Canadian HR Reporter

OCTOBER 2019 12 NEWS Regular bonuses with each paycheque considered wages: Ontario board Company said mining, safety bonuses were subject to employer discretion, but they were tied to the number of hours worked by employees so not exempt from ESA BY JEFFREY R. SMITH N ormally, bonuses that are paid to workers that are subject to the em- ployer's discretion aren't con- sidered part of employee's regu- lar wages and, as a result, aren't subject to some of the same re- quirements under employment standards legislation. However, one Ontario compa- ny that considered two bonuses paid to employees on a regular ba- sis as discretionary was mistaken when the two workers success- fully argued the bonuses should be considered wages for the pur- poses of vacation pay entitlement. Technica is an underground construction and mining con- tractor based in Lively, Ont. e company pays mining employees a base salary with an hourly rate depending on the worker's skills, ability and experience. In addition, the company pays a mining bonus to employees who complete their initial training period. Before 2017, Technica provided its mining employees with an op- tion to pay into a safety bonus sys- tem. e company also paid into the system, which would reward employees with a bonus if they followed safety standards and demonstrated a commitment to safe work. Employees who com- mitted safety violations would for- feit the money they pledged into the program. In 2017, Technica changed its safety bonus system and started calculating it and paying it to mining employees on an hourly basis, similar to the way the min- ing bonus was paid. Depending on the project, the "zero harm" bonus could be anywhere from $4 per hour to as much as $25 per hour on top of the employee's base pay and mining bonus. Bonuses based on performance, safety of work e company considered both the mining bonus and the safety bonus discretionary bonuses, as three levels of management had to approve them, and supervisors determined whether individual miners received them by evalu- ating each shift based on their assignment. Miners who failed to meet performance expecta- tions for each pay period didn't receive the mining bonus and those who didn't work safely or had violations also missed out on the safety bonus. e Technica employee hand- book outlined the standards em- ployees had to meet to be eligible for the bonuses. Mining employ- ees were told at the time of their employment offer and in orienta- tion that the bonuses were pro- vided at the company's discretion and were based on "safety perfor- mance, attitude, quality of work, qualifications, experience and... sustained past performance." In addition, the safety bonus was only paid for time doing ac- tual mining work and wasn't part of the employees' compensation during training or safety meetings. e employee handbook also outlined how employees could lose their "zero harm" safety bonus if they were involved in an accident or injury or received disciplinary action for a safety violation. Technica hired Dustin Agular in May 2017 and provided him with a document outlining his base pay rate, an hourly mining bonus and an hourly safety bo- nus. He was told that he would always receive the mining bonus, but the safety bonus could be lost if he failed to follow safety pro- cedures or was written up for a safety infraction. Agular received the two bonus- es with his pay every two weeks, although the company only cal- culated his vacation pay with his base salary. In April 2018, his su- pervisor increased his mining bo- nus based on his "attitude, compe- tence and job performance." ESA considerations Technica didn't provide vacation pay on the two bonuses because it didn't believe it was required under the Ontario Employment Standards Act, 2000 (ESA). is belief was based on a decision by the Ontario Labour Relations Board (OLRB) in 2013, where the board determined that Technica's mining bonus was a discretionary payment and not "wages" as de- fined by the ESA. e ESA stipulates that vaca- tion pay must be paid on wages, but its definition of wages specifi- cally excludes "any sums paid as gifts or bonuses that are depen- dent on the discretion of the em- ployer and that are not related to hours, production or efficiency." Agular and a co-worker filed a complaint with the Ontario di- rector of employment standards claiming that both the mining bo- nus and the safety bonus should be considered as part of their wages and they should draw va- cation pay from those amounts as a result. An employment standards offi- cer found that both bonuses con- stituted "prearranged monetary remuneration payable under the terms of an employment contract and are not dependent upon the exercise of employer discretion." e officer ordered Technica to pay the two employees vacation pay on their mining and safety bonuses along with a notice of contravention of the ESA and an accompanying $250 fine and a no- tice of compliance. e director of employment standards noted that the ESA Policy and Interpretation Manu- al described bonuses that should be included as part of wages at those "that have been pre- arranged by both employer and employee and thus consequently become part of the employment contract" and "are related to hours of work, production or the efficiency of the worker." Technica appealed the decision to the OLRB, maintaining that the bonuses were discretionary payments and not wages under the ESA. e company acknowl- edged that the bonuses were cal- culated based on a miner's hours of work for the purposes of paying them but they weren't related to "hours, production or efficiency" as required in the ESA's definition of wages. Unlike bonuses that are part of wages and "earned, predict- able and directly related to the efforts and/or performance of employees," the mining and safe- ty bonuses were "not predictable, earned or based on the attainment of defined or quantifiable levels of performance," said the company. Bonus payments connected to hours worked In the decision (Technica Group Inc., Applicant v. Dustin Agular, and Director of Employment Stan- dards, Responding Parties (Aug. 2, 2019), OLRB Case No. 2669-18- ES and 3236-18-ES (Ont. Lab. Rel. Bd.), the OLRB noted that it had been established by the Supreme Court of Canada and in its own previous decisions that the ESA, as remedial legislation, should be read "expansively" with few ex- emptions to its clauses. With that approach, in order to exclude bonuses from the defini- tion of wages, "it must be clear to the board that they are truly de- pendent on the discretion of the company and that they are not related to hours, production or efficiency." The OLRB found that Tech- nica's own employee handbook linked the company's exercise of discretion in its bonuses with job performance by stating the bo- nuses were based on "the individ- ual's safety performance attitude, quality of work, qualifications, experience and the employee's sustained past performance." And as long as an employee maintained an acceptable job performance, the mining bonus was a predictable and expected element of their regular pay, said the OLRB. In addition, the OLRB found that payment of the mining bonus wasn't truly dependent on the em- ployer's discretion, as the amount depended on the number of hours worked — making it "related to" the hours an employee worked and not exempted from being in- cluded under the ESA's definition of wages. "Technica miners clearly have an expectation of receiving the mining bonus for competent work performance, and the company's discretion is limited to evaluat- ing a miner's performance on the basis of the criteria set out in the handbook," the OLRB said. As for the "zero harm" safety bonus, the OLRB noted that its purpose was to incentivize safe work and was paid according to an employee's ability to work "independently and safely." It was originally set up as a "bonus/pen- alty system," but it was changed to an hourly-rate bonus that is paid to every employee as long as they weren't involved in any safety violations as set out in the employee handbook. As a result, the safety bonus was even less discretionary than the mining bonus — employees only had to avoid the safety mis- conduct outlined in the employee handbook and they would receive it, with the amount tied to the hours worked, found the OLRB. is made the safety bonus also related to hours as contemplated by the ESA with little discretion- ary aspect to it. The OLRB determined that Technica's mining and safety bo- nuses constituted "wages" under the Ontario ESA and upheld the employment standards officer's orders to pay. As a result, Tech- nica was ordered to pay Agular and his co-worker vacation pay on the bonuses. However, the OLRB also found that Technica didn't deliberately violate the ESA as it was relying on an earlier board decision that found the company wasn't re- quired to provide vacation pay on the mining bonus. Accordingly, it reduced the amount of the fine the company received with the notice of con- travention to zero from $250 and rescinded the notice of compli- ance issued by the employment standards officer. Two workers at an Ontario mining company successfully argued that their bonuses should be considered wages for the purpose of vacation pay entitlement. Credit: Aqnus Febriyant (shutterstock) e bonuses constituted prearranged monetary remuneration payable under the employment contract and were not dependent on employer discretion.

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