NB Government Responds to Employer Concerns over Potential Directors’ Liability

December 19, 2013

The Employment Standards Act (“ESA”) sets minimum rights and responsibilities for all provincially regulated employers and employees in the Province of New Brunswick. The ESA regulates minimum wages, vacation pay, public holiday pay, leave, etc. If an employer violates an employee’s rights under the ESA, the employer may be ordered to comply with provisions of the ESA and/or to compensate the employee for amounts owed to them under the ESA.

CHAPTER 13 – AN ACT TO AMEND THE EMPLOYMENT STANDARDS ACT
Chapter 13 – An Act to Amend the Employment Standards Act was introduced in July of 2013 and set out new liability for directors of for-profit corporations with respect to unpaid wages, vacation pay, and administrative penalties.
Chapter 13 included the following amendments to the ESA:
  • Personal liability of directors of for-profit corporations for unpaid wages for up to 6 months, unpaid vacation pay for up to 12 months, as well as administrative penalties ranging from $150-$900. Directors may be held liable for up to two years after they cease to be a director.
  • The ability of a director who is liable to an employee to bring an action against the corporation or any other director for contribution or indemnity for the amounts paid.
  • The ability of a director faced with an order to request a hearing before the Labour and Employment Board (the “Board”). The director requesting the hearing must deposit to the Board the amount stipulated in the order with Employment Standards, up to a maximum of $2,000.
Chapter 13 did not include:
  • any defences for directors.
  • any notice requirements to directors.

Our newsletter on the amendments proposed in Chapter 13 can be found at the following link: New Liability for Directors of For-Profit Corporations
The proposed amendments were met with criticism from New Brunswick employers.

BILL 21 – AN ACT TO AMEND AN ACT TO AMEND THE EMPLOYMENT STANDARDS ACT
Bill 21 – An Act to Amend an Act to Amend the Employment Standards Act was introduced in December of 2013 and attempts to respond to the criticisms of New Brunswick employers relating to Chapter 13.
Bill 21 proposes the following amendments to the ESA:
  • Any director or former director of a for-profit corporation is liable, along with the corporation, to an employee or former employee for:
  1. Up to 6 months of wages
  2. Up to 12 months of vacation pay or pay in lieu of vacation
  • The liability is limited to amounts that became due to the employee only while that director was serving as a director of the corporation.

PRECONDITIONS TO LIABILITY

Under Bill 21, a director will only be liable if:
  • The Director of Employment Standards has ordered an employer to pay an amount of unpaid wages or vacation pay, and
  • The amount ordered to be paid has not been paid and 30 days has passed since the order was made, and
  • A notice of liability has been sent to the director and 30 days has passed since it was received. This notice can be sent at the same time as the Director’s order to the employer.

DEFENCE OF REASONABLE DILIGENCE

If a director establishes that he or she used reasonable diligence to provide for the payment ordered, that director will not be liable.

OTHER CONSIDERATIONS

  • Liability extends to former directors for up to two years after they ceased to be a director.
  • Liability of directors does not extend to administrative penalties imposed against the corporation.
  • If a director complies with an order to pay, he/she has the right to bring an action against the corporation or one or more directors or former directors for contribution or indemnification for the amount paid.
  • Bill 21 is expected to come into force in 2014.
Jessica Bungay

Jessica Bungay

Partner
Fredericton

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Jamie Eddy, KC

Jamie Eddy, KC

Partner
Fredericton

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