Introduction

On May 8, 2018, the Government Contract Wages Act, 2018 (the “Act”) received Royal Assent. The newly passed legislation allows Ontario to establish minimum rates of pay for people working in construction, building cleaning, and security services jobs under contracts with the government. Private sector contractors and subcontractors will be required to pay according to those rates.

The Act – passed on the final sitting day of the Ontario legislature before the June election – updates the Ontario government’s Fair Wage Policy for the first time since 1995. It builds on the historic actions that Ontario has already taken to create more opportunity and security for workers through the Fair Workplaces, Better Jobs Act, 2017.

Discretion of the Director of Government Contract Wages

The Act provides for the appointment of a Director of Government Contract Wages (the “Director”) who is empowered to make orders establishing minimum government contract wages. The Director may establish different minimum contract wages for:

a) different types of work performed by employees;

b) work under contracts with different government entities;

c) work under different types of contracts including work under contracts of different monetary values;

d) work done in different parts of the province; and

e) work under specific contracts.

The Director has considerable discretion when setting wage rates. In exercising said discretion, however, the Director shall consider any relevant information and sources, including collective agreements, Statistics Canada data, and other government sources.

Application and Features of the Act

As highlighted below, the Act only applies to wages for people working in construction, building cleaning, and security services jobs under contracts with the Ontario government, and contains certain features of note:

Cleaning and security services: With respect to building cleaning or security services, the Act applies to work performed under a contract for a building owned and occupied by a government entity. It may also apply to buildings leased by the government if provided for via regulation.

Construction projects: The Act applies to work done in relation to certain types of construction projects carried out under a contract with the government. Specifically, it applies to construction in the industrial, commercial and institutional sector, the sewers and watermains sector, the roads sector, and the heavy engineering sector.

No retroactivity: Employers currently contracting with the government should be aware that the Act only applies when a contract or procurement process was entered into after the Director has made and published an order establishing applicable minimum contract wages.

Existence of collective agreement: If an employer is bound by a collective agreement, the Act will be enforceable against the employer as if it were part of the collective agreement.

Employer Obligations under the Act

Private sector contractors and subcontractors will be required to pay according to those rates established by the Director. The Act also provides a number of ways for employees to recover their wages and includes an anti-reprisal mechanism.

Furthermore, the Act places a number of record keeping and information sharing obligations on employers. For example, employers subject to the Act are required to record information about the dates and times that an employee performed work subject to established minimum contract wages, as well as the applicable wage rate and whether (and to whom) work has been subcontracted. This information may need to be shared with subcontractors and with the Director. Additional record keeping and information sharing obligations may be prescribed by regulation.

Employer Takeaways

While the Act is intended to prevent a “race to the bottom” between contractors with respect to wages when bidding for public projects, wages in the skilled trades are fairly competitive such that many construction employers will likely not be substantially impacted by the Act or by any orders made thereunder. On the other hand, employers providing security or cleaning services will likely be compelled to pay close attention to orders made under the Act and take these minimum rates into account when bidding on government contracts.

In any event, private sector employers contracting directly with the government or subcontracting with other private sector employers on government contracts would do well to take note of their obligations under the Act. The Act is enforced via processes analogous to those under the Employment Standards Act, 2000. Employers may not contract out of the provisions of the Act and contravening the Act can result in punitive measures. Under the Act, individuals may be fined up to $50,000 and/or face imprisonment of up to 12 months, while corporations may be fined up to $500,000 for non-compliance.