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Bill 2 grinds wages, complicates payroll, and impedes union drives

The second bill introduced by Alberta’s new United Conservative Party (UCP) government is An Act to Make Alberta Open for Business. In conjunction with an Order in Council, if passed this act will reduce the minimum wage for many workers under 18, reduce all workers' access to general holiday pay and overtime premiums, and make it harder for workers to unionize.

According to Premier Jason Kenney, these changes are designed to increase employment levels and fairness in the workplace: "Our government ran on a promise to get Albertans, especially young people, back to work. … With Bill 2 and the youth minimum wage, we are restoring fairness and balance to the workplace and getting 'Help Wanted' signs back in the windows of Alberta businesses."

Minister of Labour Jason Copping asserts these changes will also reduce red tape and increase the employment of minors, saying, "We need to encourage employers to create opportunities for all workers. These changes would help Alberta's businesses to do just that. We’re bringing back balance, cutting red tape and making it more affordable to hire teens for their first jobs."

An examination of Bill 2 suggests that it will, in fact, yield none of these claimed benefits. Instead, it will reduce workers' income, make payroll administration more complex, and impede workers seeking to join a union.

Youth minimum wage

Effective June 26, the minimum wage for workers under 18 who attend school will drop from $15 per hour to $13 per hour. The government will (somehow) allow employers to immediately reduce the wages for these workers.

During weeks when school is in session, the first 28 hours worked by minors who are in school will be paid at $13 per hour while subsequent hours will be paid at $15 per hour. During weeks when school is not in session (e.g., summer, Christmas, spring break), all hours will be paid at the lower $13 rate.

The premise underlying this 13 percent reduction in the minimum wage is that employers will hire more minors who are in school. It certainly is possible that, given the opportunity to hire minors at $13 per hour or adults at $15 per hour, some employers will hire more minors who are in school. Shifting who gets hired will not, however, change overall employment levels.

I was unable to locate any academic research addressing the impact of reducing the minimum wage for minors. While it is possible that employers will use the savings they realize to hire more workers, this seems unlikely. Hiring is typically driven by demand for a product or service. Reducing wage levels does not increase demand. What we are likely to see is that employers (who are in business to make money) will simply pocket these savings.

What this change does do is significantly increase payroll complexity for employers (particularly small businesses) by requiring them to:

  1. know which employees are students,
  2. know when each employee’s school is in session or on a break,
  3. vary each employee’s hourly wage depending upon hours worked and whether school is in session, and
  4. change workers’ wages and payroll calculations when workers turn 18.

This effect seems at odds with the UCP’s election promise to reduce red tape. To avoid the red tape the UCP is creating, some employers may simply cap minors at 28 hours of work per week. Other employers may cope by simply paying all minors $13 an hour in all instances and waiting to see if anyone complains (unfortunately, most minors won't).

The government has also promised to allow employers to quickly reduce the wages of minors who are in school via the provision of notice. This promise directly interferes with employment contracts negotiated between employers and employees in a way that negatively affects the more vulnerable party (i.e., young workers). It is unclear how the government’s requirement for notice would satisfy the usual requirements for a contractual change. Neither Bill 2 nor the associated Order in Council addresses this issue.

Overall, reducing the minimum wage for minors who are in school benefits employers by reducing their labour costs. These savings may be offset by the increasing administrative complexity created by this change. It is unclear how this change would increase overall employment.

General holiday pay

At present, Alberta workers are entitled to nine paid general holidays (often called statutory holidays) immediately after hiring. General holiday pay is complicated, but the basic rules are:

  1. To be eligible for holiday pay, your must work your regularly scheduled shifts before and after the holiday as well as on the holiday, if asked.
  2. If you do not work the holiday, you get your average daily pay rate (regardless of when the holiday falls).
  3. If you do work the holiday you either get 1.5 times your hourly rate for hours worker or your regular rate plus another day off with pay.

Bill 2 proposes adding an additional requirement that you must be employed by the employer for the 30 days preceding the holiday. Bill 2 also proposes that if a holiday falls on a day you do not normally work and you do not work the holiday, you are not entitled to general holiday pay. Essentially, the UCP is adding back in much of the complexity that employers asked the former NDP government to remove.

It is very difficult to calculate the exact effect of this change. Overall, employers will see a reduction in labour costs and workers will see a reduction in take-home pay. Employers will face additional work and complexity in determining who is entitled to pay for each holiday. Workers with irregular or flexible schedules may be affected more significantly than workers who work a standard work week.

Overtime premiums

Bill 2 also proposes reducing the rate at which banked overtime is paid out. At present, if you work more than 8 hours in a day or 44 hours in a week, you are entitled to be paid at a rate of 1.5 times your normal rate of pay for these overtime hours.

The Employment Standards Code allows employers and employees to enter into overtime banking arrangements, whereby overtime is not immediately paid out. Instead, employees can draw down their banked overtime to take time off with pay at a rate of 1.5 hours off for every hour of overtime worked. If the employee does not draw down the banked time, it is then paid out at the overtime rate.

Overtime banking is often used in industries subject to seasonal fluctuations. Workers bank overtime during a busy period and then draw down this time to maintain their employment (and benefits) during the slow season.

The UCP is proposing that banked overtime taken as time off would be taken at straight time. In effect, employees would lose the overtime premium they are due. While employees could elect to cash out their banked overtime (and get the premium), if they are using overtime to bridge slow seasons (to avoid a layoff), cashing out overtime may trigger a layoff (thereby terminating their benefits).

This change benefits employers by providing them with a way to avoid paying overtime premiums to workers. It is unclear how this would increase workplace fairness or increase employment. Indeed, incentivizing employers to use overtime (by cheapening it) will likely reduce employment levels.

Mandatory certification votes

At present, when workers wish to join a union, a union files an application for certification with the Alberta Labour Relations Board (ALRB). Certification applications must include evidence that at least 40 percent of employees in the proposed bargaining unit support the union's application. If the union provides evidence that more than 65 percent of workers support the union, then the ALRB will certify the union as the bargaining agent for the unit without the need for a vote. This is called card-check certification.

If the union cannot demonstrate greater than 65 percent support, then the ALRB will order a vote of all of the workers in the proposed bargaining unit to determine if the majority of voters support the application.

Bill 2 proposes eliminating card-check certification and requiring mandatory certification votes in all certification applications. The research from across Canada is pretty clear: card-certification results in more applications to join unions and a greater success rate. We have seen this dynamic already take effect in Alberta.

The reason for this effect is that card-check certification eliminates the opportunity for employers to interfere in what should be a free choice by employees. One Canadian study found that 80 percent of employers oppose certification drives, 60 percent do so overtly, and 20 percent take action that is illegal (e.g., threatening or dismissing workers).

Employer interference tends to put a chill on the organizing drive. Research from both British Columbia and Ontario shows that, as soon as the rules switch to mandatory votes, the number and success rate of union drives drops significantly.

Requiring certification votes is often justified as fundamentally democratic, and as a way to prevent union intimidation of workers. Equating certification votes with the electoral process ignores the fact that, when workers cast a vote in a federal or provincial election, the government doesn't spend the campaign period threatening to fire workers if they vote for a different party.

Such claims also ignore that elections and union drives are fundamentally different. Government policies profoundly affect every aspect of our lives and can't be avoided (unless we abandon our country and citizenship). By contrast, the selection of a bargaining agent affects only certain aspects of our employment and the effects (typically higher wages and greater job security) can be avoided by changing jobs.

The idea that mandatory votes prevent the intimidation of workers is misleading. Requiring mandatory votes may prevent (very uncommon) union intimidation of workers, but it does so at the cost of facilitating (very common) employer intimidation of workers.

Eliminating card-check (i.e., requiring votes on every application) will reduce the number of workplaces that are unionized. Because unionized workplaces typically better terms and conditions of employment, reducing the number of workplaces that unionize financial benefits employers and financially penalizes workers.

Analysis

Bill 2 is clearly designed to reduce labour costs for Alberta employers. Bill 2 achieves this by transferring these costs to workers, in the form of reduced compensation. There is no evidence or reason to believe that this transfer of costs will result in an overall increase in employment rates, and the mechanisms set out in Bill 2 will also substantially increase payroll complexity for employers (particularly small businesses).

Eliminating card-check certification increases employers' abilities to interfere in workers' decisions about whether they wish to be represented by a union or not. The result will be fewer successful union drives. This change will clearly decrease fairness in the workplace in order to help employers avoid unions.

At the media conference announcing Bill 2, Premier Kenney stated that additional labour law reform will be introduced in the fall. This may include the introduction of a lower minimum wage for serving staff (following the appointment of a task force), restrictions on how unions can spend dues collected from members, and changes the essential services rules for public-sector unions.

Illustration by rawpixel.com - freepik.com

Bob Barnetson

Dr. Bob Barnetson is a professor of labour relations at Athabasca University. His research focuses on the political economy of workplace injury, farm workers, and child labour in Alberta. He’s the author of The Political Economy of Workplace Injury in Canada (Athabasca University Press, 2010), co-editor of Farm Workers in Western Canada: Injustices and Activism (University of Alberta Press, 2016), co-author of Health and Safety in Canadian Workplaces (Athabasca University Press, 2016), and author of Canada’s Labour Market Training System (Athabasca University Press, 2018).

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