In CNESST c. PF Résolu Canada inc., 2022 QCCS 4888, the Superior Court reminded businesses that use employees supplied under a contract for services or a personnel placement contract that they may be held solidarily liable for money owed to the employees if there is a violation of the Labour Standards Act ("LSA") or its regulations by the subcontractor or the personnel agency.
This recent judgment is one of the rare applications of section 95 of the Labour Standards Act that relates to solidary liability as between a client business and its subcontractor in the case of a pecuniary claim made by the CNESST on behalf of employees.
Gestion Danis et Frères (4036409 Canada inc.) (“Gestion Danis”) was acting as a subcontractor for Produits Forestiers Résolu inc. (“PF Résolu”) under a contract for services signed in 2013.
The non-unionized employees of Gestion Danis worked on the same schedule as the unionized employees of the client business, PF Résolu. Under the collective agreement in effect at PF Résolu, the work schedule was staggered over two weeks: 48 hours for the first week and 36 hours for the second week. The employees also got a paid meal break of one hour per day.
Because of how the hours of work were staggered, no overtime was paid. This meant that Gestion Danis employees were paid every two weeks for a total of 84 hours at the regular rate.
In response to an anonymous complaint, the CNESST carried out an investigation at Gestion Danis. The investigation disclosed that the overtime worked by the Gestion Danis employees was not paid in accordance with the provisions of the LSA. As a result, the CNESST claimed payment of $114,358.78, plus the 20% “penalty” provided in the LSA, on behalf of the 34 employees concerned.
Unlawful staggering of hours
The Superior Court pointed out that staggering hours on a basis other than weekly must comply with the conditions set out in section 53 LSA. For non-unionized employees, the employer must obtain the authorization of the CNESST and the average of the working hours must be equivalent to the standard provided for in the law.
Gestion Danis applied the staggering of hours provided in the collective agreement, covering the unionized employees of PF Résolu, to its own non-unionized employees but did not request or obtain authorization from the CNESST in accordance with the provisions of the LSA.
Without that authorization, Gestion Danis was required to pay the overtime worked based on the normal 40-hour work week, not on the schedule provided in the PF Résolu collective agreement. The Superior Court judge held that the amount owed for wages and annual leave was $114,358.78, with interest.
Exemption from the 20% “penalty”
However, the Superior Court exempted Gestion Danis from paying the 20% of the amount owed to the employees under section 114 LSA.
The courts have held that awarding that amount is discretionary. As a general rule, it will not be awarded where the employer proves good faith and has presented an argument that, while erroneous, was not unreasonable.
The judge noted that Gestion Danis cooperated in the investigation and that the amounts owed as overtime and unpaid annual leave already amounted to a substantial sum for the employer.
As well, there was no doubt as to the good faith of Gestion Danis, which simply copied the schedule of its client business, PF Résolu. The distinction is this, however: unlike Gestion Davis, the PF Résolu employees were unionized and section 53 LSA allows the hours agreed to in a collective agreement to be staggered without authorization from the CNESST.
Solidary liability of the client business
The Superior Court stated that the first paragraph of section 95 of the LSA is clear and unambiguous: when a subcontract is signed, the client business becomes solidarily liable, with the subcontractor or its intermediary, for the pecuniary obligations provided in the LSA and the regulations under that Act.
Having signed a contract for services with Gestion Danis, PF Résolu was solidarily liable for payment of the amounted owed to the CNESST.
This case highlights the importance of a client business verifying compliance by a subcontractor or personnel agency with the pecuniary obligations provided by the LSA and its regulations. It also points out that certain distinctions apply between unionized employees and non-unionized employees that call for a more detailed analysis of the terms of employment offered to the personnel placed.
A careful review of the contracts for services or personnel placement and of the terms of employment offered to the employees placed, whether before the signature is signed, when it is renewed, or during its term, by doing an audit, could help to avoid legal problems and contain costs.
In addition, to guarantee performance of the pecuniary obligations provided by the LSA and its regulations by the subcontractor or personnel agency, a client business could also require that signing the contract for services or personnel placement be subject to a withholding to be returned following submission of a certificate of compliance.