering Incentive Structures Beyond compliance strategies • Even if politically acceptable, each compliance strategy to address root causes has limited reach. • Reformed workplace representation rules could strengthen legal accountability. • Ensuring legal accountability may require changes to the rules of legal responsibility.

19. Addressing Root Causes by Altering Incentive Structures Rules of legal responsibility • Rethinking the control + dependency nexus – particularly the types of control or influence that lead to legal responsibility. • Legal presumptions concerning particular forms of business organization?

20. How Will Politics Respond? Bill 148 • Substantial minimum wage increase • Increased resources for Ministry and target of inspecting 1/10 workplaces announced with Bill 148 • Modest increases in sanctions accompanying NOCs • Power to publish identities of employers to whom NOCs are issued. • Misclassification to be an offence.

21. How Will Politics Respond? What is not in Bill 148 or the announcement • Announcements of concrete action to address the consequences of fissuring for legal accountability - specifics of new enforcement strategies. • Deterrent economic sanctions: government response ignores CWR recommendations regarding jurisdiction of OLRB to impose significant monetary penalties on the application of a Director of Enforcement in serious cases. • Changes to legal responsibility within networked production. • Outside of successorship in building services, changes enabling new models of representation.

22. How Will Politics Respond? What was not in CWR report • Rethinking legal responsibility in networked production. • Outside of franchising, no recommendations on enabling new models of organizing.

23. How Will Politics Respond? Why not?  (1) Unfocused vision in the expert literature • Lack of research fully justifying and specifying new approaches to enterprise responsibility within production networks for unpaid wages or other violations of employment laws. • New models of representation tend to push up against the fundamental compromises of the Wagner model, requiring new paths to union recognition and bargaining – and therefore cannot be devised piecemeal without both stepping out of and thinking through the implications for the whole system. (2) Uncertain prospects of progressive politics.

24. Thank you. https://cirhr.library.utoronto.ca/sites/cirhr.library.utoronto.ca/files/research-projects/Banks-6B-ESA%20Enforcement.pdf