Employer Fined $900,000 and Jailed 90 Days for Unpaid Wages

The owner of a now bankrupt Toronto-area restaurant chain has been ordered to serve 90 days in jail and has been fined $900,000 for failing to pay her former employees the wages they were owed.

What Happened?

Between June 2013 and April 2014, the Ministry of Labour (the “Ministry”) received 68 individual complaints from employees of 12 restaurants owned or controlled by Yuk Yee Ellen Pun (Pun). Each claim ranged from a few hundred dollars to $45,000 in various types of unpaid wages.

The workers claimed that they had been denied wages in a number of ways: some were misclassified as liquor servers (who are not entitled to full minimum wage), others were not paid for several months at a time, and still others were regularly given cheques that bounced.

Through their investigation, the Ministry discovered that Pun and another woman owned at least 19 related companies. While the Ministry had initially been able to make contact with Pun, she later stopped returning phone calls or answering emails, and did not provide any evidence requested during the investigation.

Pun eventually sold her home through a power of sale for several million dollars before declaring bankruptcy. Records showed that she had total debts of $11.3 million.

In June 2015, the Ministry found that that Pun and the corporations owed the 68 employees  $676,000 in basic salary, overtime pay, public holiday pay, vacation pay, termination pay, and severance. At the time, this was one of the largest orders for unpaid wages the Ministry had ever made. Of the money owing, Pun and her companies paid only $104,800.

The Ministry pursued further action which resulted in the jail time and the large fine. In addition to the jail time and the financial penalty, the Justice of the Peace imposed 25% victim fine surcharge to be paid into a government fund assisting victims of crime.

Jail Time for Unpaid Wages is Rare

The Ministry prosecutes individuals and corporations for violations of the Employment Standards Act, 2000 (the “ESA”) and its regulations, including for failures to comply with orders to pay. These prosecutions are pursued under the Provincial Offences Act (the “POA”).

While the Ministry can pursue prosecution for employers who do not pay wages, and jail time of up to 12 months is a potential consequence where an employer is found not to have obeyed an order to pay, this outcome is rare. Only a few employers in recent years have faced a similar result. More often, employers face penalties and fines.

Where employers are convicted, information about the conviction and the penalty imposed is posted on the Ministry website.

How Can Employees Recover Unpaid Wages?

The majority of employers in Ontario are provincially regulated and are therefore governed by the ESA.  Federally regulated employers (i.e. banking, trucking/interprovincial transportation, and the federal government, among others) are governed by the Canada Labour Code, and a different process applies.

The ESA defines “wages” as any type of monetary payment that is owing to an employee by an employer under the terms of an employment contract, including salary, vacation pay, commission, and other payments, but excluding payment of bonuses or gifts that are dependent on the discretion of the employer.

If an employee believes that they are owed unpaid wages, they can either make a complaint to the Ministry, or they can sue the employer (but not both).

Ministry of Labour

When a claim for unpaid wages is filed with the Ministry, an Employment Standards Officer (ESO) will begin an investigation.

If a Ministry investigation finds that an employer has not paid wages, significant implications may arise. For any claims filed against employers prior to February 20, 2015:

  • There was a cap of $10,000 for recovery of unpaid wages; and,
  • Claims could only be made for wages owing 6 months prior to the claim.

However, in February 2015 the ESA underwent major changes. Any claims filed after February 20, 2015:

  • Have no upper limit as to how much can be recovered; and,
  • Can be made for wages owing up to 2 years prior to the claim.

If an employee has filed a claim with the Ministry for unpaid wages but subsequently decides to commence a court action regarding those same wages, they must withdraw their ESA claim within two weeks of filing it with the Ministry.

Court

If an employee is owed$25,000 or less, they can choose to file a claim against their employer in Small Claims Court to recover unpaid wages.

If an employee is owed more than $25,000, a claim can be made against their employer in Superior Court to recover the unpaid wages.

If you are an employee and believe you are owed wages, or if you are an employer against whom an ESA claim or a lawsuit has been filed for unpaid wages, we can help. At Duncan, Linton LLP in Waterloo, we have been advising and acting for both employers and employees across a broad range of sectors for over 150 years. The knowledgeable and strategic lawyers in our Employment Group regularly assist clients with managing all aspects of their workplace relationships including ESA related issues. Call us at (519) 886-3340 or contact us online to schedule a consultation.